Estonia, EU – Baltic States, Financial Services, Technology

Pointing out that Transferwise has based its entire marketing strategy on rubbishing banks and pointing out how unnecessary they are, Kaminska says that "as Transferwise's official bank float balloons and old school banks figure out that the company is exploiting their own transfer systems and the guarantees that come with it against them, they will be increasingly inclined to cut bilateral deals with 'the bank disruptor' to ensure the company takes on its fair share of the Know-your-customer (KYC) and anti-money laundering (AML) cost onto its own shoulders. That will kill a lot of the free lunch supposedly available here."

The banks on the other hand have every reason to point out the counterparty risk associated with keeping float with a non-bank institution like Transferwise, or that this float isn't guaranteed by the UK Financial Services Compensation Scheme for as long as it sits in their account rather than the customer's.

According to Nick England, CEO of VFX, a longer-standing payments platform, Transferwise's model uses banks' own rails against them. The problem for Transferwise in that regard is that banks tend to notice when protections they provide at cost to retail customers end up being exploited by third party corporations, especially when those corporations make a big song and dance of wanting to eat their lunch.

The blog says that at the end of the day, despite all the hullabaloo about disrupting the banks, Transferwise is just another intermediary using traditional intermediary technology –- one which must either charge an additional cut to survive or lower its KYC/AML/security/standards, a.k.a do a worst job, or alternatively still find another way of cross-subsidizing its business.

"The fundamental point perhaps is that Transferwise's model is based on bundling teeny tiny payments which banks can't be bothered to go after –- with good reason –- netting them, and then ensuring only the differential is transferred in one lump payment via the banks' own systems. That's a lovely model, providing it doesn't cost you more to screen, protect and match those teeny tiny customers than what you potentially earn from them," it adds.

Transferwise said earlier this week it is in talks with several UK banks about embedding its money transfer capabilities in their smartphone apps. The money transfer company has struck a deal with Estonian retail bank LHV in a move that opens the door for a rollout of its technology with banks across Europe and the United States. It added that it was in "preliminary talks with other banks looking to make similar moves," the Financial Times reported.