- TransferWise is Europe’s one of the best fintech companies.
- Early investors and employees of TransferWise sold their shares in a USD 319 million secondary deal.
- It highlights the rise in digital payments and reduction in cash usage due to coronavirus pandemic.
TransferWise, a fintech start-up, recently declared that it is now valued at USD 5 billion following a secondary share sale. This is because of the rise in digital payments due to the COVID-19 pandemic.
TransferWise was established in 2011 with the aim of making international money transfers easy, cost-efficient, and fair. It is a strong competitor to the advanced fintech companies such as MoneyGram and Western Union. In comparison to MoneyGram and Western Union, TransferWise fee is lower and provides a digital platform to help customers transfer money across borders.
This fintech start-up has approximately 8 million consumers across the globe and processes about USD 5.2 billion payments across cross-border every month.
Its London-headquarters has not added any additional cash to its balance sheet with this deal. Instead, the company is giving a chance to early investors and its employees to sell some of their shares in an approximately USD 319 million secondary deal. This is not the first time current shareholders have sold their stocks. In the past year, the company was valued at about USD 3.5 billion in a USD 292 million secondary round.
Kristo Kaarmann, TransferWise’s CEO and Co-founder, said, “This secondary round provides an opportunity for new investors to come in, alongside rewarding the investors and employees who’ve helped us succeed so far.” Further, he added, “We’ve been funded exclusively by our customers for the last few years and we didn’t need to raise external funding for the company.”
Recently, Kaarmann said, TransferWise is more profitable than its rival fintech unicorns such as N26, Revolut, and Monzo. Thus, the company is expected to gain more revenue share in 2020 as well. The company is in profit for the past three years; thus, the big selling point of its multi-currency card is its capability to convert local currencies when traveling.
TransferWise said the decision to sell shares was taken internally, rather than through an investment bank like Goldman Sachs. The valuation of approximately USD 5 billion makes TransferWise one of the most valuable start-ups in Europe, amongst Checkout.com, Revolut, and Klarna—each worth approximately USD 5.5 billion.
The secondary round was co-led by new stakeholder D1 Capital Partners and current venture capitalist Lone Pine Capital. Also, Vulcan Capital, a new stakeholder, bought the company shares, while venture capital fund, Baillie Gifford and Fidelity upgraded their holdings too. Other investors include PayPal co-founders Peter Thiel and Max Levchin and British billionaire Richard Branson.
Digital payments help to boost company revenue
TransferWise has made its place into the banking domain, of late, by introducing a “borderless” multi-currency account linked with a Mastercard debit card. The company claims to have taken more than EUR 2 billion in current deposits via an account and released approximately 1 million cards. This fintech start-up says, banks are their main competitors, although they do not have any plans to become a bank itself.
TransferWise is planning to start its investment services by 2021 after approval from the UK’s Financial Conduct Authority.
TransferWise’s valuation increased by about 43% because of a reduction in cash usage caused by coronavirus and a rise in digital payments. Recently, the UK peer Revolut raised USD 80 million of cash from San Francisco-based private equity group TSG Consumer Partners.
As per the data published by cash machine network Link, ATM transactions reduced to 60% on average during the lockdown in the UK. In the meantime, Bain and amp; Company, a management consultancy, forecasts that digital payments would rise by 10% points to approximately 67% of total transaction values by 2025.
The company is expanding at a rapid pace. In the past nine years, the movement of the organization has spread far and wide. The company has more than 8 million happy consumers who transact about EUR 4 billion every month and save over EUR 3 million in bank fees every day. There are over 14 offices with more than 2,200 employees. Thus, the company’s multi-currency account holds over 50 currencies at once and allows one to convert them anytime by using TransferWise debit Mastercard.