Fixing International Payments for the World with TransferWise
Kristo Käärmann is the co-founder and CEO of TransferWise, a payments company fighting to break banks’ usurious grip on FX and international transfers.
TransferWise is one of Europe’s greatest fintech success stories, most recently valued at $3.5 billion in a secondary offering earlier this year. The company has nearly 2,000 employees around the world, moves $5.5 billion a month between nearly 100 countries and saves customers over $1 billion a year in fees.
In this conversation, Kristo and I discuss the evolution of international payments, how TransferWise helps banks as much as challenges them and how competition will shape the digital banking space.
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Thank you very much for joining us today. Please welcome, Kristo Käärmann.
Will:
Kristo Käärmann, welcome to Rebank. It's a pleasure to have you here.
It’s great to connect with you. I’ve been following your progress for years and, like many of our listeners, I’m sure, I’m an active user of your product — which I think is phenomenal.
Maybe you could give us a quick, high-level introduction to TransferWise and what you guys do?
Kristo:
Absolutely.
The story of TransferWise really started more than 10 years ago, when I moved to London from my native Estonia. I moved for work — I had a good salary and was consulting for banks. Over Christmas that year, I wanted to move my bonus back to my savings account in Estonia.
Back then, in 2008, the way it worked was you'd go to your HSBC branch, fill in a form, and then the money would show up in euros — maybe a week later.
The issue was, about 500 euros were missing from what I expected to receive.
I started investigating. I asked my Estonian bank and HSBC what had happened, and both told me it was all done by the book.
I realized that the problem was this: I had looked at the exchange rate on Google — the real rate — but what HSBC did was take that rate and mark it up by 5%. So while they told me it would cost me 15 euros to make the transfer, the actual cost ended up being closer to 515 euros because of the hidden markup.
At the time, I had a friend with the exact opposite situation. He was paid in euros but living in London, so he needed to move euros into pounds.
We started just swapping money. I made a pound-to-pound transfer into his Lloyds account in the UK. We looked up the real exchange rate on Google, and he put the equivalent amount of euros into my Estonian account.
So I got rid of my pounds in London, and he got his euros in Estonia. We both saved about 500 euros by cutting out the bank fees and the exchange rate markup.
That’s how it started — we had solved the problem for ourselves.
In 2011 — more than eight years ago now — we launched TransferWise with pretty much exactly that model: pounds to euros and euros to pounds. We collected pounds in the UK and euros in the Eurozone, then paid out recipients on the other end.
It was literally described in the opening TechCrunch blog post as: "There’s this website built by two Estonian dudes that lets you move money."
And what do you know — 15 minutes later, money started arriving in our accounts.
It was an incredible success story, especially given that it was 2011 — and the word "FinTech" didn’t even exist yet.
Will:
Okay, so I have to start with what I think is the most basic question — one I’m sure you get all the time — but I’m genuinely interested in your answer.
Why haven’t incumbent banks changed their model in response to TransferWise?
Kristo:
The short answer is, they don’t have to.
Retail banks have a large product suite, and if you rank those products by priority, international payments is not going to be at the top.
For most banks — the vast majority of the 26,000 banks around the world — international payments isn’t a key revenue driver. It’s not the reason people choose one bank over another.
So for them, it’s just not that important. That’s one part of the answer — they simply don’t need to change.
The second part is that it’s a little tricky for them to change, because they’ve never told their customers how much international payments actually cost.
In my case, they told me the transfer would cost 15 euros. Technically true — but they didn’t tell me that they were also marking up the exchange rate by 5%, which cost me another 500 euros.
So now imagine trying to make a public announcement saying, “Hey, that hidden 500 euro fee? It’s now just 400.” That’s hard to do.
They never disclosed it before, so it’s hard for them to “lower” a fee that was never officially stated in the first place.
And then there’s another element — one that took us a while to realize.
Initially, we thought banks were just taking all that as profit. It’s a lot of money, and we couldn’t really imagine that it actually cost that much to provide the service.
But then we started to see banks that were recommending TransferWise to their customers.
The first one was in Hungary. We saw a spike in new users and traced it back to a bank recommending TransferWise to their customers.
It was a small, niche bank, and for them, international transfers were expensive to handle. They were charging a lot, but it was also costing them a lot.
So in the end, they were making no profit — net zero — and delivering a bad customer experience on top of it.
In fact, we think the bank managers were using TransferWise themselves.
