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The Global Digital Remittance Market is projected to grow at 13% CAGR to reach $40.26 billion by 2028 from $15.94 billion in 2020. Digital transformation is helping drive growth in the industry as institutions are able to provide improved products and services while minimizing user costs. London-based Wise (LSE:L) is a leading FinTech player in the market that recently went public.

Wise’s Offerings

Founded in 2011 by Kristo Kaarmann and Taavet Hinrikus, Wise, formerly known as TransferWise, was built to transfer money across different countries. It allows customers to manage money internationally more transparently, quickly, and in a more cost-effective manner.

The Estonian founders got the idea for Wise when they faced issues while transferring money from London to Estonia. Taavet lived in London but got paid in Euros; and Kristo lived in London, got paid in Pounds, but needed to send Euros back to Estonia for a mortgage payment. The two moved their money with their banks but realized that it was an expensive way because of the fees and the poor exchange rates offered by the banks.

To help address the issue, they came up with a rather simple process. They would look up the real exchange rate on Reuters, and each of them would use the rate to add Euros or Pounds to the other’s account. Both managed to get the currency they needed instantly, without having to pay any fees, and at the going exchange rate.

They decided to scale up this service to meet the demands of other similar customers. Today, TransferWise, now renamed as Wise, has partnered with banks and companies like Monzo, Bolt, and GoCardless, to give customers access to better international banking. They have also added a multi-currency account, a debit card, and a business account to cater to the growing demand. Unlike other wire transfer services that merely transfer funds from one currency to another, Wise also allows users to hold money in up to 56 different currencies with a Wise account, spend money internationally with the Wise card, and even invest in stocks.

Wise’s Financials

Wise earns revenues through cross-border transaction fees. It has been profitable since 2017. For its fiscal 2021, its revenues grew 39% to £421 million and profit was £30.9 million (~$42.7 million). It recently announced its third-quarter earnings and reported revenues of £149.8 million (~ $194.9 million), up 34%.

Recently, Wise announced its partnership with Haslle. The partnership allows Haslle customers to access fast, cheap, and transparent international payments provided by Wise within the Haslle platform. Wise Platform allows Hassle to meet the demands of seamless digital solutions while continuing to increase the number of spend management companies who have selected Wise Platform to provide international money transfers.

It also announced its partnership with Fruugo that will allow its merchants to use Wise Business account details to receive earnings as local withdrawals in 10 currencies, such as US, Australian, Singapore dollars, Euros, and British pounds. Customers will be able to receive local currencies, have low conversion fees on international transactions to over 50 currencies, and have access to a multi-currency debit card. With the partnership, Fruugo will be able to continue to provide a seamless and inexpensive solution while enabling retailers to sell more, worldwide.

Despite its innovative products, Wise competes with a slew of other financial institutions and dedicated money transfer services such as Western Union and Remitly. The key difference between these services and Wise though remains in Wise’s ability to allow customers to hold funds in different currencies. Companies like Remitly not only charge transaction fees for transfers, but they also earn money on foreign exchange spreads as they purchase currencies at a lower price than the quotes to the users. Wise, instead, wants to become known as a multicurrency account for any business or individual. It strives to reduce its fees from transactions to zero and recently announced that its average price charged to customers fell from 0.69% a year ago to 0.60%. Its ability to cross-sell new products to its customers has helped it deliver strong growth so far.

Prior to going public, Wise had raised $1.3 billion in 13 rounds of funding led by Silicon Valley Bank UK, Victor Koch, Fidelity, LocalGlobe, Baillie Gifford, Lone Pine Capital, Vulcan Capital, D1 Capital Partners, Vitruvian Partners, and Latitude. Its most recent round was held in May 2021, where it raised £160 million (~ $208.2 million) at an undisclosed valuation. A round held in 2020 had valued the company at $5 billion.

Wise went public in July 2021 through the direct listing route when it was listed on the London Stock Exchange. Its stock opened at £8 (~$11) apiece and was valued at $11 billion. Its stock is currently trading at $514.35 at a market capitalization of $5.25 billion.