'Estonian Foreigner's "Wise" Breaks Down Borders of Money [Hidden Eop Story]'

Established in London, UK in 2010
Dissatisfied with high bank transfer fees
Launched fast, affordable new service integrating IT
High growth rate with provocative marketing strategy
Also regarded as the 'Second PayPal'

Wise co-founder Christo Karman (right) and Tabet Hilingkus / Photo by Wise homepage capture

[Asia Economy Reporter Lim Juhyung] The advancement of technology has even broken down the "borders of money." This is the story of the UK-based overseas remittance company Wise. Founded in 2010 by an Estonian migrant worker frustrated with the inconvenient overseas remittance services of major banks, Wise has transformed into a tech company used by tens of millions of people across 80 countries worldwide in just 11 years. How did Wise grow into a flagship company in the UK fintech industry?

◆Tired of Bank Fees... 'Wise' Founded by Migrant Workers

Wise was established in 2010 as a startup in London, the capital of the UK. At that time, its name was 'TransferWise.' It can be translated as "transfer wisely." The founders of Wise were two IT workers who had come to the UK from the small Eastern European country of Estonia in search of jobs. Their names were Kristo K??rmann and Taavet Hinrikus.

They faced a problem at the time. K??rmann, who worked at the large UK accounting firm Deloitte, was paid in pounds but needed to send money to his family back home in euros. Conversely, Hinrikus was paid in euros but needed to convert to pounds to live in the UK.

Logo of British fintech company 'Wise' / Photo by Wikipedia capture

The two had no choice but to rely on the foreign exchange and overseas remittance systems of major banks to exchange pounds and euros. The problem was that banks charged exorbitantly high fees for currency exchange and remittance, and the service took too long. There were frequent cases where exchange rates changed during the transaction time, causing greater losses than expected.

This problem was especially severe in the 2010s when Kristo and Taavet decided to start their business. At that time, hundreds of thousands of workers had migrated to the UK to escape unemployment caused by the Eurozone economic crisis, and all of them faced issues related to currency exchange and remittance. Paying high fees made their already tough lives abroad even more strained.

Sensing these consumer complaints, Kristo and Taavet decided to develop a remittance service that was simpler and cheaper than banks. They built a new remittance system applying IT technology. This was the birth of TransferWise.

◆Shaking Up the Traditional Financial Industry by Applying IT Technology

How does TransferWise work? Actually, it is very simple. TransferWise creates electronic wallets in every country where it provides currency exchange and remittance services, and when needed, it withdraws money from these wallets to pay customers.

For example, suppose person A living in the UK wants to send money to person B living in the US. TransferWise receives the amount of pounds A wants to send, applies the real-time exchange rate, withdraws the equivalent amount in dollars from its US account, and sends it to B. Then, it collects the remittance amount from A's account and deposits it into its UK account.

In other words, no actual transaction occurs directly between A and B. Instead, TransferWise's UK and US accounts pay and receive amounts equivalent to what A sends and B receives. Through this method, TransferWise can provide currency exchange and remittance services almost in real-time without the complicated international remittance procedures. This is a case where IT technology was applied to traditional finance to create a much more competitive service.

Wise gained consumer support by implementing an aggressive marketing strategy that pointed out the high fees of traditional large banks. / Photo by Wise YouTube Channel Capture

TransferWise received enthusiastic responses from global investors upon its initial launch. Over 10 years since its founding, it has raised a cumulative $1.3 billion (about 1.55 trillion KRW) in venture capital, and in July last year, it changed its corporate name to 'Wise' and successfully listed on the London Stock Exchange. As of the 13th, Wise's market capitalization reached ?9.2 billion (about 15 trillion KRW).

In its early days, the company attracted attention with its aggressive and "bold" marketing. Highlighting the expensive fees of bank exchange services, TransferWise ran a naked protest called 'nothingtohide' in 2014, emphasizing its transparent fee system and capturing consumer attention.

As a result, the company has been rapidly expanding every year. Its revenue has grown by 40-50% annually, and the most recent disclosed figures show that in the first quarter, revenue was about ?123.5 million (approximately 200 billion KRW), with remittance volume reaching a staggering ?16.4 billion (26 trillion KRW) during the same period.

◆Wise Expands into Asset Management, Could It Become the Next PayPal?

Wise is now focusing on business expansion. In August, Wise launched a new asset management service called 'Assets.' It aims not only to convert customers' money into other currencies or send it overseas but also to manage various assets such as stocks directly and generate profits, evolving into a full-fledged financial company.

In this regard, global investment firm Motley Fool compared Wise's trajectory to that of the world's largest online remittance company, PayPal. Motley Fool noted that Wise's growth story is similar to PayPal's early days, stating, "Just as PayPal established itself as the market standard through aggressive marketing strategies, Wise is taking a similar offensive."

They added, "PayPal did not stop at remittance systems but accumulated various services to become a 'super app.' It seems Wise is gradually trying to follow this path. PayPal helped new technologies like e-commerce grow. While it is still too early to judge what role Wise will play in the future, imagining the potential of this fintech company is very exciting."

This content was produced with the assistance of AI translation services.