- Wise is a fintech company founded by Estonian businessmen Kristo Käärmann and Taavet Hinrikus in 2011. The pair created Wise to help consumers avoid currency conversion fees and unfavorable exchange rates.
- Wise makes money via money transfer fees and ATM withdrawal fees if customers exceed a monthly limit. What’s more, the company charges a holding fee for account balances that exceed €15,000 for individuals and €70,000 for businesses.
- Wise also charges a fixed wire payment fee to users who want to receive U.S. dollars. Lastly, the company charges a 0.40% annual fee for its Wise Assets investment service.
Business Model Element Analysis Implications Examples Value Proposition Wise’s value proposition centers on offering a transparent and cost-effective solution for international money transfers and currency exchange. It provides real exchange rates, low fees, and multi-currency accounts, saving customers money compared to traditional banks. Wise emphasizes transparency, speed, and convenience, making it an attractive option for individuals and businesses with international financial needs. Provides a transparent and cost-effective solution for international money transfers. Offers real exchange rates and low fees, saving customers money. Provides multi-currency accounts for convenient global financial management. Attracts individuals and businesses seeking a reliable and affordable way to transfer money internationally. Promotes financial inclusion by making cross-border transactions accessible to all. – Individuals use Wise to send money abroad to family, friends, or for personal reasons, benefiting from cost savings and transparency. – Businesses leverage Wise for international payments, payroll, and supplier transactions, reducing currency exchange costs. – Multi-currency accounts enable users to hold and manage funds in different currencies, simplifying global financial operations. – Wise’s user-friendly platform makes it accessible to a wide range of customers, promoting financial inclusion. – Wise’s transparent fee structure and exchange rates set it apart from traditional banks and money transfer providers. Customer Segments Wise serves a diverse customer base, including individuals, expatriates, freelancers, small and medium-sized enterprises (SMEs), and large corporations. It caters to people and businesses with international financial needs, whether it’s sending money to family abroad, paying international suppliers, or managing global finances. Wise’s global reach attracts users worldwide. Addresses the needs of individuals, expatriates, freelancers, SMEs, and large corporations. Caters to customers with international financial needs. Provides solutions for various cross-border transactions and financial management. Offers services suitable for both personal and business use cases. Attracts users from around the world seeking affordable and convenient international money transfer options. – Individuals use Wise to send money to family members living abroad, pay for international services, or make overseas investments. – Expatriates and freelancers rely on Wise for receiving payments from clients worldwide, saving on currency conversion fees. – SMEs and large corporations utilize Wise for international payments, payroll, and managing multiple currencies. – Wise’s global presence and multi-currency accounts make it accessible to users from different countries and backgrounds. Distribution Strategy Wise primarily operates as a digital platform accessible through its website and mobile apps. It offers a straightforward process for creating accounts, verifying identities, and initiating transfers. Wise utilizes digital marketing, partnerships, and word-of-mouth referrals to attract and engage users. The platform actively promotes its multi-currency accounts and borderless debit card. Ensures accessibility through digital platforms and mobile apps. Provides a streamlined account creation and verification process. Utilizes digital marketing and partnerships to reach potential users. Encourages word-of-mouth referrals by offering incentives. Actively promotes multi-currency accounts and borderless debit cards for added convenience. Attracts users seeking a user-friendly and convenient solution for international financial transactions. – Users can create accounts and initiate transfers through Wise’s website and mobile apps, offering flexibility and convenience. – Digital marketing efforts include online advertisem*nts and social media promotion to reach a wider audience interested in international money transfer. – Partnerships with businesses and platforms expand Wise’s reach and user base. – Wise’s referral program incentivizes users to refer others, driving word-of-mouth growth. – Multi-currency accounts and borderless debit cards provide added convenience for users managing global finances. Revenue Streams Wise generates revenue through several sources, primarily transaction fees, currency exchange spreads, and subscription fees for business users. It charges customers a fee based on the transaction amount, typically a percentage of the total. The currency exchange spreads are based on real exchange rates, and Wise’s transparent pricing ensures customers are aware of the costs involved. Additionally, Wise earns income from its premium business plans and borderless account services. Relies on transaction fees and currency exchange spreads as primary revenue sources. Charges customers based on transaction amounts. Offers transparent pricing to ensure cost awareness. Generates income from premium business plans and borderless account services. Diversifies revenue streams to support financial stability. – Users are charged transaction fees and currency exchange spreads when sending money internationally. – Wise’s transparent pricing model provides clarity about the costs involved, fostering