14 ms·

I used to study remittance flows for a living. This was a problem that was (is?) begging to be solved. Incumbents like Western Union have always been very expen

by a_d 9y ago

I used to study remittance flows for a living. This was a problem that was (is?) begging to be solved. Incumbents like Western Union have always been very expensive and borderline evil. There are well known “corridors” of remittance flows that are still yet to be captured - like Kerala (India) <> Saudi Arabia (Middle-east more generally); Mexico <> US; US <> LatAm etc. My guess is TransferWise captured the UK<> Poland corridor and expanded from there. This problem is a great one to solve because the customers have a real pain and one can be very targeted about capturing high-value corridors. I wish TW the best. Lower fee, Lower friction, Lesser time == Great for customers! Anyone looking to build a startup in this domain should start here: http://www.worldbank.org/en/topic/migrationremittancesdiasporaissues/brief/migration-remittances-data http://www.worldbank.org/en/topic/migrationremittancesdiaspo... (This data is useful to understand origin<>destination of remittance flows; Its a greater than $150B market and a lot of untapped/Uncaptured areas; lots still left to do!)

gedrap 9y ago
> TransferWise captured the UK<> Poland corridor and expanded from there. Close! They started with UK <> Estonia, both co-founders are Estonians. IIRC in the very very early days, the whole settlement was done by users themselves over a Skype group.
- kreetx 9y ago
  You are right, but the Poland corridor was probably the key to proving the model though.
  - ido 9y ago
    Why would either be lucrative? AFAIK within the EU bank transfers are free of fees.
    - occamrazor 9y ago
      I think the exact rule is this: International bank transfers denominated in EUR below 50.000 EUR can’t have higher fees than domestic transfers. FX fees and spread can still remain.
    - gondo 9y ago
      exchange rate
    - glebedel 9y ago
      Not if using different currencies. high fees and/or abusive exchange rates.
    - killedbydeath 9y ago
      Poland has 30x the population and likely 30x the number of immigrants to the UK.
    - makomk 9y ago
      Within the Eurozone bank transfers are generally free of fees, but banks still like to rip people off on exchange rates between different currencies and the EU doesn't seem interested in doing anything about that.
2K17 9y ago
I wish someone would challenge other dinosaurs like PayPal. Say what you want about Amazon's monopoly but at least they have actual customer support.
- ddorian43 9y ago
  Paypal also has support (call,email) used them for refunds and changes on account.
  - 2K17 9y ago
    I haven't seen the refund one. Do you have it? All I could see is the ticket system where issues are closed by support rather than user.
    - ddorian43 9y ago
      Should be able to try for a refund on a payment until 6 months old.
  - JoshTriplett 9y ago
    Having had a recent experience with that, their "support" is utterly incompetent. Made a donation to a charitable organization (same one I've made in a previous year), PayPal reversed it without giving any reason, I contacted their support trying to find out why, and several hours later they could tell me nothing more than what the website said: that it was rejected and no reason was given, and I should try using some other method to make the transaction. (They also referred me to an email address for another department, who had no phone number, and that email produced no answer for a week, after which they gave the same non-answer.)
    - 2K17 9y ago
      I think maybe payers are the product here not customers.
      - 9y ago
thisisit 9y ago
I have zero experience in remittances, so I could be wrong but the whole model seems very capital intensive. It needed ~ 1 billion dollars worth of transactions to turn a profit. [1] [2] Isn't that supposed to be a bad idea, specially for software based companies. [1] Transferwise model: https://en.wikipedia.org/wiki/TransferWise#/media/File:TransferWise_peer-to-peer_money_transfer.png https://en.wikipedia.org/wiki/TransferWise#/media/File:Trans... [2] The company started back in 2011. And select quotes from the article: > A source close to TransferWise, which has been profitable since early 2017, tells me the new funding values the seven-year old company at $1.6 billion. and, > The company now serves over two million customers and offers 750 currency routes, seeing customers transfer more than £1 billion every month.
- mseebach 9y ago
  That's not what capital intensive means[1]. A company that has low margins as its business model necessarily needs to have a large body of transactions to get much revenue. Six years to get profitable is not really a remarkable period for a VC-funded company. 1: It means requiring lots of capital to get set up, eg. because you need to aquire expensive assets to run your business. Buying your own hardware is more capital intensive that running cloud, even if the latter is possibly more expensive in the long run.
  - thisisit 9y ago