So eventually, they trained their branch staff: if someone comes in asking to send money abroad, show them how to download the TransferWise app, how to set up a transfer to the US or Thailand or wherever, and how to fund it from their account.
Problem solved. The bank didn’t make money on the transfer either way, but now they had a happy customer.
Will:
Mm-hmm. And I think the integration piece — the B2B side of TransferWise — is an increasingly important part of the business.
Many of the customers for that are actually banks, right?
In fact, I think in the U.S., you recently launched with at least one regional bank.
It sounds like in the U.S., there’s more scope for partnerships going forward.
Can you talk a bit about that B2B proposition and the uptake you’ve seen from banks?
Kristo:
This part of the business was actually inspired by the Hungarian bank I mentioned earlier.
It helped us realize something important:
Yes, it’s a problem that banks are not transparent — and we shouldn’t tolerate that.
But even if they were transparent, international payments would still be a very expensive service line for them to offer.
Since 2016, we’ve started opening up our APIs — initially for selected partners.
The first was N26, the German challenger bank.
They went live with TransferWise integration, which immediately gave their users international reach.
N26 account holders could access TransferWise from directly within their app.
Since then, we’ve rolled it out to other large challenger banks — like Monzo in the UK.
More recently, a bank called Up in Australia announced an integration.
Bunq in the Netherlands is also live, and there are a few others.
Interestingly, we’re now also seeing interest from traditional banks.
For many of them, international payments are not a core business, but they still want to offer their customers a great experience.
So they’re partnering with us.
A good example is BPC in France — a large banking group that announced a TransferWise integration last summer.
And the one you mentioned in the U.S. is Stanford Credit Union.
They’re a smaller bank, focused on serving Stanford students and staff — who, of course, are quite international.
What’s really cool about the Stanford Credit Union launch is that, because even moving money domestically in the U.S. can be expensive, it turns out that Stanford Credit Union is now the cheapest bank in the country for international payments.
It even shows up on our comparison board — it’s cheaper than using TransferWise directly.
Will:
I feel like there’s a play there to just use TransferWise for domestic payments in the U.S. I mean, the system is so bad — you can’t even make an account-to-account transfer easily.
Kristo:
I mean, you have Venmo now — and clearly there was an opening in the market.
When people need to do something, and there’s no good facilitator for it, new solutions like Venmo will emerge.
We saw the same thing happen in China.
The banks weren’t particularly easy to use, so you suddenly had Ant Financial, Alipay, and WeChat Pay sweeping up the domestic market because they were so much more convenient.
Will:
Right, but with Venmo, you still have to offload the funds once you receive them — whereas TransferWise is account-to-account.
Kristo:
That’s true.
But even for us, we’re still relying on the same underlying infrastructure.
Sure, moving money from one TransferWise account to another is fast — but that’s not rocket science. That’s not really the interesting part.
The challenge is when we move money to or from other bank accounts in the U.S.
There, we still have to use the ACH network — and the ACH network is now much slower than nearly every other country’s domestic payments system.
Will:
Other countries seem far ahead in this regard. The U.S. domestic payments system is still incredibly slow. Maybe there’s very slow progress on that front, but hopefully it’ll come in time.
Kristo:
It’ll come.
Will:
So, building on this B2C point, and thinking about not just account-to-account payments internationally, but also the borderless account—which is a fantastic product—and then your B2B proposition through partnerships, if you think about TransferWise today and project forward a few years, what’s the primary driver of your growth and value creation? Are you a B2B company or a B2C company?
Kristo:
We revisit that question quite often. And the basic answer is: the problem we’re solving is moving money across borders—whether that’s individuals, businesses, institutions, or large corporates. At the end of the day, it’s still the end consumer paying for all of this, whether directly or indirectly.
Large consultancies like McKinsey and Bain have studied the space and estimate that people—whether individuals directly or through small businesses—pay around $200 billion annually in cross-border fees. That includes both transaction fees and the hidden costs built into exchange rates.
So our impact, as TransferWise, is measurable. We try to be precise in calculating how much we save our users. We know where their money comes from and what they would’ve paid using their bank. By our estimates, we’re saving users about £1 billion a year—that’s around $1.3 billion. So we’ve addressed roughly 0.5% of the overall problem.
That tells us two things. One: we’ve made meaningful progress. Two: we still have a long way to go. And that’s what drives our product development.
