For the frequent flyer, some names in this story may be familiar. Before boarding a plane, they could have considered using either Wise or Revolut as a contactless card for overseas use.
The early 2010s saw a rise of payment fintech created as an alternative to traditional financial institutions. Most of their founding stories sing a similar tune — founders speak of frustration with archaic and costly platforms, which drove them to create start-ups that aim to make payments more transparent and equitable.
A few names that started out targeting the consumer market have pivoted to offer business solutions. Where do these consumer- and business-focused fintechs stand in the global payment ecosystem?
Penny wise, not pound foolish
The founding story of Wise is all too relatable — two friends from Estonia working in London, who were paid their salaries in euros and pounds, found that moving money back home was expensive and slow. As Kristo Käärmann recounts in various interviews, he was slapped with a EUR500 fee when he tried to transfer his GBP10,000 Christmas bonus to an Estonian account. So, Käärmann and co-founder Taavet Hinriku invented cross-border payments transfer platform TransferWise in 2010, known as Wise today. Their business proposition was simple: they would get rid of the “middlemen”, otherwise known as correspondent banks, from the value chain of payments. In the traditional value chain of payments, correspondent banks process transactions such as fund transfers or currency exchanges between consumers and merchants. Correspondent banks rely on the Swift network, made up of 11,500 financial institutions in over 200 countries and territories, to carry out the transaction. This process comes with a 2%–5% fee of the total sum and takes between one and four working days. In Käärmann’s case, this meant a EUR500 fee. Instead, Wise built its own banking network, opening bank accounts in all the geographies that they are present in, which allows them to move funds within the region without any pricing or foreign exchange fees.
