TransferWise Case Study

The peer-to-peer money transfer service limits the fees from remittances across borders.

The peer-to-peer money transfer service launched in January 2011 has already seen more than £3 billion transferred through its platform across more than 300 currency routes across the world. Instead of transferring the sender's money directly to the recipient, it is redirected to the recipient of an equivalent transfer going in the opposite direction. Likewise, the recipient of the transfer receives a payment not from the sender initiating the transfer, but from the sender of the equivalent transfer. This process avoids costly currency conversion and transfers crossing borders.

With rapid growth in international migration, it is no surprise that remittances have surged too. In 2014, foreign workers sent a whopping US$583 billion home to family members.1 Of that, US$436 billion went from developed to developing countries, the World Bank Group estimates.2

Remittances are critical income for developing countries.3 The UK’s Somali diaspora, for example, remits around US$500 million annually, 90% of which is spent on food, healthcare and education, says the World Bank.4 But the cost of moving money takes a big bite out of these precious sums – in mid-2016, the global average was 7.6% of the amount transferred.5 In Sub-Saharan Africa, the picture is worse, at 9.58%.6

While the burden is huge, these numbers mark significant progress on a decade ago.7 And now financial technology, or ‘fintech’, companies are helping to improve the outlook further. While it still costs over 11% to send money via traditional banks,8 using the new crop of online products costs an average of 5.48%, says the World Bank.9

The most successful such disruptor is TransferWise, a London-based start-up valued at over US$1.1 billion, which counts Richard Branson and Peter Thiel among its investors.10 Its ‘peer-to-peer’ transfer service allows customers to avoid international fees by matching the amount they want to send in one currency to a sum coming the opposite direction, meaning currency never actually crosses borders.11 Its growth has been impressive. In September 2016, the company announced monthly transaction volumes of UK£800 million, while revenue in the 12 months to March was UK£28 million, almost three times the previous year’s figure.12

Peer-to-peer currency exchange faces structural challenges, most obviously the fact that remittances do not flow equally between countries.13 Just 5% of the US$20 billion remitted between the US and Mexico goes to America, for instance.14 So far TransferWise has proven itself able to navigate such complexities; the company currently buys the missing currency on the interbank market, allowing it to operate comfortably even on routes where cash flows are higher in one direction than vice versa.15


1 Grandolini, G. (2015) “Getting SmaRT About Reducing Remittances Costs”. Huffington Post, 16 June.

2 Ibid.

3 World Bank. “Project Greenback 2.0 Remittances Champion Cities”. Remittance Prices Worldwide.

4 World Bank. (2015) “Migrants’ Remittances from the United Kingdom: International remittances and access to financial services for migrants in London, UK”.  Greenback 2.0, July.

5 World Bank. (2016) “Remittance Prices Worldwide: An analysis of trends in cost of remittance services”. World Bank, Issue 10, June.

6 Ibid.

7 World Bank. (2016) “The Cost of Sending Remittances December 2015 Data”. World Bank, Issue 16, December.

8 Ibid.

9 World Bank. (2015) “The Cost of Sending Remittances: June 2015 Data”. World Bank, Issue 14, June.

10 Save on Send. (2016) “TransferWise: Rebel, What is Your Cause?”. 28 October.

11 Burn-Callander, R. (2016) “TransferWise raises further £18m as it targets small business market”. The Telegraph, 25 May.

12 Graham, P. (2016) “UK money transfer site Transferwise volumes rise to 800 million pound a month”. Reuters, 5 September.

13 Pew Global. (2016) “Remittance Flows Worldwide in 2015”. 31 August.

14 Ibid.

15 From internal company conversation