For the November issue of Wired Italy (print edition), I interviewed Taavet Hinrikus, founder of TransferWise, an Estonian startup which aims to disrupt the bank system starting from one the most annoying things for customers: the cost of moving money from one currency to another.

Here’s how it works, in short, according to the official description (I tested the service, and it worked, for me): “Estonian friends Taavet and Kristo came up with the idea for building the platform when they first became expats in London and were confronted by the high fees banks charge to transfer money abroad. Taavet had worked for Skype in Estonia, so was paid in euros, but lived in London. Kristo worked in London, but had a mortgage in euros back in Estonia. They realised they each needed the currency the other had, so they devised a simple plan: every month Kristo put pounds in Taavet’s British bank account and Taavet put euros in

Kristo’s euro account. They used the official mid-market rate exchange rate (that’s the one in the papers, not the one invented by the bank). They both received the right amount of money, and neither paid any bank fees. Within a few months they’d saved thousands of pounds and realised there were probably millions of others that needed a system just like theirs. So they set to work – the rest is TransferWise“.

 

And here’s the unedited transcript of the interview (different from what appeared in print):

 

Q: Technology have already “disrupted” many sectors, from music to publishing to phone calls; do you think the banking sector will be the next and you are at the forehead of this evolution?

A: Absolutely! The banking sector has got to be next – almost everything else has been disrupted. It’s ridiculous that banks can take a week to move money across borders – and take up to a 5% cut for doing so!

You can tell there was a systemic failure in the UK high street banking market because so many of the best UK startups are finance based – Zopa in personal loans, Funding Circle and MarketInvoice in loans to established businesses, GoCardless in instant payments, Seedrs and Crowdcube in lending to start-ups, us in foreign exchange – the list goes on and on.

 

How many customers do you have and what kind of persons are they? (young nerds, businessman, more men or women, from which country etc)? Do you know also something about their motivations for using the service? (I noticed you ask for them before you complete a transfer).

In terms of size, we’ve transferred over £125m worth of customer money so far and continue to grow at over 20 percent a month.

We don’t have a “typical customer” since we dramatically reduce the cost of international money transfers for anyone who wants to send money abroad. That said, there are several broad groups we are particularly popular with at the moment – early adopters, perhaps? These include:

(1) People who were just like my co-founder Kristo and I before we started TransferWise. That is, expats who are paid in one currency, but spend their money in another.

(2) British pensioners who have retired to Spain and want to see their retirement funds go further.

(3) Freelancers who get a rotten deal from the banks and brokers alike. Susan, an Irish freelance writer customer of ours, has worked out that she was losing hundreds a year when her British clients paid her through PayPal!

(4) Small and medium sized businesses. Every small business needs to make their cash go as far as possible. Particularly startups who raise overseas investment don’t want to see 5 percent of it go to the bank.

Our customers are spread out across most European countries, but we probably see slightly more customers coming from the UK, France and Spain at the moment.

 

How can you be so inexpensive and still be profitable (if you are profitable)?

We could have broken even earlier this year, but we’re reinvesting what we’ve earned back into the platform because want to build a much larger service, offering many more currency exchange routes. As a two-year-old, venture-capital backed business, our focus is growth , growth, growth at the moment.

 

How many employees do you have? Are you planning to expand and hire more personnel?

We currently have 40 employees, but with a growth rate of over 20 percent a month we’re hiring all the time.

 

Why did you choose Estonia as your hub for handling transfers? And why you did not base there and chose London instead?

Both my co-founder and I are Estonian and the country has a rich supply of banking, operational and technology talent, so it was a logical move to have some of our operations in Tallinn. Our head office, however, is in London. We’re an international business that caters to international people, so it’s important to be spread across Europe.

 

When it comes to money, people think twice before trust others to manage their own. How will you win this natural diffidence?

It’s obviously a battle. There’s an old adage in the UK that you’re more like to change your husband or wife in your lifetime than your bank provider, which demonstrates quite how conservative the market can be! We’re doing well so far, though. I think the combination of the great 9.7/10 review our customers have given us on Trustpilot, our high profile backers – PayPal founders Peter Thiel and Max Levchin among many others – and our fully authorised status with the UK FCA – the Financial Conduct Authority really helps.

 

What are the other obstacles you have encountered until now, in creating and growing the service? Traditional banks are fighting back somehow?

It’s an enormous market (trillions of pounds are moved daily), so the banks haven’t reacted yet. TransferWise’s customers call us “revolutionary” and “game changers”, though – and that’s what really matters.

 

I read this passage, in a previous interview: ” The exchange relies on there being someone at the other end wanting to change euro into pounds. In order to guarantee that there will be someone, TransferWise works with The Currency Cloud for added liquidity”. Could you elaborate a little more on that?

That’s not entirely accurate. We have enough liquidity to service all transfers between pounds and euros ourselves – customers never wait more than 3 working days for their transfer to be processed. But we do partner with Currency Cloud alongside many other innovative and technology-savvy banks and currency providers across the world. We use their services to deliver payments and to buy in extra currency to top up the liquidity if a currencies start moving more in one direction than another.