30 May 2023

UK fintech disruptor lowers cost of currency transfers

Today’s fintech is tackling an ancient challenge: how to move money across the world as fast and cheaply as possible.

Bank-based methods are costly because commissions are charged by intermediary banks. Margins between buying and selling a currency are often between 5% and 10%. 

These costs impact Australian businesses – especially exporters with operations and employees overseas. It also impacts Australians who want to transfer money to friends and families overseas.

One company that’s tackled this challenge head on is LSE-listed Wise, formerly TransferWise. Established in London in 2011, the company can execute foreign transfers in more than 50 currencies. According to Anhar Khanbhai, Senior Manager, Public Relations, Wise aims to create a money-transfer service that was instant, convenient and transparent.

‘At Wise, “instant” means the money arrives in less than 20 seconds. “Convenient” means it’s a 100% digital experience. “Transparent” means no hidden fees or exchange rate markups. On average we charge one-eighth the cost of our traditional competitors.’

Australian consumers are open to fintech innovation

Wise launched in Australia in 2016. According to Anhar, the market was right for disruption. Australia has a large migrant population with millions of citizens and residents who want to transfer money to family members overseas. However, there was little competition for money-transfer services.

‘Back then, Australia was one of the most expensive countries in the world to send money from,’ she says. ‘It made perfect sense for Wise to launch here.’

Australia: an attractive destination for fintech investors

 Anhar says that despite the challenges, it proved easier to set up operations in Australia as compared to other financial jurisdictions. 

‘Australia’s a great place for fintechs to invest,’ she says. ‘The regulators benchmark themselves against financial regulators in other countries. This makes them adaptive. But it also means fintechs that come to Australia meet familiar territory.’

Wise has expanded its product suite since setting up in Australia. In November 2020, APRA issued Wise a Purchased Payment Facility license. This is a limited banking licence that allows Wise to directly connect to Australia's real-time payments systems. 

Fintech helps Australian exporters lower the cost of money transfers

Wise’s initial target market was Australian consumers. Almost immediately, however, businesses began asking to use the same service. Wise began to open up the services to commercial customers. 

Anhar says that thousands of Australian businesses are now using the service’s dedicated business features. These include batch payments, integrations with accounting platforms for simpler reconciliation and multi-user access. 

Wise’s technology can also be integrated into business backend systems, to run international payroll.

‘Wise is making it cheaper for Australian businesses to trade overseas’, says Anhar. ‘Small exporters benefit particularly. This is one example of how fintech is helping to lower the barriers for Australian companies that are building overseas markets.’ 

Helping Australia’s challenger banks

According to Anhar, Wise is helping to shake up financial markets in Australia as well. This is creating more choice for businesses and consumers. 

For example, some of Australia’s challenger banks have now connected Wise into their own banking apps. 

‘In 2019, we teamed up with Australian challenger digital bank ‘Up’,’ she says. ‘Up integrated Wise’s API into their app. This saved them from having to build up their own international transfer feature from scratch.’

This article was first published on 17 December 2021. It was updated on 30 May 2023 to reflect changes in relation to the Australia-UK Free Trade Agreement (A-UKFTA).

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