Estonia, EU – Baltic States, Financial Services, Good for Business, Technology

One of the founders of the start-up, a former key figure in Skype, angel investor and "citizen of the world", Taavet Hinrikus says that Transferwise would bring lower prices and greater transparency to the world of currency exchange.

The system's operation basis is simple. If one wants to exchange, say, 1000 euros into pounds sterling at a favorable rate, he or she visits the site, registers as a user and enters the request. Then the money is transferred to the Transferwise deposit account. The company will pair another user who wants to exchange money with the requester. The sterling pounds than are transferred to the client's specified account, either in the same or a different country. One exchange transaction costs one euro or one pound sterling.

"We aggregate demand and supply, i.e. all euros looking for pounds and vice versa. And we exchange at the central bank rate of the moment, which is 3-6% less than the highway robbery rates charged by banks," Hinrikus points out.

On a 1000-euro exchange, Transferwise thus offers savings of 60 euros – quite a noteworthy amount. Banks would keep that sum in the form of commissions and fees. After all, it’s no secret that service fees are how large banks earn their huge profits and maintain their huge office networks.

As to the size of Transferwise's customer base after a few weeks in operation, the company does not wish to say. Hinrikus says that the new and innovative finance service has met with much positive feedback and has drawn an active clientele primarily comprised of people who live, work or study in different countries – all over Europe, Estonia included.

The currency exchange customers also want US dollars and Swiss francs and the possibility of repeat transactions. Support for CHF is a matter of time, but the biggest goal for Transferwise right now is to reach the US great (albeit complicated) market.

"We currently have local importance. If we could exchange dollars, we would reach the world level. There is great demand for exchanging dollars," says Hinrikus. "While Europe has a Single European Payment Area, service fees in the US are not standardized. And moving money from one bank to another costs much more on average than it does in Europe. We won't be able to offer the same one-dollar service fee."

Hinrikus thinks Transferwise is indicative of the future trend in the field of financial services.

"We will prove that it is possible to bring innovative financial services to market. We will take the part what the banks usually skim off and give it back to the people. We don't need a 30-storey headquarters in the middle of the Tallinn city center; we have no tellers sitting behind mahogany tables. We offer better, more cost-effective service," he says.

The one-euro or one-pound service fee covers the company's expenses, Hinrikus says, but will not make them rich. Larger profits will hopefully come with service enhancements for different customer groups, such as for business customers.