One of my favorite quotes from the current U.S. president is “Don’t tell me your values; show me your budget.” Swap out “budget” for “brand” and you’ll learn a lot about where the priorities of Wise, the fintech formerly known as TransferWise, currently lay.
“Our customers now need us for more than money transfers,” company CEO Kristo Kaarmann announced on the Wise blog earlier this week. In the beginning, it was sending money that was “too expensive, slow, and inconvenient,” he noted. Now, he believes that banking services suffer from many of the same problems that money transfers once did and, further, sees his rebranded company as being in an ideal position to do something about it.
Color us convinced. But for the doubters, here are the three, pretty good reasons why the Wise rebrand makes great sense.
First reason: Banking is Beautiful … and Broad
Wise sees itself as a “community of people and businesses with multi-currency lives.” This image, and the company’s origins as a cross-border money transfer innovator, sync well with our bank-in-your-pocket / work-from-anywhere / market-at-your-fingertips world.
In addition to its cross-border money transfer business, Wise offers a multi-currency account that enables users to hold more than 55 different currencies and receive payments in ten. The company also has issued more than one million of its debit cards. In fact, Wise announced a partnership with Visa last month to expand its debit card offering to the Asia Pacific, Europe, MENA, U.K., and U.S. markets.
And while Wise has not secured a banking license – and expressed no plans to do so – the company was granted a license from the Financial Conduct Authority last summer to offer investment services to retail customers.
These are the ways, in Kaarman’s words, that Wise is increasingly “replacing international banking for many” of its customers. And it is this combination of infrastructure and culture that Wise is leveraging in its pivot toward banking.
Second reason: Growing Pains
These new offerings underscore the degree to which the company already has outgrown its old name. Like many fintechs, Wise has been, ahem, smart to note that its road to growth will have to extend beyond cross-border payments. Money might make the world go ’round. But moving money around the world, as a business, has its limitations.
In their 2018 report, A Vision for the Future of Cross-Border Payments, McKinsey highlighted a number of trends that are likely to impact this landscape. These include both emergent technologies such as distributed ledger technology, as well as new Big Tech entrants like Alibaba and Amazon, that will offer challenges to banks, service providers, and fintechs in the cross-border space. The rebrand makes it much easier for Wise to re-define itself beyond money transfers at a time when many people are migrating to digital financial technologies in earnest for the first time.
Additionally, as at least one observer noted, “Wise” fits far better on a stock ticker than any truncated version of “TransferWise”. That leads us to our third pretty good reason below.
Third reason: IPO?
Among all the reasons cited by the company in announcing their rebrand, a potential initial public offering, was not among them. This may be for good reason. Sky News reported earlier this year that then-TransferWise had engaged both Goldman Sachs and Morgan Stanley to lead an IPO. The report cites analysts who believe an offering could give the company a valuation of more than $5 billion.
If the rumors are true and an IPO is imminent, then the rebrand is all the more timely – and further comment unlikely. That said, company co-founder, former CEO, and current Chairman Taavet Hinrikus has expressed openness to a public offering in the not-too-distant past.
“In a few years it will be time to think seriously about becoming a public company like the strongest and most trusted financial institutions are,” Hinrikus wrote. “But when we do that we will explore that through our own lens – how will it help our customers? How will it help us achieve our mission faster.”
With more than $6 million transferred around the world every month – saving its 10 million customers more than $1.5 billion every year, why shift the emphasis toward banking? For now, Wise seems content to enjoy the benefits of being bank-adjacent rather than pursue the final step of being a fully-licensed financial institution.
Photo by Anete Lusina from Pexels