A Fine Example of When a Plan Comes Together

Credit: https://www.flickr.com/photos/hermanwest/

There have been a lot of reports in the press of late about the runaway success of simple money transfer startup TransferWise, which has been gaining significant financial backing from some very serious investors. Among their high profile backers are serial entrepreneur Richard Branson and renowned tech venture capitalist firm Andreessen Horowitz. But why are investors flocking to the company to pump funding into it so readily, and what has set TransferWise apart from the crowd?

What's All the Fuss About?

Well first up, money transfers are certainly no new phenomenon. In fact the concept dates back to the 19th century from when we get the term “wire transfer”, referring to the process of sending a telegraph (via wire) to instruct a receiving bank to dispense transferred funds to the intended recipient. Of course today the term “wire transfer” is a little outdated but we still use it to describe situations where we transfer money online and there is no shortage of providers competing to do the job for us.

However, despite being such a well known and frequently used service offered by thousands of financial institutions worldwide, the team behind TransferWise identified a flaw in the system and set about tackling it. What’s interesting about this is the way in which they identified this flaw and came up with their own workaround which laid the foundations to offer something similar to others.

The TransferWise Story

Estonian friends Taavet Hinrikus and Kristo Käärmann were both living in London when they came upon an idea to help them each save significant bank transfer costs by working together. Hinrikus was working in London and paid in sterling, having to transfer money into Euros in order to pay his mortgage back home whilst Käärmann was being paid in Euros by his Estonian employer (Skype), despite living in London and consequently only needing sterling currency.

The pair discovered that by working to the day's average exchange rate they could swap money between one another’s accounts and wind up significantly better off than were they to exchange the money through traditional money transfer services offered by banks and other financial institutions.

Their company, founded just three years ago, is now worth an estimated $1 billion!

How Has This Happened?

By shaking up what had ultimately become a racket in a stagnant industry that had been exploiting people for too long (in the banking industry? Surely not), TransferWise have stuck two fingers up at the finance industry as a whole and gone it alone to offer people the sort of simple peer to peer money transfer service they need - one that sees far more of their money arrive at its intended destination than were they to make their transfers through traditional costly channels.

Taking on the finance giants was always going to be a dangerous game to play but the evidence suggests these guys have done it, and with such high profile backers and incredibly impressive growth figures (TechCrunch reports the company have handled over £3 billion in transfers to date) you’d back them to go all the way.

I love success stories like this, where a problem is identified and a workaround reached which can be expanded upon and rolled out to the world. And if that means sticking it to the banks who've brought us to our knees in recent years, then all the better. It’s time the big boys recognised that we’ll not be walked over!

Thanks for Reading

Do you have any thoughts on how this startup is shaking up the industry? Perhaps there are similar tales you'd care to share? I welcome all your comments and as ever please feel free t get in touch with me via Twitter also!