TransferWise lowers fees by 15%; net profit more than doubles

Singapore

AT a time where most businesses are shoring up their finances against the Covid-19 crisis, payments startup TransferWise has reduced its money transfer fees by around 15 per cent for the majority of its eight million customers globally.

This comes as net profit for the UK-based firm, which has its Asia-Pacific base in Singapore, more than doubled to £21.3 million (S$37.42 million) year-on-year for the fiscal year ended March 31, 2020, marking its fourth straight profitable year. Over the same period, revenue jumped 70 per cent to £302.6 million.

In an interview with The Business Times, TransferWise chief executive Kristo Kaarmann said the firm's new product launches and growing focus on business customers had helped fuel growth and lower costs in FY2020, even as the pandemic was unfolding earlier this year.

"Thanks to the growth that we're seeing, we can pass the benefits back to our customers in the form of cheaper fees. We believe that the cost of money transfer should get closer and closer to zero," he noted.

As of this week, customers sending US dollars or British pounds to anywhere in the world, and customers sending money in 10 Asian currencies including the baht and the ringgit, will pay 15 per cent less in fees on average.

For some currency routes, it can be up to 30 per cent cheaper.

Overall, the fall in prices will impact 76 per cent of customers. In a blog post on Tuesday, TransferWise chief financial officer Matt Briers said the firm was able to lower costs after scaling up the business further.

Before the latest revision, average prices went up between FY2019 and 2020 - from 0.65 per cent of the amount sent to 0.68 per cent - after "investing in more in underlying infrastructure than expected", he noted.

The firm processed £42 billion in cross-currency transfers in FY2020. Including domestic payments, total volume for the year came in at £67 billion, from £36 billion in FY2019.

Customers sending money from Europe contributed 52 per cent of the firm's overall revenue. The US business, launched in 2015, contributed 26 per cent. The remaining 22 per cent of revenue is attributed to Latin America, Canada and the Asia-Pacific, TransferWise's fastest growing market since its entry in 2017.

Mr Kaarmann is expecting the Asia-Pacific business to sustain its growth momentum amid macro uncertainties, noting that Singapore has seen the strongest demand.

"There is demand in Asia, certainly, and we know we haven't satisfied the entire demand yet. We have launched in new countries and (rolled out) new features over the last couple of years, and now we're seeing these efforts starting to pay back," he said.

In 2019, the firm acquired a remittance licence in Malaysia, its sixth Asia-Pacific market to send money from. It also launched its multi-currency "Borderless" account and accompanying debit card in Australia, Singapore and New Zealand, with plans to do the same in Japan later this year. The debit cards are also available in Europe and the United States.

Over a million cards have been issued since 2018, and the Borderless account now holds over £2 billion in current deposits.

While TransferWise started out helping individuals save on cross-border transfer fees, it has been actively growing its corporate customer base in recent years, which contributes "substantially" to revenue, said Mr Kaarmann.

The firm is "almost neutral" to impact from global travel restrictions so far, thanks to its network of business customers across multiple sectors.

Those in the travel and hospitality sector have expectedly recorded less international transfer volumes due to sluggish demand. But companies in digital commerce, or are selling digital services, have become "even more international" and are doing "very strongly", added Mr Kaarmann.

Some 107,000 new business customers were onboarded in FY2020, alongside partnerships with small businesses. Over 10,000 new business customers join TransferWise's platform every month.

Linking up with neobanks has also been part of its strategic play. The firm now has 12 bank partnerships globally, the newest being with Aspire in Singapore and Up Bank in Australia.

Beyond payments, TransferWise recently announced new permissions from the Financial Conduct Authority in the UK to offer savings and investments options via its borderless account, with the new product set to launch in the next 12 months.

The fintech unicorn was most recently valued at US$5 billion - an uplift of 43 per cent since May 2019 - following a secondary share sale in July this year that took its total raise in primary and secondary funding to over US$1 billion.