TransferWise just received an investment license – what does this mean?

This week, TransferWise, the London-headquartered fintech company, announced that it had secured an additional license with UK regulators. The license will help the company, which is well known for its money transfer services to offer investment solutions.

What is TransferWise?

For starters, TransferWise is a large fintech company in 2010 to disrupt the money transfer industry. It achieved this by reducing the time it takes for funds to reach a recipient. It also lowered the costs involved in foreign transactions.

To date, the company has raised more than $772 million from investors and at a valuation of more than $3.5 billion. It has more than 8 million customers globally.

Its success has also inspired the launch of similar products. For example, in April this year, Santander, the giant Spanish bank, launched PagoFx, a company that offers a similar product. Other similar products are Azimo, Remitly, and TransferGo.

Over the years, TransferWise has expanded its offerings. In 2017, the company launched a borderless account, which enables people to hold more than 25 currencies in just one account. The company has also launched its debit cards, which now support direct debits and instant payments to friends.

Why is this a big deal?

The decision by TransferWise to acquire an investment license is a big deal. For one, it will enable its borderless account holders to earn interest in their accounts. According to the company, deposits total more than £2 billion. This move could incentivise more customers to switch to the account.

It could also force other companies in the industry to rethink their business models. This includes companies like TransferGo and WorldRemit. Also, a company like Santander could leverage its experience in the banking industry to offer these services.

Analysts believe that the company is attempting to move into banking sector. Consider what its CEO told TechCrunch:

“And not merely as a medium of sending money from one country to another but also to get paid internationally. For businesses, for freelancers, for ex-pats, for people that have just moved countries. So, this is another feature along the same string of things that people want us to do for them.”

However, the company has long avoided moving into traditional banking. In a statement, the CEO said that he is not a huge fan of current accounts because he believes that they serve the interest of banks.

The decision by TransferWise to get an investment account shows how new age companies are taking-on established brands like Western Union and MoneyGram. In June, we reported that Remessa Online, a Brazilian company similar to TransferWise, had raised funds to build its investment product.

We believe that TransferWise will possibly launch an investment product similar to that offered by Betterment, Acorns, and Wealthfront.

Are you sending money abroad? At MoneyTransfers, we can help you save money by letting you compare fees charged by hundreds of companies.