    Yes. Sorry, incorrect choice of words. So the question is if the margins are so low that they need a billion dollars to make a profit, what kind of scale do they need to be worth a billion dollars. And it somehow it makes me question their business model as well. Sooner or later they will be tempted to raise fees and get more profitability.
    - raverbashing 9y ago
      They don't need to sell a billion dollars, they need to move a billion dollars And yes, they might increase their fees when they get bigger, still, if it's smaller than what the banks charge, it's a win (However, since money movements are not balanced they still need to "move back" some of it so they can settle their accounts - but I guess they already have some bulk currency buyng/selling bank to do that)
afarrell 9y ago
https://www.wave.com/ https://www.wave.com/ is tackling the US/UK/CAN <-> East Africa (and apparently now Ghana?) corridor
dovdovdov 9y ago
It's clearly a service mostly depending on eastern (central) european migrants working in the UK. I wonder if brexit doesn't fall through what will it do to their single leg business. And even if brexit fails, these people will become less and less dependent of their home country. (moving close family to the uk, paying off mortgages) So yeah, my point is these untapped areas can dry off quick. (I'm talking a decade maybe) Or there are stupid investors who don't want to invest into this no-brainer goldmine. :)
- richardknop 9y ago
  It started as that but it has expanded since. There are lots of people using Transferwise all over the world now. People going to vacation or living in Japan, for example, can save money by using TW.
- Dobbs 9y ago
  I use transferwise for US => UK. It also seems to be the most widely recommended of the services in the expat community.
- riffraff 9y ago
  not just the UK, this is the same pain point for everyone when interacting between Euroland and the rest of Europe too. Germany + France + Italy + Spain have _a lot_ of people sending money to non-euro countries. EDIT: this could dry up quickly anyway though. My bank charges idiotic amounts to change and trasnfer money, I doubt there is any technical reason they must, they can get to TW level trivially, it seems, they just don't care enough.
- saas_co_de 9y ago
  transferwise has great rates all over the world but not sure how dependent they are on UK market.
- briandear 9y ago
  I use them to move money to/from Europe, The US and Mexico. I used a competitor a year ago. My point is that their business seems to be far beyond a significant Brexit risk. If they gain inroads in the US Mexican/Central American community, the UK-Eastern Europe segment will pale in significance.
NetStrikeForce 9y ago
It actually got most of the GBPEUR, not just for Poland.
- chillydawg 9y ago
  It might have got most of GBPEUR retail, but the vast majority of that flow by volume is traded in placed like Interactive Brokers, or over the phone between guys who need to swap a few million here and there.
  - NetStrikeForce 9y ago
    Fair enough, yeah. I only had retail in mind :)
charlesdm 9y ago
In general, banks do charge excessive fees on exchanging currencies. For example, if you want to exchange €1,000 to $ or £, they'll charge you (by default) a 2.5-5% conversion fee. After negotiating with them, you generally get it down to 0.3%. These days, I convert through my broker, because they only charge me 0.2% for FX conversions.
- consz 9y ago
  It's insane, borderline criminal. I knew someone who wanted to convert ~1m AUD -> USD -- and the banks were still trying to offer to do at 2-3% ! At that amount, you can open a brokerage account and trade through EBS or CNX directly and pay basis points.
  - charlesdm 9y ago
    Of course they would. Most people don't understand how the fee structure works, so will comply. You can open up a brokerage account at Interactive Brokers with a few thousand and use it to exchange FX. It's pretty accessible.
    - consz 9y ago
      I agree, most people are just not aware. I like the machines I've seen in airports and train stations that offer currency conversions. They have 'No Fees! No commission!' posted all over them -- ignoring the fact that the bid-ask spread they're charging is 15-20%. Again, criminal.
      - charlesdm 9y ago
        Sad but true. :( That said, people do pay for convenience, which I assume is the main function of those cash machines. If I end up in a foreign country that I haven't visited before, I'll likely withdraw some cash (not much) from one of those machines just to be safe. You never know when your credit cards might stop working.. (I've had my main card blocked randomly while travelling and it frankly was a pain)
mandeepj 9y ago
For me, Transferwise is still very expensive. I use ICICI bank to send money to India and it goes straight to recipient bank account in less than 2 hours along with market rate (xe.com)
- dgaaaaaaaaaa 9y ago
  Doesn't ICICI quote at least 2 rupees higher than the market rate? I have only sent money from INR to $
  - mandeepj 9y ago
    It is still very cheaper than rest of the herd
JoshTriplett 9y ago
> Incumbents like Western Union have always been very expensive and borderline evil. I'd be interested in more information on this; what kinds of things have they done?

