This article was updated on 20th December 2016.
TransferWise has been one of the big success stories of London’s tech scene.
This year alone, the Tech City-based fintech startup raised $25m from Richard Branson, was named in the FinTech40, a list of the top forty people in Europe’s burgeoning fintech industry, and last week announced a TV ad, app, new website and new branding.
It was also one of the founding members of Innovate Finance, a new trade body promoting the UK’s rapidly growing fintech sector, and is without a doubt one of the leading voices for that growing pool of companies.
Tech City News caught up with co-founder Taavet Hinrikus to discuss where the company – and fintech in general – is going.
For those of us who are financially less knowledgeable, can you explain in layman’s terms how TransferWise gets better rates?
TransferWise is based on a peer-to-peer system. If someone wants to convert their pounds to euros, for example, TransferWise’s technology finds someone who wants to transfer money in the opposite direction (that is – euros into pounds).
The system automatically matches the currency flows at the real mid-market exchange rate and then pays out from the local euro or pound account, meaning the money never actually moves across borders. Doing things this way means customers can avoid traditional banking fees altogether (more information on how TransferWise operates).
You’ve just announced a TV ad, new website, app and rebrand. TV ads obviously aren’t cheap. Do you think that now, with a rapidly growing number of tech startups all over the world, startups with genuinely good ideas still thrive without big marketing budgets?
You’re right – it wasn’t cheap! But the ad helps us to reach out to customers who are still using high street banks to transfer money abroad and are unaware they’re being screwed over by the exchange rates.
However, even after all the time and money spent on our ads, it’s still word of mouth and our customers shouting out about us that helps us grow so fast. I’d say to any startup that if your product is good enough, your customers will go ahead and sell it for you.
How do you think London managed to establish itself as such a driving force for fintech?
London has a competitive advantage over other cities, because there’s both financial and tech talent on our doorstep here. That’s what makes it a unique place for starting a fintech company.
When you look at the US, for example, Silicon Valley has a lot of great tech, but isn’t so strong on finance. New York, on the other hand, has lots of finance but not much tech.
What does it need to do to maintain its lead over the rest of Europe?
To keep London in the driving seat, government needs to break down some of the barriers to entry that exist in traditional markets, like FX.
For example, regulators need to make sure that financial products are advertised in a fair and transparent way. That’s how consumers can make informed choices, see beyond the big five banks they grew up with, and consider alternative financial providers.
Are there any British startups you’ve got an eye on right now?
Duedil, Funding Circle, and Nutmeg are doing a great job at disrupting each of the markets they operate in – it’s great to see what they’re up to.
Innovate Finance recently launched. Do you think it is solving a serious problem?
London is home to a lot of disruptive startups like iZettle, Zopa, Funding Circle, GoCardless and ourselves. We have a lot to say, and before Innovate Finance we had to attempt to do this on our own.
It’s fantastic that Innovate Finance will be representing us and that it’ll help us profile London’s booming fintech industry.