Cross Border Commerce

TransferWise To Break Free From Banks

Global money transfer firm TransferWise is getting ready to free itself from reliance on banks.

The five-year-old London-based start-up has long advertised itself (colorfully) as the transparent alternative to banks when it comes to moving money around the world — but in the background, TransferWise still needed those banks to handle the initial link between the customer and the company.

But that may soon be a thing of the past.

The start-up — currently valued at $1 billion — has been collecting state licenses in the U.S. since last year. The firm also recently announced its rapidly forthcoming ability to directly access the U.K.’s real-time payment system. At present it still requires small banks as partners.

TransferWise CEO and co-founder Taavet Hinrikus has noted that it has always been the firm’s long-term ambition to hold its own licenses — though such licensing requires that the firm secure verification for things which they are not currently responsible. These are things like making sure their clients aren’t laundering money and that accounts are adequately funded to make transfers. TransferWise notes that it is already doing such checks and thus the regulations create no change in procedure.

TranferWise’s main attraction is its “peer to peer” model that matches customers sending money or receiving it cross-border — and charges a fee to match those senders while offering exchanges at the prevailing market rate. As of now, TransferWise is behind billions of dollars in annual transfers around the world — but not without creating some regulatory hassles for itself, particularly in the U.S., where banking licenses are granted state-by-state.

Mr. Hinrikus said a major aim of operating under the company’s own state licenses was to open up the services it could offer at a reasonable cost.

“The only way to offer the best global service is to act locally in every market,” said Mr. Hinrikus. “The cost per payment has to be dropping.”

Currently, TransferWise is licensed in 37 states and operates independently in three states that don’t require licenses. In the remaining ten states it will continue to work with a bank partner.

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