TransferWise Review: Built To Solve Real Problems

TransferWise is one of the many newcomers to the online money transfer industry born in the aftermath of the 2008 financial crisis. The advancement of technology, wide-spread use of the internet, and a general distrust in the traditional financial system made it possible for a new wave of entrepreneurs to beat banks at their own games.

TransferWise was created in 2010 after two people met at a party and realized they shared a common financial problem. More than 10 years later, the company is valued in the billions of dollars as it proved it can help millions of people save money transferring funds across the world.

Much like every company in the space, TransferWise has its sets of strong positives and negatives. No balanced review of TransferWise would be complete without pointing out where it falls behind the competition.

What Is TransferWise?

Simply put, TransferWise helps customers, both individuals and companies, move money across the world. TransferWise ranks as one of the largest money transfer companies in London -- the main global hub for foreign exchange services. 

TransferWise advertises its services as up to eight times cheaper than banks by using the “real” exchange rate. 

Banks are notorious for charging their customers a large premium on a currency pair’s exchange rate. This money goes straight into the bank’s coffers and it is how they generate a profit. But TransferWise uses smart technology that links local bank accounts in countries all over the world so it can charge rock-bottom rates, as low as 0.5%. 

Here is how TransferWise's business operates: Suppose a customer in the United Kingdom needs to send money to someone in France. TransferWise will essentially exchange the customer's British pounds to its UK account and then TransferWise’s account in France will disperse the exact amount of euros to the recipient.

In essence, money never really transfers borders so costs are kept to a bare minimum and the savings are passed on to the consumers.

According to media reports, TransferWise generated revenue of £302.6 million in its fiscal year 2020 (March ending), up 70% year-over-year. The company generated £21.3 million in net profit after tax and gained 6 million new customers to end the fiscal year with 8 million customers worldwide. Total cross-currency transfers for the year was £42 billion.

TransferWise competes directly with other fintech heavyweights in the money transfer space, including CurrencyFair, Currencies Direct, TorFX, WorldFirst, among others.

Created To Solve Real Problems

To best understand why most TransferWise reviews are overly positive, we would need to rewind back to the company’s first days to understand its roots.

Taavet Hinrikus, a native Estonian moved to London to work as Skype’s first employee. Since he was employed by a Europe-based company, he was paid in euros and had no option but to pay excessive bank fees so he could exchange his euros for pounds.

At a party, he met Kristo Kaarmann, a fellow Estonian that worked as a business consultant in London. He was paid in pounds but needed to consistently exchange part of his salary for euros to pay for a mortgage in his native country.

The two quickly realized how much money they waste on bank foreign exchange markups and discovered there was a way for them to help each other out. Simply, Hinrikus would deposit his euros into his friend’s account and vice versa.

Gone are the days of requiring banks to act as middlemen when individuals can just as easily transact among themselves and avoid fees.

And there was born the idea of Transferwise. What turned out to be a simple solution among two individuals spiraled into a global business that attracted investments from some of the biggest names around. Peter Thiel (PayPal co-founder), Richard Branson (Virgin founder), and mega venture capital firm Andreessen Horowitz are all listed as early investors and backers.

More than a decade may have passed since the company’s creation and there have certainly been some bumps in the road along the way. But TransferWise never compromised on its core mission of helping customers save money.

Transferwise Review Of Costs 

TransferWise in particular prides itself as being an entity that can not only challenge banks at their own game but dominate them in costs.

No TransferWise review is complete without a deep dive into what it charges consumers.

Here is a list of how much TransferWise charges consumers looking to transact in some of the most notable currencies.

• US dollar: Fixed fee of $1.23 + 0.37% on the first $135,000 converted and 0.27% on anything above.
• Euro: Fixed fee of €0.61 + 0.33% on the first €115,000 converted and 0.23% on anything above.
• Japanese yen: Fixed fee of ¥ 185.00 + 0.63% of the total amount converted.
• Canadian dollar: Fixed fee of $0.87 + 0.59% on the first $175,000 converted and 0.49% on anything above.
• Australian Dollar: Fixed fee of $1.14 + 0.41% on the first $180,000 converted and 0.31% on anything above.

So, how does this compare to Transferwise’s peers? In the majority of cases, Transferwise’s rate is better or roughly on par with its peers to the point where customers transferring small amounts won’t realize a difference.

For example, WorldFirst has a minimum fee of 0.5% of the amount exchanged. As an example, the difference between Transferwise’s 0.59% fee on Canadian dollar transfers and WorldFirst’s 0.5% is a mere fraction of a percent. The dollar differential on a $1,000 exchange is just 90 cents.

But corporate customers and high net worth individuals that transfer the equivalent of more than £5 million annually can potentially benefit from a much more generous fee structure of 0.15% of the amount exchanged. A smaller fee break is offered to customers that transfer the equivalence of £500,000 to £5 million annually can potentially qualify for a fee of 0.25% on the amount exchanged.

• Trust And Safety

For the vast majority of users, trust and safety is just as important if not more important than cost. Many Transferwise reviews note that customers are willing to pay an extra dollar or two to transact on Transferwise’s platform because it is deemed to be among the most, if not the most trustworthy and safe.

While the major currency exchange companies are all regulated by the same government bodies worldwide, TransferWise’s business is likely more closely watched by government regulators. TransferWise needs to operate a squeaky-clean business and follow all relevant laws ahead of its plans to become a public company on the London Stock Exchange. 

A scan of many Transferwise reviews certainly includes many customer complaints. The most common complaint is that a customer did not receive their money in a reasonable amount of time. In the vast majority of cases, there is likely much more to the story, including potential human error, such as the customer entering incorrect banking information.

Mistakes can and do happen, and sometimes TransferWise might be at fault. But by all indications, TransferWise takes the necessary steps to fix its mistakes to the client’s satisfaction.

Conclusion: A Great Choice, But One Of Many To Choose From

TransferWise is one of many online money transfer services that earned a reputation for top quality services over its 10+ years of existence. While the competitive landscape has intensified in recent years, TransferWise remains committed to executing on its initial vision of helping people avoid excessive bank fees.

As already noted, corporate clients and high net worth individuals might be able to find better rates elsewhere. But TransferWise's stellar reputation makes it a default go-to option for new consumers that aren’t looking to exchange six- or seven-digits annually.

The good thing about the online money exchange industry is there is no shortage of choices. Consumers that aren’t happy with their transaction on TransferWise for whatever reason can opt to take their money to one of the many rival firms.

(Devdiscourse's journalists were not involved in the production of this article. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)