{"id":4069,"date":"2015-12-08T22:38:50","date_gmt":"2015-12-09T03:38:50","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/transferwise-the-money-transfer-revolution\/"},"modified":"2015-12-08T23:01:05","modified_gmt":"2015-12-09T04:01:05","slug":"transferwise-the-money-transfer-revolution","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/transferwise-the-money-transfer-revolution\/","title":{"rendered":"Transferwise \u2013 The money transfer revolution"},"content":{"rendered":"<p>&nbsp;<\/p>\n<p>Having raised over 90M$ in venture capital from Andreessen Horowitz, Valar ventures (Peter Thiel&#8217;s fund) and Sir Richard Brandson, Transferwise is the leading fintech start-up disrupting the money transfer markets. The company was founded in 2011 by Taavet Hinrikus, Skype\u2019s first employee, and Kristo K\u00e4\u00e4rmann, a financial consultant, under the premise that a 5% fee on international money transfers was simply outrageous.<\/p>\n<p>Since the company was founded, over $8Bn have been transferred through the platform at 1\/10<sup>th<\/sup> of the cost of a Brick and Mortar bank, saving customers over 350M$ in fees.<\/p>\n<p><iframe loading=\"lazy\" title=\"The New World of TransferWise\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/F9kNnTD6ndw?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p>&nbsp;<\/p>\n<p>How can they charge only 1\/10 of the price that Banks charge? <strong>THEIR OPERATING MODEL!!!<\/strong><\/p>\n<p>Transferwise uses a marketplace model that is extremely different compared to the traditional banking model. Let\u2019s revise both<\/p>\n<p><strong><u>Traditional Banking model<\/u><\/strong><\/p>\n<p>Banks, who tend to operate usually in one country and in one unique currency, have small amounts of reserves of different currencies in their balance sheet. When one customer wants to transfer money to another currency, they go to the FX market and exchange the money for him. Then, they send the money to the destination account in the foreign country.<\/p>\n<p>The cost banks charge the customer tend to be the FX cost they had to exchange the money + a big margin (~80% of the cost). Currency exchange is a profit pool used to compensate for other loosing products like checking account services.<\/p>\n<p><strong><u>Peer-2-Peer Currency exchange model<\/u><\/strong><\/p>\n<p><a href=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/how_transferwise_works.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-4081 \" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/how_transferwise_works-1024x724.jpg\" alt=\"how_transferwise_works\" width=\"725\" height=\"513\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/how_transferwise_works-1024x724.jpg 1024w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/how_transferwise_works-300x212.jpg 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/how_transferwise_works-600x424.jpg 600w\" sizes=\"auto, (max-width: 725px) 100vw, 725px\" \/><\/a><\/p>\n<p>Transferwise has a double sided model. The company has bank accounts in each country they operate in and don\u2019t actually transfer money, they just match customers that are willing to exchange the same currencies but in opposite directions. For example, if a German person (Euros holder) wants to transfer money to a British account in Pounds, the german transfers the money from their own bank account to the Transferwise German bank account. On the other side, Transferwise transfers money from their own British bank account (in pounds), to the customers\u2019 British bank account. On the flip side, if an British person wants to transfer money to a german bank account, it works the other way round. Through this model, the actual money never gets transferred in the market, saving the FX fees necessary to operate in the market.<\/p>\n<p><strong><u>Provocative Marketing campaigns<\/u><\/strong><\/p>\n<p>Together with a different operational model that sustains a value creation business model, Transferwise has made a case to \u201cvilify\u201d banks, accusing them of hidden fees and unfaithful practices. Several youtube campaigns have become notorious in Europe for their originality and aggressiveness, deserving them free publicity in the media and capitalizing on the current distrust the general public has on the banking system.<\/p>\n<p><iframe loading=\"lazy\" title=\"#Nothing2Hide - NYC\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/ZufqOLl6ajE?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p>Transferwise has to date a valuation of over $1Bn and it has an ambition of revolutionize not only the currecny exchange market but also the entire banking industry leveraging an already well-known brand. Let the disruption begin.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Technology, borderless operations and innovative thinking is bringing light to the obscure market of retail currency exchange market. Let the banking revolution begin!<\/p>\n","protected":false},"author":1167,"featured_media":4139,"comment_status":"open","ping_status":"closed","template":"","categories":[385,19,380,259],"class_list":["post-4069","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-banking","category-consumer-tech","category-financial-markets","category-fintech"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Transferwise \u2013 The money transfer revolution - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/transferwise-the-money-transfer-revolution\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Transferwise \u2013 The money transfer revolution - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Technology, borderless operations and innovative thinking is bringing light to the obscure market of retail currency exchange market. 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