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UK-based cross-border money transfer fintech TransferWise is in talks to raise new funds, reports Reuters citing people familiar with the matter.
Business Insider Intelligence
The startup, which is backed by a slew of big-name investors, including entrepreneur Richard Branson and PayPal founders Peter Thiel and Max Levchin, is looking to raise as much as $300 million, which would value the firm in the region of $4 billion, according to a source by the outlet.
Here’s what it means: The prospective funding raise would cement TransferWise’s position as one of Europe’s leading fintechs and fuel future growth.
- TransferWise has already raised over $400 million — making it one of the best-funded fintechs in Europe. Alongside a number of major neobanks, the money-transfer fintech has attracted a strong inflow of investor cash, reaching unicorn status in 2015. Although it has since been joined by a number of others, including neobanks Monzo and OakNorth, its anticipated $4 billion valuation would see it soar beyond these players.
- The startup is already profitable, which is likely to attract high investor demand for its anticipated $300 million raise. The firm, which transfers 50 currencies through more than 1,300 cross-border routes, reported £6.2 million ($8 million) in post-tax profits for the fiscal year ending in March 2018, on £117 million ($151 million) in revenue. And it managed to do so despite significantly undercutting the fees charged by incumbents for cross-border transfers: It typically charges less than 1%, compared with the 7% global average for the cross-border transfers. In contrast, many fintechs have struggled to break even as they seek to scale their offerings, while maintaining lower-cost services than their established competitors.
- It’s launched a number of new products and broadened its revenue strategy in the last two years — and new funding should help accelerate its expansion.Among these products is its borderless account, a multicurrency bank account, in effect, that allows customers to move money between dozens of currencies. TransferWise has also been busy broadening its revenue funnel, signing a number of deals to provide its services to both established lenders and startups: It signed an agreement with French banking group BPCE in July, for instance, adding to its existing agreements with Monzo and N26.
The big picture: We expect investors to continue piling money into TransferWise, which could see it genuinely disrupt the cross-border transfer segment.
While TransferWise continues to log impressive numbers, its share of the global cross-border flows remains small, giving it a long growth runway. Global remittance flows, for instance, hit a total of $613 billion in 2017. Based on this figure and TransferWise’s publicly available numbers, Business Insider Intelligence estimates the startup’s share of this segment is around the 4% mark. By doubling down on its efforts to reach more consumers by expanding the geographies it operates in and signing up bank partners, the startup can significantly increase this volume.
Here’s an industry opinion, as told to Business Insider Intelligence:
“TransferWise is quite unique in that it’s both still growing significantly as well as turning a profit, which is especially challenging given the fierce competition in this market from both incumbents and startups. It’s also managed to stay in regulators’ good grace despite operating in a market filled with regulatory landmines, unlike others, including Revolut and Robinhood. These factors make it an attractive proposition for investors.” — Tomer Michaeli, Viola Fintech general partner
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