The largest market globally is clearly the financial market where the demand is actually supplied and paid for by the goods themselves – money. TransferWise is a new startup from Estonia that looks to stir things up a little in the currency exchange market. Currently, the market is dominated mostly by brick and mortar organisations who charge high comissions or margins on a simple transaction.
I talked to Taavet Hinrikus, one of the co-founders behind the company (one of the first Skype employees). He started the company together with Kristo Kaarmann, who in turn has his background in financial services at Deloitte and PricewaterhouseCoopers.
“It all started around our own behaviour – when we were living in London we had the issue of transferring money to/from Estonia. It always cost too much in terms of the ripoff exchange rates and fees. So we started exercising this model with friends – if someone needed money in Estonia they would ask friends if anyone has excess money in Estonia and needs it in London. If yes they would just make the exchanges locally”, states Taavet Hinrikus.
That model then grew to TransferWise, an online service. The gentlement started work on the project Q1/Q2 last year, applying for approriate licenses in the UK as well as the webservice itself.
While being a simple approach to an age old problem, TransferWise doesn’t have a lot of overhead costs – enabling them to charge only £1 per exchange, whatever the amount.
The service currently works only in exchanges of currency between the British Pound Sterling and the Euro. Despite being a very limited set of currencies, albeit some of the most used in the world – the feedback towards the service has been great.
Taave Hinrikus continues, “Reception is great – during our friends and family testing we have tried it in larger EU countries in addition to UK and everyone is happy with the service. Can’t argue with saving money, can we? On a couple hundred Euros or Sterling transfer the savings are as much as several tens of euros.
The service will expand to other currencies in the future. The company is currently looking to enable USD to CHF exchanges. Apparently, according to Taavet Hinrikus, it’s one of the more needed currencies. With the Swiss banking laws, it’s no wonder.