TransferWise, the online currency exchange that uses the crowd to undercut traditional money transfer services, has announced that it’s added support for the U.S. dollar — a move that it believes, along with existing support for the British pound, euro, Swiss franc, Polish zloty, Swedish krona, Norwegian krone, and Danish krone, positions the company to become the preferred method of money transfer for European startups.
“We are seeing tons of startups using TransferWise already”, says TransferWise co-founder and CEO, Taavet Hinrikus, citing the examples of Erply and Adzuna, both of whom, I’m told, are using the service for part of their payroll with employees in the U.S., and Greece, respectively.
Billing itself as the “Skype of money transfer“, TransferWise enables individuals and businesses to send money between countries for a fraction of the price that banks and others charge, using a peer-to-peer, “crowdsourced” model — where money destined for transfer doesn’t unnecessarily actually leave each country — to get the best rate on the exchange. It passes on these saving by charging a small flat fee per transfer.
“We’re just not greedy”, says Hinrikus. “There is no real reason a bank has to charge this much for a simple thing – it’s not much harder for a bank to send money overseas than to send an email overseas”.
However, it’s a model that, like Skype and lots of other Internet startups, will require scale to become truly viable. Adding the USD to its currency mix would seem an important step towards achieving that.
Hinrikus says that for most European startups, TransferWise now supports the majority of currencies required to meet their international money transfer needs. And that, in addition to payroll (where savings could be passed on to give employees a “5% salary increase”, he says), and other outsourcing, startups are using the platform when taking early-stage investment from overseas investors. In this scenario, savings could amount to the equivalent of the corresponding legal fees for closing the round, which as PR-driven as that statement is, based on my own experience, does seem plausible depending on the size of the investment.
Interestingly, beyond the need to scale and the startup’s ambition, the comparison to Skype also extends to TransferWise’s personnel: Hinrikus was the Internet calling giant’s first employee. He’s since invested in a number of startups, including Tweetdeck, betaworks, Mendeley, blip.tv, wikimart.ru, and OMGPOP. TransferWise’s other co-founder is Kristo Käärmann, who is said to have “fintech” experience from PricewaterhouseCoopers and Deloitte&Touche.
In April of this year, TransferWise raised a $1.3m seed round from Index Ventures, IA Ventures, Max Levchin (co-founder of PayPal), TAG, Seedcamp and others.
To date, the company has grown to 20 employees, and I’m told will be “at least double” this time next year, increasing head count in its London and Tallinn, Estonia offices. The focus will be on maintaining its positive customer experience, and new product development (e.g. mobile, debit card support, and additional currencies).