You mentioned the borderless account. That product gives users local account details in multiple countries—six or seven now—including the U.S., U.K., New Zealand, Australia, Poland, and Germany.
So for example, if I’m a merchant in Sweden and I need to invoice a client in the U.S., I now have a U.S. bank account through my TransferWise borderless account. That lets me invoice as a local business, which improves cash flow and lowers costs.
It also works well for freelancers being paid by international companies. Instead of their paycheck getting converted at a bad rate by a local bank, they can get paid directly in the currency of the paying market, then convert it at a fair rate whenever they choose.
We’ve also added a debit card to this account. It uses whatever balance is available in the corresponding currency. So if I’m in Singapore, the card draws from my Singapore dollar balance. If I’m in the U.S., it uses my U.S. dollar balance.
This helps us tackle another issue: if you use your bank card abroad, you often get hit with poor exchange rates and additional international transaction fees. There are countless ways those $200 billion in fees get accumulated across borders.
What we’re doing at TransferWise is expanding the toolkit that helps people and businesses move money globally—more transparently, more affordably, and more efficiently.
Will:
So you mentioned Singapore before. We're sitting in your beautiful Singapore office right now, and I think either just this week or maybe last week, you put out a press release around the integration into, I think it was six of the more widely used wallets throughout Asia.
It’s a fascinating phenomenon that I think anyone based in Asia or who’s spent time here is very familiar with — the idea that storing money, spending money, sending and receiving money is often done through non-bank wallets.
Can you talk a bit about the importance of wallets in Singapore and Southeast Asia, and what motivated your decision to connect into them?
Kristo:
That’s a very good question. It’s helpful to reflect that there are actually three generations of wallets.
I’d say the first generation was PayPal — now about 20 years ago. That was the world’s first wallet in a sense. It was a place where people could hold money, but it didn’t necessarily have an underlying bank account.
The second generation of wallets were things like M-Pesa — feature phone–based wallets, very widely used in Africa and some parts of Asia, but not quite as ubiquitous here. They did really well in Africa. If you walk around Western or East African countries, most people don’t have a reason to open a bank account because money moves easily between telecom-carrier-based wallets. That works really well.
Now in Asia, we’re seeing the growth of a third generation — which is what you’re referring to. These are the wallets that have emerged in apps like Grab or Gojek — super apps, essentially. China is probably the best example, with Alipay and WeChat Pay.
The reality is that using a traditional bank account just isn’t very convenient in a lot of cases. So these apps — whether it's a ride-hailing app like Grab or a messaging app like WeChat — have added wallet functionality. And that’s where people store and use their money.
That’s definitely a key phenomenon in Asia.
At TransferWise, we’ve historically been very good at moving money from bank account to bank account, because in the Western world, that’s where money lives. In Asia, that’s no longer true. Yes, 98% of the time money still lives in bank accounts, but 2% of the time, it lives in wallets — and in some countries, that number is much higher.
Take Indonesia for example. Some people have bank accounts, and we’ve always delivered money to those. But there are millions — tens of millions — of people who only use wallets. They have no reason to go to a bank.
So with our move to integrate with six of the most popular wallets in Asia, we’ve opened up TransferWise to potentially 150 million people across the region.
These are people who didn’t previously have access to international money transfers through our platform, because they didn’t have bank accounts. Now they can receive money directly into their wallets.
That’s a pretty incredible number if you stop and think about it.
Will:
And I guess there’s scope to bring on additional wallets over time?
Kristo:
Absolutely, and I think it’s certainly a wave we see developing.
Maybe it will remain specific to Asia in the future, or maybe it becomes a broader global movement.
But certainly, delivering money to wherever it’s held electronically is part of our long-term goal.
We still don’t deal with cash — it’s just too expensive and too hard to track.
Will:
I’d love to switch gears slightly and hear a bit more about the eight years between founding in 2011 and where you are now.
You guys have clearly been one of the big UK FinTech success stories — global FinTech success stories.
In your mind, what one or two things have been most relevant in helping you scale globally so quickly?
Kristo:
I do think we’ve had a very clear problem to solve.
The threshold for how expensive and poor the international payment services offered by banks are — for both people and businesses — has really fueled our growth.
But the way we’ve approached this is, first and foremost, with focus.
We’ve been really clear about why people join TransferWise and why they recommend TransferWise.
In the early days, we had an invite program where you could post a message to a friend on our website, and we’d email it to them.
Reading through those messages was incredibly enlightening — it helped us understand exactly why people were recommending TransferWise.
