Trans­parency pays off for ris­ing star of fin­tech scene

A drive for open­ness has helped the Trans­fer­Wise boss to build a $5bn global player, writes James Cook

The Daily Telegraph - Business - - Technology Intelligen­ce -

Kristo Käär­mann, the 40-year-old chief ex­ec­u­tive of $5bn (£3.9bn) cur­rency trans­fer ser­vice Trans­fer­Wise, pulls up his hoodie as he sits out­side a log cabin in Tallinn. “Sorry, it’s very windy here,” he says, peer­ing into his com­puter screen on a Zoom call. “Luck­ily the sun is out, which is quite rare.”

Af­ter a decade spent in London build­ing what has be­come one of Europe’s most suc­cess­ful fin­techs, Käär­mann has used lock­down as an op­por­tu­nity to move back home to his na­tive Es­to­nia.

With a net worth of £229m, he can af­ford to take a short break with his wife, lin­gerie de­signer Kriss Soonik.

It’s just 10 years since he and his co-founder Taavet Hin­rikus were try­ing to jug­gle their own ex­penses while Käär­mann worked as a man­age­ment con­sul­tant and Hin­rikus was an ex­ec­u­tive at Skype.

Even­tu­ally, they hit upon the idea of pay­ing each other’s ex­penses, re­duc­ing the amount of money flow­ing around the world and thus avoid­ing stiff cur­rency trans­fer costs. Not long af­ter, Trans­fer­Wise was born.

Käär­mann spent the first 26 years of his life in Es­to­nia, ex­pe­ri­enc­ing Per­e­stroika and the coun­try’s tran­si­tion to in­de­pen­dence in the Nineties.

It helped to in­stil a sense of in­ven­tive­ness in Käär­mann, who had watched as new in­dus­tries in­clud­ing bank­ing emerged from the wreck­age of the USSR.

“It was an in­spi­ra­tion to me,” he re­calls. “The idea that a cou­ple of sim­ple dudes from the fringes of

Europe can pro­vide a fix to this was a lit­tle bit in­spired from our up­bring­ing.”

In the com­pany’s early days, the pair made a splash in the City by strip­ping down to their un­der­wear out­side the of­fices of big fi­nan­cial firms to boast that they had “noth­ing to hide” about the cost of cur­rency trans­fers.

More re­cently, their ap­proach seems to have mel­lowed some­what, but “the at­ti­tude hasn’t re­ally changed”.

Käär­mann adds: “The fact that they’re not telling you what you’re charged, that’s not ac­cept­able.”

Trans­fer­Wise an­nounced on Wed­nes­day that its an­nual prof­its had dou­bled to £21.3m and its rev­enues rose 70pc to £302m.

It now has 8m cus­tomers glob­ally, pro­cess­ing around £4bn in pay­ments

each month. The com­pany was ex­pected to have been hit hard by the pan­demic be­cause it of­fers a travel card, but Käär­mann says that cus­tomers in­clud­ing ex­pats and fam­i­lies split among sev­eral coun­tries are still us­ing the ser­vice.

Part of Trans­fer­Wise’s re­silience is down to a shift in strat­egy. “Back in the day, you might re­mem­ber ev­ery­thing was about growth and how many cus­tomers you have,” Käär­mann says.

But af­ter five years burn­ing money chas­ing rapid growth, the founders switched their fo­cus to prof­itabil­ity: “Al­most ev­ery ac­tion that you do on Trans­fer­Wise is sus­tain­able and maybe even slightly prof­itable.”

It’s a far cry from chal­lenger banks, where ex­ec­u­tives pri­vately com­plain of los­ing money from of­fer­ing cur­rent ac­counts. Käär­mann speaks proudly of the com­pany’s part­ner­ships with cen­tral banks in­clud­ing the Bank of Eng­land and the Hun­gar­ian Na­tional Bank, which al­low his busi­ness to send cus­tomer cash di­rectly around the world.

These deals helped to boost Trans­fer­Wise’s val­u­a­tion to $5bn in July fol­low­ing a $319m sec­ondary of­fer­ing, plac­ing it just be­hind Revo­lut, Check­out.com and Swe­den’s Klarna in a league ta­ble of Euro­pean fin­tech.

Does this make the com­pany a con­tender to meet Do­minic Cum­mings’ dream of build­ing $1 tril­lion start-ups in the UK af­ter Brexit?

Käär­mann laughs when asked about Cum­mings’ plan. “I didn’t spend any time on this to be hon­est,” he says.

When asked what’s on his shop­ping list of fac­tors needed to grow Trans­fer­Wise in the UK, Käär­mann pauses to think.

“It would be great if we had an ar­range­ment to ac­cess the Euro­pean mar­ket on the same terms as we had it two years ago,” he says.

The com­pany last raised ven­ture cap­i­tal fund­ing in 2017, and Käär­mann says “this is it for a while” when it comes to rais­ing out­side money.

Trans­fer­Wise’s founders have stayed silent on any plans to go public, but when asked whether a fu­ture float would take place in London or New York, Käär­mann makes it clear that both cities are seem­ingly still in play.

“I do think London is an in­ter­est­ing, real thing and I wish that there would be more com­pa­nies list­ing in London,” he says.

“But then again, we also have com­pa­nies in London who list in New York and that also makes sense in many ways.”

“We haven’t thought about this that much,” he says as the wind picks up out­side the cabin, rat­tling the wind chimes once again.

“You’re right, one day we will have to think about it. But we’re not there yet.”

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.