trust among users. – Premium business plans and borderless account services offer additional features and generate income for Wise. – Diversified revenue streams help maintain financial stability, even during fluctuations in transaction volume and currency exchange rates. Marketing Strategy Wise’s marketing strategy includes digital advertising, content marketing, partnerships, and customer referrals. It focuses on educating customers about the hidden costs of traditional banks and emphasizing Wise’s transparent pricing. Wise actively encourages users to refer others through its referral program, leveraging word-of-mouth marketing. The company also provides informative content to enhance users’ understanding of international finance. Utilizes digital advertising and content marketing to educate customers about hidden bank fees. Emphasizes transparent pricing as a key selling point. Encourages word-of-mouth marketing through its referral program. Provides informative content to enhance users’ understanding of international finance. Attracts users seeking a cost-effective and transparent solution for international money transfer. – Wise’s digital advertising campaigns highlight the hidden fees charged by traditional banks and the benefits of transparent pricing. – Content marketing efforts include blog posts, articles, and guides to educate users about international finance and currency exchange. – The referral program incentivizes users to refer friends and family to Wise, contributing to user growth. – Informative content provided by Wise enhances users’ knowledge of international finance, enabling informed decisions. – Wise’s marketing efforts attract users looking for an affordable and transparent way to send money internationally. Organization Structure Wise operates with a centralized structure overseeing product development, marketing, and customer support. It collaborates with regulatory authorities to ensure compliance with financial regulations. Wise maintains a dedicated customer support team to assist users with inquiries, account management, and security-related matters. The platform actively engages with the fintech community and industry partners. Employs a centralized structure for product development, marketing, and customer support. Collaborates with regulatory authorities to ensure compliance. Provides customer support teams to assist users with inquiries and security. Actively engages with the fintech community and industry partners. Focuses on regulatory compliance, security, and user education to build trust. Adapts to evolving regulatory changes and industry developments. – Wise’s product development teams work on enhancing the platform’s features and security measures. – Collaborations with regulatory authorities ensure compliance with financial regulations and promote trust among users. – Customer support assists users with inquiries, account management, and security-related matters. – Active engagement with the fintech community fosters collaboration and knowledge sharing. – Wise places a strong emphasis on regulatory compliance, security, and user education to build trust among users. – Staying informed about regulatory changes and industry developments allows Wise to adapt to evolving requirements and maintain compliance. Competitive Advantage Wise’s competitive advantage lies in its transparent and cost-effective approach to international money transfer and currency exchange. It offers real exchange rates and low fees, saving customers money compared to traditional banks. Wise’s user-friendly platform, global reach, and multi-currency accounts set it apart. Its commitment to transparency, education, and customer referrals contribute to its leadership in the fintech industry. Provides a transparent and cost-effective solution for international money transfer and currency exchange. Offers real exchange rates and low fees, saving customers money. Provides a user-friendly platform with multi-currency accounts. Attracts a global customer base seeking affordable and convenient international financial services. Fosters trust and user growth through transparency, education, and customer referrals. Sets itself apart as a leader in the fintech industry. – Wise’s platform is recognized for its transparency, offering real exchange rates and low fees that save customers money. – A user-friendly interface makes Wise accessible to a wide range of customers, from individuals to businesses. – Global reach and multi-currency accounts cater to users with diverse international financial needs. – Wise’s commitment to transparency, education, and customer referrals contributes to its growth and leadership in the fintech industry. – Wise’s competitive advantage is reinforced by its continuous efforts to provide cost-effective and convenient solutions for international finance.
Table of Contents
Origin story
Wise, formerly TransferWise, is a fintech company founded by Estonian businessmen Kristo Käärmann and Taavet Hinrikus in 2011.
The idea for the platform was conceived while friends Hinrikus and Käärmann were working in London.
Hinrikus, who was the first employee at Skype, was paid in euros but needed British pounds to pay his bills.
Conversely, Käärmann worked for Deloitte and was paid in British pounds but had a mortgage in euros back in Estonia.
As a result, the pair found moving funds between bank accounts to be an expensive process – a fact exacerbated by poor exchange rates.
To remedy this problem, the pair first looked up the real exchange rate on Reuters each month.
Hinrikus then transferred his euros into Käärmann’s bank account, while Käärmann did the reverse with his British pounds.
Both received the currency they needed almost immediately and were able to avoid poor exchange rates and other unscrupulous charges.
Quite by accident, the pair had discovered a new business model.
