Name: Balancing the Ledger: TransferWise Says No to Blockchain
Uploaded: 2018-11-16
Duration: 10 min 22 s
Description: TrasnferWise cofounder and chairman Taavet Hinrikus stops by The Ledger.

[ MUSIC ] Welcome to Balancing the Ledger, where tech and finance intersect. I'm Robert Hackett. And I'm Joan [ UNKNOWN ]. And today we're here with Taavet Hinrikus, co- founder and chairman of Transferwise, one of the hot Fin tech companies out there right now. Now Transferwise, you guys do cross border payments, but what do you do differently than the incombence? So we really started Transferwise because myself and my co founder, Kristo, we were sending money between Estonia and Ukrane and we realized whenever we go to the bank we get horrible service. It's slow expensive and really. Inconvenient to use. Stand in line, wait days for money to arrive. We said well wait, it's the twenty- first century, [ UNKNOWN ], there might be something we can do to have the same experience with money. We realized that in order to do it, we have to go and build our own infrastructure. In every country we tried to connect the parent network, so we take money from the customer Really quickly for a low cost. We're able to convert it and to pay out to the recipient. And if we're lucky we can do it in real time in many countries we're in. How long does it usually take for the money to arrive? You can send money from Australia to UK, it'll be there in 15 seconds. Wow. That's something which, you know, was If you're a customer of a bank, it's like the future has arrived. Why are you able to do this but the banks aren't? It comes down to the building of our own infrastructure. Banks use a switch network which is great, money eventually gets out but many people touch the money in between and everyone takes a cut. Everyone keeps the money for a day using transfer wires because we plug in directly in every country. We can do it really quickly, and the cost is typically 10 times less using the bank. You plug in directly. Explain a little bit about what that means. So classically if you want to access US payment system, you probably have to go to a bank, maybe Wells Fargo, maybe some other bank, and you ask them, hey. Can you help us access the UK [ UNKNOWN ] network, that's the way it works in most places around the world. In the UK now TransferWise is planting directly into the faster payment system. Faster payment is a payment network which allows money to move between banks and consumer accounts in real time in the UK. TransferWise now became the first non- bank to be directly a member of faster payments. That means Whenever we need to make a payment in UK. We pay it out and boom, instantaneously it's on the recipient account. So, we emulate the [ UNKNOWN ] which means we usually get money from consumers or we payout instantaneously and [ UNKNOWN ] for us to do the currency exchange and that's the reason why we can do it. In close to real time in many cases. So your main competitors are Western Union and the banks of the world. But you only charge 1 % or less in fees. How are you able to keep your fee so much lower than these others? So really it comes down to a few things. It comes down to being online only, so we don't have a branch [ INAUDIBLE ] to support. It's only on your smartphone or computer so that makes things easier for us. Second, you know, we're really focused on being a technology company so we're using technology to make things smoother and faster. And you know, being started only seven years ago means we're doing things in a very modern way compared to a bank which may have systems failing back tens and tens of years. And lastly being straightly connected in the payment systems in every country means that we don't pay fees to any intermediaries. That kind of results in us being able to offer the lowest price which really allows us to offer the service and run a profitable business. And you've been profitable for this is your second year now isn't that right? Exactly. We're profitable, and we're really happy with that. That's enabled us to drop our prices. We done more than a dozen price drops this year. We're really looking at how do we make sure consumers get the best deal. So we meet entrepeneurs all the time who are talking about using cryptocurrency and using block chains to effect these cross quarter trades in a very cheap and fast way. Have you evaluated this technology? What do you think about it? Here's someone obviously we've heard this dream many times from different people. However if you start digging into it you realize that it may look great on paper. But in reality to make use of it it's really hard. Let's take BitCoin as an example. If you want to buy BitCoin you have to sign up to an exchange. You have to go through an inconvenient kyc procedure. It'll probably take days. And they'll take a few percent of your money. So you send BitCoin to a friend, they receive it. That happens pretty quickly. As they receive it, then guess what? You know, they can't go and buy coffee with BitCoin. So your friend receives some money. And so you have to find a local exchange. And it takes them again days to get the Bitcoin converted into real money. And somebody will take a few percent, and meanwhile Bitcoin has plummeted 15 %. So you get a cup of coffee only this tall. So not really convenient or fast. So we've looked at different blockchain technologies. But yet we haven't found anything which enabled us to do what we do in a way which is cheaper or faster. Kind of going back to building up our own network is what we believe in. And it has kind of the only ways that we can really make things ten times better than the existing