As consumers, we hate to feel we’re being taken advantage of. This is one of the reasons why consumers have such a poor perception of the big names in the finance world. There are a whole host of banking services that exasperate customers but one in particular that leaves consumers dissatisfied is international transfer services.
Something that should be simple; sending money abroad, is often a frustrating process. The banks add their fee which isn’t always advertised upfront, leaving the customer feeling they’ve been ripped off. Of course, there are many different banks to choose from but when all use roughly the same process and fees, the customer feels they don’t really have a choice.
It was precisely this problem that led to the creation of TransferWise, a peer-to-peer money transfer service, in 2011.
While working together in London, two Estonian colleagues Kristo Käärmann and Taavet Hinrikus shared a common frustration when sending money between the UK and Estonia.
Taavet had worked for Skype in Estonia and was paid in euros while Kristo worked in London but paid a mortgage in euros in Estonia. Both encountered hefty bank fees when sending money abroad and so came together to create their own transfer scheme.
Using the mid-market rate on Reuters, the pair agreed a fair exchange rate to transfer money each month. Kristo placed pounds into Taavet’s bank account in the UK while Taavet paid euros into Kristo’s account in Estonia. As a result, they were both able to get the right currency without paying any bank charges.
The pair quickly realised that many others must be experiencing the same problems so they created TransferWise, replicating their own peer-to-peer arrangement but on a much larger scale. The result is a platform that offers international transfers at a fraction of the cost of a traditional bank.
With over a million customers each month, TransferWise has already transferred over £1 billion across 19 different currencies, saving customers money on every transaction.
What makes TransferWise different and so attractive for consumers is that it is completely open about its fees. Unlike the banks, TransferWise uses real exchange rates and the small fee is clearly advertised so there are no hidden surprises.
The company has devised an incredibly simple system to keep its costs low. For example, when a customer transfers money from Britain to Italy, they send the money to TransferWise and it is stored in the company’s British account. If the money is being moved the other way, it will be stored in the Italian account. The company has bank accounts all over the world, making it possible to transfer money to and from just about anywhere.
TransferWise has developed an algorithm to match one sum with another and takes the sum out of the national account to give to the receiver. This avoids international transfers altogether and means the money never actually crosses borders.
The TransferWise story is a great example of a crusade where the needs of customers have been addressed by using the latest technologies. Like the very best crusades; they have found a simple solution to a worldwide problem!
TransferWise has now developed a mobile app so its customers can make transfers on the go. And email updates let the customer know exactly where their money is throughout the transfer process.
TransferWise understands the importance of creating a great customer experience to build loyalty and a strong reputation. In contrast to the big financial institutions, TransferWise started with the needs of the customer, producing a service that would be fair to them, rather than one purely based on profits.
The fair and transparent ethos has allowed the company to gain a 5-star rating on the business review site TrustPilot – no mean feat for a finance business. The company has also attracted interest from investors, most notably receiving a $25 million investment from Sir Richard Branson.
The company has a great social media presence, using Facebook and Twitter to build the brand and reach new customers. They also offer live chat on their website and have a dedicated customer service department to respond to customer queries.
TransferWise has recently launched a business arm; allowing businesses to transfer money at a fraction of the cost they may be paying their bank. It is estimated that 44% of UK SMEs send or receive international money transfers at least once every six months but many are unaware how much they’re charged for the service.
Using TransferWise, businesses can pay suppliers or employees overseas, take payments from customers and transfer funds between their own accounts in different countries.
TransferWise is a great example of how consumers are no longer willing to sit back and be taken advantage of. We know that technology allows companies to keep their overheads low and we want them to pass the cost-savings on to us.
The banks need to up their game and start treating consumers more fairly. If not, crusading start-ups like TransferWise will beat them to it.