Despite neither co-founder actually wanting to start a company, the idea quickly spread amongst other Estonian ex-pats.
TransferWise was launched in 2011, with one customer making a transfer just fifteen minutes after TechCrunch posted an explainer article on the platform.
The pair quit their jobs and self-funded for a while before turning the corner a year later, with billionaire disruptor Peter Thiel leading a $6 million round of Series C funding.
A subsequent round of $25 million was raised in June 2014, with Richard Branson one of the investors.
As the platform grew, more features were added such as a debit card, business account, and multi-currency account.
Over 11 million people now use Waze to transfer more than £6 billion every month.
Wise was valued at $11 billion after debuting on the London Stock Exchange in July 2021, becoming that exchange’s largest-ever tech listing.
Wise revenue generation
Wise operates according to the multisided platform business model, which entails developing a technology or product that lets two or more customer groups have direct interactions.
Wise now makes money via money transfer fees, withdrawal fees, currency conversion fees, holding fees, wire transfer fees, and fees associated with its stock management functionality.
Money transfer fee
Users who sign up for a Wise account are not charged a subscription or any other recurring fee.
However, the company does charge a money transfer fee that varies according to the transaction currency.
The fee starts at 0.35%.
Withdrawal fee
Users can also enjoy free ATM withdrawals up to a certain limit.
In the United Kingdom, for example, there is a 1.75% fee plus £0.50 if the withdrawal amount exceeds £200 per month.
Currency conversion fee
Currency conversion fees are also charged in certain circ*mstances. Like money transfer fees, currency conversion fees start at 0.35% and vary according to the currency transacted.
Holding fee
Users who hold more than the equivalent of €15,000 are also charged a 0.4% annual holding fee which is billed monthly.
For businesses, the same fee applies but for a holding that exceeds €70,000.
Wire payment fee
Users can receive money in up to 10 currencies for free, including but not limited to EUR, GBP, AUD, NZD, and CAD. Businesses are charged £16 to receive money in the same 10 currencies.
For those who wish to receive their funds in USD, there is a fixed wire payment fee of $7.50.
Wise Assets
Wise Assets was released in September 2021 and gives users the ability to convert their funds into a stockholding.
The company charges a 0.40% annual fee for this service, billed monthly. Users who hold more than €15,000 in stocks can avoid the holding fee we explained earlier.
Businesses are charged a 0.55% annual fee.
Key Highlights
- Founding and Purpose: Wise, formerly TransferWise, was founded in 2011 by Estonian businessmen Kristo Käärmann and Taavet Hinrikus. The company was created to address the issue of high currency conversion fees and unfavorable exchange rates faced by individuals and businesses during international money transfers.
- Revenue Generation: Wise generates revenue through various fees and charges, including money transfer fees, ATM withdrawal fees (beyond a limit), holding fees for account balances exceeding certain thresholds, fixed wire payment fees for receiving U.S. dollars, and an annual fee for its Wise Assets investment service.
- Platform Model: Wise operates on a multisided platform business model, facilitating direct interactions between different customer groups. This model enables users to conduct transactions and currency exchanges more efficiently.
- Money Transfer Fees: Wise charges money transfer fees based on the transaction currency, starting at 0.35%. Users are not charged a subscription or recurring fee for using a Wise account.
- ATM Withdrawal Fees: Free ATM withdrawals are available up to a specified limit. Beyond that limit, there is a fee (e.g., 1.75% plus £0.50 for withdrawals exceeding £200 per month in the UK).
- Currency Conversion Fees: Currency conversion fees are applied, starting at 0.35%, and vary based on the currencies involved in the transaction.
- Holding Fees: Users with account balances exceeding €15,000 (for individuals) or €70,000 (for businesses) are charged a 0.4% annual holding fee, billed monthly.
- Wire Payment Fees: Users can receive funds in various currencies for free, but there’s a fixed wire payment fee of $7.50 for receiving funds in USD. Businesses are charged £16 to receive money in specific currencies.
- Wise Assets: Introduced in September 2021, Wise Assets allows users to invest their funds in stocks. The service incurs a 0.40% annual fee, billed monthly. Users holding over €15,000 in stocks can avoid the regular holding fee.
- Growth and Valuation: Wise has expanded its services over the years, offering features like a debit card, business account, and multi-currency account. It has gained substantial popularity, with over 11 million users transferring billions monthly. The company was valued at $11 billion after its debut on the London Stock Exchange in July 2021, marking the largest-ever tech listing on that exchange.
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