by a_d 9y ago

gedrap 9y ago

> TransferWise captured the UK<> Poland corridor and expanded from there. Close! They started with UK <> Estonia, both co-founders are Estonians. IIRC in the very very early days, the whole settlement was done by users themselves over a Skype group.

kreetx 9y ago
You are right, but the Poland corridor was probably the key to proving the model though.
- ido 9y ago
  Why would either be lucrative? AFAIK within the EU bank transfers are free of fees.
  - occamrazor 9y ago
    I think the exact rule is this: International bank transfers denominated in EUR below 50.000 EUR can’t have higher fees than domestic transfers. FX fees and spread can still remain.
  - gondo 9y ago
    exchange rate
  - glebedel 9y ago
    Not if using different currencies. high fees and/or abusive exchange rates.
  - killedbydeath 9y ago
    Poland has 30x the population and likely 30x the number of immigrants to the UK.
  - makomk 9y ago
    Within the Eurozone bank transfers are generally free of fees, but banks still like to rip people off on exchange rates between different currencies and the EU doesn't seem interested in doing anything about that.

2K17 9y ago

I wish someone would challenge other dinosaurs like PayPal. Say what you want about Amazon's monopoly but at least they have actual customer support.

ddorian43 9y ago
Paypal also has support (call,email) used them for refunds and changes on account.
- 2K17 9y ago
  I haven't seen the refund one. Do you have it? All I could see is the ticket system where issues are closed by support rather than user.
  - ddorian43 9y ago
    Should be able to try for a refund on a payment until 6 months old.
- JoshTriplett 9y ago
  Having had a recent experience with that, their "support" is utterly incompetent. Made a donation to a charitable organization (same one I've made in a previous year), PayPal reversed it without giving any reason, I contacted their support trying to find out why, and several hours later they could tell me nothing more than what the website said: that it was rejected and no reason was given, and I should try using some other method to make the transaction. (They also referred me to an email address for another department, who had no phone number, and that email produced no answer for a week, after which they gave the same non-answer.)
  - 2K17 9y ago
    I think maybe payers are the product here not customers.
    - 9y ago

thisisit 9y ago

I have zero experience in remittances, so I could be wrong but the whole model seems very capital intensive. It needed ~ 1 billion dollars worth of transactions to turn a profit. [1] [2] Isn't that supposed to be a bad idea, specially for software based companies. [1] Transferwise model: https://en.wikipedia.org/wiki/TransferWise#/media/File:TransferWise_peer-to-peer_money_transfer.png https://en.wikipedia.org/wiki/TransferWise#/media/File:Trans... [2] The company started back in 2011. And select quotes from the article: > A source close to TransferWise, which has been profitable since early 2017, tells me the new funding values the seven-year old company at $1.6 billion. and, > The company now serves over two million customers and offers 750 currency routes, seeing customers transfer more than £1 billion every month.

mseebach 9y ago
That's not what capital intensive means[1]. A company that has low margins as its business model necessarily needs to have a large body of transactions to get much revenue. Six years to get profitable is not really a remarkable period for a VC-funded company. 1: It means requiring lots of capital to get set up, eg. because you need to aquire expensive assets to run your business. Buying your own hardware is more capital intensive that running cloud, even if the latter is possibly more expensive in the long run.
- thisisit 9y ago
  Yes. Sorry, incorrect choice of words. So the question is if the margins are so low that they need a billion dollars to make a profit, what kind of scale do they need to be worth a billion dollars. And it somehow it makes me question their business model as well. Sooner or later they will be tempted to raise fees and get more profitability.
  - raverbashing 9y ago
    They don't need to sell a billion dollars, they need to move a billion dollars And yes, they might increase their fees when they get bigger, still, if it's smaller than what the banks charge, it's a win (However, since money movements are not balanced they still need to "move back" some of it so they can settle their accounts - but I guess they already have some bulk currency buyng/selling bank to do that)

