Impact Plan Company Spotlight - Wise

Charles Kelton

by , Product copywriter

at PensionBee

02 Oct 2023 /  

Woman looking out of a plane window

Wise enables people to make international money transfers. Customers can send, receive and hold money from 160 countries in more than 40 currencies. Its mission is to make international money transfers cheap, fair and simple.

What problems are Wise trying to solve?

The size of the cross-border transfer market is growing substantially. It’s expected to increase from around $150 trillion in 2017 to over $250 trillion by 2027, but it’s dominated by banks that charge customers high fees for a slow service. Wise has been working to solve this problem since its launch in 2011.

Transferring money internationally is challenging for many. In part, this is due to the many people who remain ‘unbanked’ and lack access to a bank or other financial services to send and receive money. For many, this may be because they don’t have the required identification to open a bank account or their region lacks the necessary financial infrastructure. Even for those with a bank account, transfers are often slow and expensive. Transfer times can range between one and five days and the average cost of an international bank transfer is around 6% of the amount transferred. The true cost of making a transfer’s not always clear. There can often be fees and exchange rate markups not realised until a transfer is made.

Remittances provide a lifeline for millions of people, enabling overseas workers to help support someone in their home country. Over 200 million migrant workers support over 800 million family members. Yet, those sending money are often unaware of the full costs involved. Retailers aren’t always clear about the costs that make up their exchange rates, and the high costs of traditional banks mean family members receive less of the payment.

How does Wise create an impact?

Wise makes international money transfers much cheaper and faster than mainstream banks and is typically eight times cheaper than banks. It’s been able to reduce transfer fees in part by building its own payment transfer network. For instance, Wise has built a system that connects to the UK’s Faster Payments Service, which enables it to process payments as soon as they’re received. As the business expands so too does its own payment network.

The company aims to provide cheaper, fairer and simpler payments so it can support the financial inclusion of millions worldwide. Its services improve the ability of underserved populations to access financial services. It achieves this in part by making transparency one of its key values; ensuring customers are aware of all the fees involved with making a transfer. Lower-cost transfers result in more money ending up with the recipient. This is especially important for families that depend on remittances, which are often used to pay for essential household needs and education.

Many people move internationally every year for a variety of reasons and transferring money between countries is essential to enable and sustain those moves. For one family, a move from Australia to France helped create a lifestyle allowing them to spend more time together. Wise made the process of transferring money from their Australian bank account easier, enabling them to buy their new home in France and establish their way of living more quickly. Others, like Alexander, have been able to take the opportunity to work abroad more easily. Alexander has been living in Switzerland as an American Football coach and can convert between US dollars and multiple currencies more affordably through Wise.

Wise also benefits businesses; they can move, hold and spend money in over 40 currencies without high fees. These include micro, small and medium-sized businesses, freelancers and self-employed professionals. Business transactions are done at the mid-market exchange rate. This is the rate the market sets and banks trade between themselves but often don’t pass on to their customers. Athina is a business owner living in the USA and her business helps indigenousness and artisanal communities in her native Colombia. With Wise, Athina’s business is better positioned to foster the economic and social development of those it supports.

What’s the size of Wise’s impact?

Wise has over 16 million customers in more than 30 countries. Together they spend money in more than 170 countries and transfer more than £9 billion every month across international borders. Wise customers save more than £1.5 billion annually compared to using a traditional bank.

Wise aims to make all transfers it processes instant, which it defines as taking less than 20 seconds to reach a recipient’s bank account. Over the years, Wise has made significant strides to do this. In the first three months of 2023, 55% of all Wise’s cross-border transfers arrived instantly.

Wise’s continued growth comes in part from building its own global payments system with more than 70 banking partners around the world. It’s also connected to four domestic payment systems, reducing the costs of processing transactions. In turn, it passes these lower costs onto its customers. Wise’s partnerships have enabled it to bring instant transfers to more customers. In 2023 it launched instant payments from Singapore to Malaysia and to and from Brazil. It also improved transfer times in Japan and Chile, while in the US Wise reduced the average transfer time from 25 hours to six. These improvements bring faster and more affordable payments to millions of people.

Wise as a financial investment

Wise is one of the world’s fastest-growing technology companies. Its annual report for 2023 shows strong financial performance across its products. Its gross profit increased by 73%, growing to £638.2 million compared to the 2022 financial year. And its number of business customers increased by 27% to 0.52%.

In the 2023 financial year, Wise acquired more than 10 million active customers, 34% more than the previous financial year.

The company’s well-positioned to continue growing as it increases investment. It continues to expand its product offerings into new markets, such as launching its Assets product in the UK, Singapore, France and Spain. Wise predicts its income to grow between 28-33% in the 2024 financial year and its growth outlook is also favoured by positive industry trends. The market for cross-border payments is projected to grow to over £250 trillion by 2023.

Wise’s inclusion in the Impact Plan

Wise aims to make money transfers accessible and affordable to everyone and has been able to do this by building its own payment system. These improvements empower people to move and operate around the world. It also helps migrant workers to send payments home to support their families, and small businesses to grow.

Wise has proven its ability to disrupt the traditional way of sending money internationally and to innovate and expand into new markets. Wise continues to make international money transfers cheaper, faster and simpler.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice

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