what we see out there. You mentioned Bitcoin. But Bitcoin has many failings that have been long recognized as a medium of exchange. You cited some of those examples. But people have built upon that and have come up with other sorts of projects and different sorts of cryptocurrencies. There's Ripple, Stellar, you've got apps like Abra. And they're all trying to take on this cross- border payment market. Have you looked at those as well and what did you find? Did they come up short somehow? We have looked at that. I think today where we end up fundamentally is a question that There is not enough wide spread adoption of any of these. If every bank in the world was connected the Ripple network that would be amazing. Yet how many banks are using Ripple today in production? It's a very short list. So, we're, in that sense, we're big supporters of Ripple or anything else. We know the Ripple team and the other team and any of these get enough adoption. And it actually materially helps us do things cheaper and faster we love to. But so far we haven't found one. You've recently expanded not just from consumer to consumer transactions but also for business payments as well and you raised a whole lot of money last year in Venture Capital to do this. Can you talk a little bit about how that expansion is going and what's happening next? So when we launch TransferWise it was really focus on consumers. People like myself and [ UNKNOWN ] moving money from one country to another. We also learned that similar to consumers, the first multi [ UNKNOWN ] business you get a very horrible service from your bank. And I've realize there are many small businesses where they're employing overseas, who have supplied overseas, customer overseas And there's something we can do to help this. So we've been building out our multimedia business through services which over the past couple of years is going really well. In the US today, it's about one- third of our usage is happening from multimedia businesses. We've also now launched our API. So now anyone can take whatever products they're building and integrate transfer wise. And over, we're looking at people who are doing payroll service, people who have their own ERP system. You can built transport and freight into it and one last exciting piece of that, we're now working with a number of banks around the world to let overseas banks to work for their customers more international point of solution So if you are a new bank for example, Monzo is in UK, Say, Monzo owns a million customers, say a little bit transfer wire took some about three four weeks from start to end. And now everyone using Monzo is a mobile app can do transfer wires. We also sign a deal with BPCE, second biggest bank in France With more than 15 million customers who is now working on integrating Transfer Wise to offer it to all the customers. Transfer Wise is based in the UK, is that right? Correct. How are you coping with Brexit? You know to be honest it's a little bit frustrating you know we're now a few years into it and we still don't quite know what this means you know and the most important thing is It creates a whole lot of uncertainty around talent, you know. So day Brexit, So days have both happened the next day. You can't select people who are coming and asking, you know, what's gonna happen to us, are we allowed to stay in the UK, half of the people in our London office are not British. And now when hiring people, the same thing and like everybody is worried about kinda what's gonna happen, you know And on a micro level, it's really a question of how do we ensure that the great talent that's been coming to London will still keep on coming to London. If you look at Fusco and a company like Transferwise, so it's Buy even talent. So if London is unable to attract this talent in the future, that will make London much less competitive in the global war for talent. You were the CEO of [ INAUDIBLE ] Rise Up until about a year ago, can you tell us about that succession and why you changed roles, became the chairman instead? So a year ago we built a company to an amazing place. You know, I have spent seven years running [ INAUDIBLE ] we had a great team and company was profitable. Was kind of, you know, gave me a moment to think about what the next seven years would bring [ INAUDIBLE ]. I was lucky enough that I had a co- founder who was very excited to take over as CEO. And I continue as chairman, which allows me to look at other things besides [ INAUDIBLE ]. Yet, I'm spending a big chunk of my time helping transfer wise because still that's a very [ INAUDIBLE ] stages of the company. And back earlier in your career, you were the first employee at Skype, isn't that right? Yes, and I first got the back for the start up when I was hired by Nicholas [ INAUDIBLE ] before they started Skype. So I was part of the team that built Skype and seeing how you get a company from an IDM back to an applicant to hundreds and millions of customers. It was really exciting and in a way that's why there's a continuation in Skype journey you know. We're trying to make So we're in a smaller place. So looking at that career trajectory, are you looking at something after transfer wise? Are you dabbling in other sorts of things as well? Well we can talk about it in the future. [ LAUGH ] Okay well we'd love to have you back to talk about that. Thank you so much for being on the show. Thank you. I'm Robert Hackett. And I'm Jen Wieczner. For more Balancing The Ledger come to fortune. com. See you next time. [ MUSIC ]

Balancing the Ledger: TransferWise Says No to Blockchain

Finance

TrasnferWise cofounder and chairman Taavet Hinrikus stops by The Ledger.