afarrell 9y ago

https://www.wave.com/ https://www.wave.com/ is tackling the US/UK/CAN <-> East Africa (and apparently now Ghana?) corridor

dovdovdov 9y ago

It's clearly a service mostly depending on eastern (central) european migrants working in the UK. I wonder if brexit doesn't fall through what will it do to their single leg business. And even if brexit fails, these people will become less and less dependent of their home country. (moving close family to the uk, paying off mortgages) So yeah, my point is these untapped areas can dry off quick. (I'm talking a decade maybe) Or there are stupid investors who don't want to invest into this no-brainer goldmine. :)

richardknop 9y ago
It started as that but it has expanded since. There are lots of people using Transferwise all over the world now. People going to vacation or living in Japan, for example, can save money by using TW.
Dobbs 9y ago
I use transferwise for US => UK. It also seems to be the most widely recommended of the services in the expat community.
riffraff 9y ago
not just the UK, this is the same pain point for everyone when interacting between Euroland and the rest of Europe too. Germany + France + Italy + Spain have _a lot_ of people sending money to non-euro countries. EDIT: this could dry up quickly anyway though. My bank charges idiotic amounts to change and trasnfer money, I doubt there is any technical reason they must, they can get to TW level trivially, it seems, they just don't care enough.
saas_co_de 9y ago
transferwise has great rates all over the world but not sure how dependent they are on UK market.
briandear 9y ago
I use them to move money to/from Europe, The US and Mexico. I used a competitor a year ago. My point is that their business seems to be far beyond a significant Brexit risk. If they gain inroads in the US Mexican/Central American community, the UK-Eastern Europe segment will pale in significance.

NetStrikeForce 9y ago

It actually got most of the GBPEUR, not just for Poland.

chillydawg 9y ago
It might have got most of GBPEUR retail, but the vast majority of that flow by volume is traded in placed like Interactive Brokers, or over the phone between guys who need to swap a few million here and there.
- NetStrikeForce 9y ago
  Fair enough, yeah. I only had retail in mind :)

charlesdm 9y ago

In general, banks do charge excessive fees on exchanging currencies. For example, if you want to exchange €1,000 to $ or £, they'll charge you (by default) a 2.5-5% conversion fee. After negotiating with them, you generally get it down to 0.3%. These days, I convert through my broker, because they only charge me 0.2% for FX conversions.

consz 9y ago
It's insane, borderline criminal. I knew someone who wanted to convert ~1m AUD -> USD -- and the banks were still trying to offer to do at 2-3% ! At that amount, you can open a brokerage account and trade through EBS or CNX directly and pay basis points.
- charlesdm 9y ago
  Of course they would. Most people don't understand how the fee structure works, so will comply. You can open up a brokerage account at Interactive Brokers with a few thousand and use it to exchange FX. It's pretty accessible.
  - consz 9y ago
    I agree, most people are just not aware. I like the machines I've seen in airports and train stations that offer currency conversions. They have 'No Fees! No commission!' posted all over them -- ignoring the fact that the bid-ask spread they're charging is 15-20%. Again, criminal.
    - charlesdm 9y ago
      Sad but true. :( That said, people do pay for convenience, which I assume is the main function of those cash machines. If I end up in a foreign country that I haven't visited before, I'll likely withdraw some cash (not much) from one of those machines just to be safe. You never know when your credit cards might stop working.. (I've had my main card blocked randomly while travelling and it frankly was a pain)

mandeepj 9y ago

For me, Transferwise is still very expensive. I use ICICI bank to send money to India and it goes straight to recipient bank account in less than 2 hours along with market rate (xe.com)

dgaaaaaaaaaa 9y ago
Doesn't ICICI quote at least 2 rupees higher than the market rate? I have only sent money from INR to $
- mandeepj 9y ago
  It is still very cheaper than rest of the herd

JoshTriplett 9y ago

> Incumbents like Western Union have always been very expensive and borderline evil. I'd be interested in more information on this; what kinds of things have they done?