This viral, recommendation-driven growth loop has been a major growth driver.
But the reasons behind the recommendations come down to three or four things — and we’ve codified these very deeply into our organization.
It starts with cost.
Most people switch because it’s simply cheaper to use TransferWise than to use their bank.
And because banks are so opaque about their fees — especially in how they build them into exchange rates — there’s usually a big “aha” moment when people realize how much they’ve been overpaying.
That realization often leads to: “I’ll never do that again,” and, “I need to tell my friends.”
So cost is the first driver.
Then, once people start using TransferWise, one of the things that stands out is speed.
We’re in Singapore now — and if you move money from your Singaporean bank account, say DBS, to a UK bank account using TransferWise,
it’s very likely to arrive in under 20 seconds.
The same is true for Hong Kong, Australia — even the US, though it's slightly slower.
In fact, 24% of all our transfers globally — and we move about $5.5 billion USD equivalent every month — arrive in under 20 seconds.
So speed is definitely a second big factor.
The third and fourth reasons are a little harder to quantify.
One is convenience.
Banks have actually helped us here — many still don’t make it easy to send money internationally.
It wasn’t long ago that if you were a Wells Fargo customer in the US and wanted to send an international wire,
you had to physically go into a branch.
That’s changed, but not everywhere and not fully.
And the fourth is coverage.
We integrate deeply into local payment networks.
We were the first non-bank to integrate directly into the Bank of England — that went live early last year.
We’re also integrated directly into the Euro system.
These integrations let us cut out middlemen, which delivers the cost and speed benefits I mentioned earlier.
Will:
And from an execution standpoint, that's no easy feat.
It's one thing to have a great product that people want to use — but how do you actually bring it to dozens and dozens of markets quickly, and in a regulated space?
With great technology that works well at scale, that functions in different languages, and handles all the local iterations?
Kristo:
There’s a lot of hard work that has gone into this.
We’re now 1,800 people — and we’re still hiring.
We have 300 open job postings right now, so go check it out.
We’re hiring in Singapore, Budapest, London, New York, Australia, Tokyo — pretty much every corner of the world.
Just find the closest office to you.
But I’ll say this: it’s not easy.
So if you’re looking for an easy job, don’t even open the website.
What we’re doing here — what we’re trying to build — isn’t easy.
Will:
To wrap up, maybe we can tie some of these threads together.
We touched on the relevance of wallets.
We talked about how incumbent banks think about FX.
We covered TransferWise’s B2C and B2B propositions.
If we project forward — looking at the evolution of the space — we’re seeing digital banks increasingly building scale.
That’s happening in Europe, in the U.S., and with newly licensed virtual banks in markets like Hong Kong — and I believe soon in Singapore as well.
TransferWise, as we discussed, is running its own digital account product, while also offering B2B integrations.
Where do you see the competitive dynamics taking the market from here?
And what does TransferWise need to do to stay relevant in that future?
Kristo:
I think one interesting observation I’ve made in the banking space is that when we compare banking and tech, we see there’s a lot more reach for a tech company.
You have one Uber, and then a few smaller players.
You have one WhatsApp — and then WeChat in China — but you don’t have a WhatsApp for every country.
By contrast, in banking, you have three or four banks for every country.
There are 26,000 banks globally.
It’s interesting to think about how that changes as banks start to act more like tech companies — as they should.
How is competition going to play out?
Does the world really need 26,000 banks?
And if so, what are all of those banks going to do?
I think it’s quite likely that banks will need to specialize and find their niche.
And that niche is unlikely to be geographic — meaning it’s probably not going to be that just one part of New York, for example, needs a specific local bank.
That seems unlikely in a world that’s increasingly digital.
So that’s something I’m curious to see — how it all plays out.
But regardless of how many banks there are, or who they are, people — and the customers of those banks — will still need to move money across borders and currencies.
We're unlikely to move to a single global currency — like Libra, or something else — anytime soon.
Even the eurozone was a monumental achievement, and it was incredibly hard to implement.
Doing something even bigger than the eurozone is hard to imagine happening any time soon.
So we’ll still have national currencies in the future.
We’ll still need to move between them.
And we’re here to build the infrastructure — for individuals, for businesses, and for banks — to do exactly that.
Will:
Excellent.
Well, great to connect with you, Kristo.
Congratulations on all the incredible work over the past few years — and I look forward to watching you continue to succeed well into the future.
