{"id":6343,"date":"2015-12-09T21:29:42","date_gmt":"2015-12-10T02:29:42","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/transferwise-quicker-and-cheaper-foreign-exchange\/"},"modified":"2015-12-09T21:29:42","modified_gmt":"2015-12-10T02:29:42","slug":"transferwise-quicker-and-cheaper-foreign-exchange","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/transferwise-quicker-and-cheaper-foreign-exchange\/","title":{"rendered":"TransferWise: Quicker and cheaper foreign exchange"},"content":{"rendered":"

Introduction to TransferWise<\/strong><\/p>\n

Until now, consumers have been forced to accept an unfortunate reality: when they wanted to exchange currency or send money abroad, their bank was going to give them a rate 200 basis points below market and probably also slap them with a fixed fee – just for good measure. Luckily, times are changing. A stream of hungry startups \u2013 such as TransferWise \u2013 are leveraging innovative business models and low cost bases to launch an assault on the market.<\/p>\n

TransferWise demonstrates the power of a closely aligned business and operating model \u2013 providing customers with substantially lower rates and fees as well as quicker transactions. The proof lies in its rapid growth \u2013 since launching in the United States in February, the platform has already transacted more than $1 billion from its US business. With a global transfer market estimated to around $5-10 trillion dollars, they well positioned for rapid growth.<\/p>\n

\"Capture2\"<\/a><\/p>\n

Business model<\/strong><\/p>\n

TransferWise allows customers to transfer money internationally by matching customers with complimentary money conversion <\/em>needs. For example, for every customer in the US that is transferring money to the UK, TransferWise is able to find customers in the UK that are transferring money to the US. Unlike a standard bank, which has one price for sellers of a currency and one for buyers and takes the spread, TransferWise offers customers the current mid-market rate and then applies a small fee. The fee varies depending on the currency, but is typically in the range of 30-40 basis points. On average, the fee is 8-10 times lower than the total cost imposed by standard banks.<\/p>\n

This business model allows TransferWise to create value for customers by essentially creating a two-sided market of currency exchange. By not actually needing to purchase currency, TransferWise is able to charge substantially lower fees<\/em>, and complete transactions rapidly \u2013 with one-third of the transactions across the Atlantic occurring instantly. [i]<\/p>\n

\"\"<\/strong><\/p>\n

Operating model<\/strong><\/p>\n

The crux of TransferWise\u2019s operating model is facilitating the low-cost market of currency exchange. This has involved establishing a number of very targeted processes:<\/p>\n