Every day, it seems, brings a fresh scandal from the financial sector. But what is bad news for the bankers and their investors is good news for those trying to steal away some of their business. A case in point is TransferWise, a young start-up that has recently been seeking to get its message across through provocative ads at bus stops and underground stations across London.
Based (in the modern way) in London and Estonia, the company was born out of a frustration with what the founders saw as excessive hidden bank fees for cross-border money transfers. Taavet Hinrikus, one of the earliest employees of the internet-based phone company Skype, and Kristo Käärmann, a former consultant in the financial sector, hit on the idea when they were each sending money between Britain and the Eurozone and spending huge sums in commission charges on the exchange rates. Kaarmann explains how the friends devised a simple plan. He worked in London, but had a mortgage back in Estonia that he needed to pay in euros, while Hinrikus worked for Skype in Estonia and so was paid in euros, but lived in London, and so needed sterling to pay expenses. Once a month, the two of them checked that day’s mid-market rate on Reuters to find a fair exchange rate. Kaarmann put pounds into Hinrikus’s UK bank account, and Hinrikus topped up his friend’s euro account with euros. Both got the currency they needed, and neither paid a cent in hidden bank fees. Realising that others in the increasingly mobile economy must be in the same situation, they decided to make a business out of it – and TransferWise was born.
That was back in 2011 and since them the fledgling company, which has fewer than 100 employees split between London and Tallinn, has picked up numerous awards and accolades as well as attracting funding from investment vehicles headed by the likes of Virgin founder Sir Richard Branson and Peter Thiel, a co-founder of PayPal and early backer of Facebook. More importantly, perhaps, it has already helped hundreds of individuals transfer more than $1bn around the world, saving them substantial amounts in foreign currency commission charges. Since Kaarmann points out that the global market is about $200bn a year, that gives TransferWise a tiny share. But – with substantial backers now on board – he and his colleagues believe that they can make inroads, once they educate people. Hence those ads.
Kaarmann – who looks after operations, technology and regulatory issues, while Hinrikus focuses on marketing and related matters – acknowledges that the rapid growth that has already occurred and is set to continue requires a special kind of leadership. “I am a big believer that people don’t need to be managed. They need to know why they are doing what they are doing,” he says. One of the problems for large organizations like the banks with which TransferWise is competing is that it is hard for employees “to see that the things they do make life better for somebody else. The chain between the customer and the person doing the work is very long”. As part of making clear the link between the work done and making things better for TransferWise and its customers, engineers spend time with customers to understand their needs. Possibly more contentiously, Kaarmann is a great believer in measuring effects and believes extensive measurement of employees’ efforts is not a problem, provided they know it is happening. “Building a team fast is tricky and building technology fast is tricky. A lot of the magic is in making sure everybody knows what they are doing and doesn’t need to be told.”
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