The entire banking industry can be disrupted for the better and bricks and mortar banks are "heading for tough times", according to Taavet Hinrikus, founder and executive chairman of TransferWise.
Hinrikus is challenging the established financial industry and helping money flow more freely than ever. TransferWise, the company he founded in London in 2011 is now worth more than US$1 billion and already has a two percent market share in the UK. The company works by avoiding foreign exchange fees, making international money transfers less expensive.
The inspiration for TransferWise came when Hinrikus and Kristo Käärmann, who are both Estonian, needed to transfer their UK wages into Euros.
They developed the company as a peer-to-peer platform for transferring money abroad for a lower cost than currently offered by banks. Banks (or Western Union style money transfer services) tend to take a cut of around five percent when you transfer money internationally, charging between $23 and $30 for the transfer and then a three percent commission on the exchange rate.
A user looking to change pounds into euro would log onto TransferWise and state how much money they wanted to exchange. TransferWise will offer the mid-market rate and take a $1.5 fee for transactions below $460 and a small percentage of any transactions over that.
TransferWise is currently handling more than $769 million a month, saving customers $34 million in fees per month. The company said it would soon be opening offices in the US, Germany and Australia and adding more currencies to its system.