July 1, 2020

TransferWise has ‘no intentions’ to become a bank but offering investment products

TransferWise, the recently valued 3.5 billion dollar international money transfer service headquartered in London, has secured an additional license with the UK. Regulators to enable the company to offer future investment products.

That’ll say U.K. Customers who have money invested in TransferWise ‘s multi-currency or so-called “borderless” account will be given the option of making it easier for them to access that money. Total deposits currently sit at £ 2bn so there’s a lot of potentially unused consumer currency.

The company does not provide any information about its upcoming investment offering, however, except to say it would initially provide “easy, inexpensive funds from reliable vendors” so that consumers can gain a return on their balance sheets. Within the Financial Services Compensation Scheme, up to £ 85,000 in assets invested as savings within a TransferWise portfolio per customer would be covered. The new bid is currently under production and will arrive “in the next twelve months.”

While zooming out, TransferWise claims a rising majority of its 8 million clients are using the borderless platform as an international banking solution. After 2018 nearly one million TransferWise debit cards have been released, and the TransferWise platform now also allows direct debits, instant foreign transfers to mates, and Apple and Google Pay. Adding savings and pensions, TransferWise says its dream is for the borderless account to replace ex-pats, freelancers, and travelers with “simple, old-world foreign banking.”

For companies, for freelancers, for ex-pats, for people who have just been moving countries. And this is another trait in the same list of things people expect us to do for them.

This, of course, begs the question: Does TransferWise aspire to become an official bank with a full banking license, appealing to the regulators’ current approvals. Käärmann gives a relatively emphatic response.

Indeed, Käärmann confesses that he is not a big fan of the prevailing current account market model, which he claims represents banks’ needs, not account keeping customers. That the money we keep in banks is being lent to deposits, company loans and overdrafts, and so forth, and the consumers keeping the money don’t even get a lot of value. And why do they do that? “Somewhat rhetorically, he asks.

Returning to the new investment option — and after a little bit of prodding from me — he says he wants it to be as straightforward as the main money exchange service of the firm, with consistent prices and working as hard as possible with the consumers. I should also expect it to be financially viable following TransferWise’s current modus operandi, rather than cross-subsidized to drag consumers into or grab quick attention, as is standard practice for other investment and savings goods.

Adds the CEO of TransferWise: “We want to be clear on what we’re solving the problem. [It] comes back to give people a choice as to where and how to keep their balances. And that might give you a hint of the product we are developing. Now I can tell that we are not developing an aggressive trading company, that’s not the goal. Our clients aren’t wondering if they could bet about the economy.

Conclusion:

There are tools for that, and for that reason, they are gradually [getting] better. What we are resolving with the investment product will be a much more passive way to choose where your balances are sitting.

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Akansha Pandey, Director of Sales at Fluper, is a leader in technology sales with a decade of experience. Known for her strategic approach, she excels in driving business growth and forging strong client relationships. Akansha's expertise lies in consultative selling, team leadership, and exceeding revenue targets. Passionate about mentoring, she enjoys sharing insights with aspiring sales professionals.