Transferwise, the currency transferring service, has raised $1.3 million (€0.99 million) to expand their team and help bring their service to more currencies. The company was started by two Estonian entrepreneurs, Taavet Hinrikus and Kristo Kaarmann, and is based in London.

The investment was led by IA Ventures, Index Ventures, Max Levchin (co-founder of Paypal) and a group of strategic investors — such as Errol Damelin, the founder of Wonga. In an interview with ArcticStartup, Co-founder Taavet Hinrikus, the first employee at Skype, described this fundraising as not only a path to expand, but also a strategic way to get the best team together behind the project.

Transferwise charges a low flat fee on small transfers (such as 1GBP on transfers up to 300 GBP), and is currently only operating in pounds and euros. Rather than banking metaphors, Hinrikus describes Transferwise as “croudsourced money transfers” that tries not to move currency, but rather to match transfers with pounds staying pounds, and euros staying euros. That may be an obvious practice, but I believe his terminology speaks to the “startup” angle that Transferwise is applying to banking services.

Taavet also tells us that the business model of low, flat transfer fees at the mid-market rate are absolutely sustainable due to the fact they don’t have the huge overhead that international banks do, and that banks have been overly profiting for too long for what amounts to simple bits of data moving in an Excel spreadsheet. In the near term Transferwise is focusing their service on individuals, but of course they are also playing with how they can better serve small and medium sized businesses.

“If we think about the market here, I think a good analogy is that EasyJet disrupted the world of airlines 20 years ago by democratizing flying. Skype democratized phone calls by making international calls free, and I think we’re doing the same thing with money transfers. We take expensive international payments and turn them into cheap, local payments,” Says Hinrikus.

The key part of Transferwise’s operations and expansion regulation, and according to Hinrikus they are dealing with that in an effective way. “What’s good for us first is that Europe is a little ahead in regulation, which makes life easier. Having [an Authorized Payment Institution license in the UK] makes life easier for us, meaning we can operate without limits all throughout Europe.”

Going into the future, what perhaps is most interesting is the role Transferwise and other banking startups are going to play in what Hinrikus calls Finance 2.0. “I personally believe as a consumer and a business that banking is broken. We can look at how specialist companies are doing bits of it right. We are doing money transfer, then there are the likes of Lending Club and Zopa that are doing crowdsourced lending. We have Wonga who is focused on lending for the underserved. Then there are more like Market Invoice and BillGuard. Everyone is focused on doing one vertical and doing better than the banks. There are now a few companies that are trying to do the whole thing again. Like Simple.com building a new bank in the U.S. These guys are also an investor in us.

“It’s really interesting to see what all is going to come of this. Fast forward a couple years, see what we’re doing, what everyone else is doing, and see how these verticals broken out from the traditional banking world are providing the same services in a much better way. I’m sure this will start moving back together and forming new banks down the road.”

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