Technology

Growing Tech: TransferWise as a Case Study for Disruption

The need for a money transfer system more effective and cheaper than bank wire transfers has existed for a long time. Even the UN recognizes that cutting the cost of transfers, remittances in particular, must be a priority in the modern world. Considering the importance of this issue for the global economy, it’s not surprising that TransferWise, the most effective solution that currency exists, has become such a huge influence in the money transfer industry. One might even argue that it was this technology that brought forth the decline of traditional banking as we know it.

Of course, banks still exist and there are some functions that only they can handle. However, it’s a fact that TransferWise, and services like it, made a huge impact on the money transfer industry. TransferWise, in particular, deserves recognition for being the biggest power in this.

A Look at the Birth and Growth of TransferWise

TransferWise was founded less than a decade ago in 2011 by two Estonians, Taavet Hinrikus and Kristo Kaarmann. They both needed a way to transfer money to and from Estonia and the UK and were highly dissatisfied with the existing methods. Here it must be noted that transfers between these countries are nowhere near as expensive or lengthy as transfers to some developing countries. There are still African transfer corridors where the costs go up as far as 20% of the transfer.

So, two Estonians with ambitions, education, and opportunities decided to change the situation with the money transfers in Europe first. This resulted in the creation of TransferWise, a service dedicated to making international transfers cheap and fast. Officially, the company only got the “go ahead” from the UK financial regulatory authority in 2012 and that’s when it started doing the business in earnest. In that first year the entirety of transactions completed via TransferWise amounted to about €10 million.

Today, less than a decade after that start, TransferWise is worth $3.5 billion and processes about £5 billion worth of transactions in a single month. Over 6 million people use its services worldwide and the company now has 13 active offices and services 750 currency routes. It’s also continuously expanding, and covering those infamous African corridors is one of its plans for the near future. According to the company data, its low rates and other helpful services enable its customers to save up to £1.5 billion in a year.

This money goes to their families and businesses and gets poured into the economies of various countries. Therefore, the impact of TransferWise on the world as a whole is significant in itself. However, this company can be considered a global disruptor in the money transfer industry not only because of its own excellent services.

TransferWise might have been the first widely successful international money transfer company, but it’s not the only one. In fact, the success of TransferWise inspired others so much that today there are dozens of companies in the international money transfer space. They are competing wildly making the industry one of the fastest-growing and evolving in the world. Moreover, TransferWise keeps pushing it further by setting the bar higher.

TransferWise as a Major Power of Disruption on the Global Money Transfer Arena

TransferWise is a power of disruption not only for the banks and their traditional but outdated money transfer methods. It’s also a constant driver of the industry it has, nominally, created. Other money transfer companies have no choice but to use TransferWise as a bar to measure themselves against. After all, if they don’t do this, they have no chance because it sets the terms that literally define the industry.

Online money transfers are fast and cheap and secure. These ate three staples of the industry, so to stand out and have a chance at success one must offer transfers that are cheaper, faster, and even more secure.

Due to its sheer size and funding, TransferWise has more opportunities in this than the majority of businesses. That’s why it has little real competition. However, even those few companies that can stand on par with this new fintech giant must adjust to stand out against it.

The reason why TransferWise was a revolutionary even in this already revolutionary industry was that it did not only offer low margins. It started using fixed margins for transfers, which made the services even more affordable.

This was what prompted WorldFirst, the other giant in the money transfer market, to follow the example and use fixed margins that are even lower. This is one example out of many of how TransferWise keeps influencing the industry and, by extension, the global economy.

If it keeps going like this, one might think that TransferWise will eventually overtake the global money transfer industry completely. Anti-monopoly laws might be the only thing that could prevent this from happening. But it’s definitely true that this company will keep driving changes in this industry because even with WorldFirst TransferWise has very little real competition to speak of.

TransferWise: Not the Smoothest Sailing Doesn’t Mean You Don’t Succeed

When one looks at the story of TransferWise at a glimpse it might seem that the company has grown as if by magic. It’s true that going from barely anything to $3.5 billion in value in less than ten years is outstanding. However, it’s definitely not a fluke.

TransferWise had plenty of challenges, from issues with regulatory authorities to having its ads banned for “misleading information”. This company was tested and tempered, which resulted in a fintech solution that currently has no true rivals.

That won’t last forever as other businesses prove they are capable of competing with this powerhouse.

This, however, only seems to push TransferWise further, which pushes the industry further, which benefits billions of people.

This is proof of how a single company can become a force that will disrupt industries but only make them better for it. The UN’s ambition to eliminate overpriced money transfer corridors doesn’t seem like an impossible dream now, and it’s largely due to the efforts of this one company.

What if such businesses existed in other industries? There are many other examples of such, but all of them are the same in a way that these companies drew changes that affected the lifestyles of people all over the world. Today we take things like smartphones or the Internet for granted and sometime soon cheap money transfers to any part of the world might become one of these “regular” things as well.

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