51–60 of 176 posts
They have no fees for transactions or currency changes (up to a quite high limit), as well with a lot more features (international prepaid MasterCard that charges no fees ever being my favourite one, and you can go to ATMs for free as well).
I've been a happy customer of them for quite some time and I have absolutely nothing bad to say about them, but the opposite.
Earlier quoted context omitted.
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 capi…
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.
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)
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…
These days, I convert through my broker, because they only charge me 0.2% for FX conversions.
For everyone that's interested in TransferWise, I'd recommend Revolut ( https://www.revolut.com/ ) instead. They have no fees for transactions or currency changes (up to a quite high limit), as well with a lot more features (international prepaid MasterCard that charges no fees ever being my favourite one, and you can go to ATMs for free as well). I've been a happy customer of them for quite some time and I have abso…
Earlier quoted context omitted.
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 capi…
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.
Well, if we're assuming P/E=20 then they need to be heading for 50 million dollars in profit. Let's guess their "gross margin" from their spread is 2%, so they're currently at top-line revenue of 2 million dollars (and the same in costs). So if their costs were completely flat they'd need to grow to be processing 25 billion dollars of transfers to justify the valuation; in practice growth won't be completely free of costs so we're talking about a bit more, maybe 50 billion dollars. Does that sound vaguely plausible?
> 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.
I doubt it; there are a lot of competitors in the same space. At the moment TransferWise has the name recognition, but that won't let them raise costs a lot.
Earlier quoted context omitted.
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.
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)
If they start charging 1% tomorrow, up from 0.5%, I'm pretty sure I would reconsider if I were using them (and I have used them in the past, in the early days -- they're great).
But I started routing currency conversions through an account at my broker (Interactive Brokers), and I'm currently getting market rate + 0.2%. These 0.3%s add up fast if you're converting meaningful amounts of money and in comparison Transferwise seems expensive again. But of course it's still a long way from the 2.5-5% banks are charging.
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…
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.