Looking to take some of the fees out of sending money overseas, TransferWise is firing up its New York team for its U.S. expansion.
The London-based company says it is a lower-cost option—compared with banks and other incumbent money transfer businesses—that uses a software platform to pair transactions that are going in opposite directions between the same countries.
TransferWise set up shop in the U.S. after raising a $58 million Series C round in February, which U.S. general manager Joe Cross says is helping to drive the company’s overall expansion.
Andreessen Horowitz led that latest funding round, joining a robust pool of backers that include Sir Richard Branson, founder of Virgin Group; Peter Thiel; IA Ventures; Seedcamp; Valar Ventures; and Index Ventures. In total, TransferWise has raised $90.4 million since being founded by Kristo Käärmann and Taavet Hinrikus in 2010.
Cross says the company had been expanding rapidly across Europe, with a push into the U.S. market being the next logical step. “In terms of remittance in international money transfer, the U.S. is far and away the largest market in the world.”
He says he crossed the pond in May to run the New York office, which handles banking relationships, marketing, and product development. The company also has operations and customer support in Tampa, FL.
Between its two U.S. locations, TransferWise has 50 people on staff in the country, with plans to grow the staff here rapidly. “We’ll probably double that sometime early next year,” Cross says. Overall, the company has a staff of 400, and he says there are plans to launch the service in Mexico “very soon,” along with a push for business across Latin America.
TransferWise, despite its promise of lower fees, faces competition from some much larger players who have dominated the international money transfer business, Cross says. “You have the banks on one hand, and then you’ve got Western Union, MoneyGram, etc. on the other.” Given the scope of the market, it is not hard to guess why these transactions are getting more attention for their business. (Other startups in the field include PeerTransfer and CurrencyFair.)
By Cross’s estimate, some 15 to 20 percent of the U.S. population was born outside of the country, many of whom have a need to send money overseas. He says exchange rates offered by some financial institutions may be adjusted some 7 percent in their favor through hidden fees, potentially costing the person who wants to transfer money abroad.
Part of what makes TransferWise different, he says, is its leaner fees. “We charge 1 percent on most rates,” Cross says. The company keeps costs down, he says, through its platform, which finds and matches transactions going between the same two countries—essentially keeping the money in the country it originated from. “What’s the point in both people doing expensive transfers?” Cross asks. “The platform allows dollars to stay in dollars, and the pounds to stay in pounds. The money does a U-turn within the country.”
Much like other mature industries, he says, money transfers are due for disruption thanks to the spread and maturity of the Internet, as well as increased transparency that consumers expect. However, he doubts incumbents will change their rates in response. “If the banks suddenly drop this cash cow, they have to make up the money elsewhere,” he says.
But changes in consumer behavior, due to increasingly pervasive technology, are getting harder and harder to ignore. “People are much more comfortable doing financial transactions online,” Cross says. “With money and fintech, now is a really hot time.”
