TransferWise, the UK based money transfer service, launched a debit card in the U.S. Thursday that works in multiple currencies at once.
Claiming to be the first FinTech to offer customers multi-country banking, the TransferWise debit Mastercard enables U.S.-based customers to spend money overseas as if they were locals.
The debit card is geared toward consumers who travel, shop or send money internationally, freelancers working for overseas companies and small business owners who pay international suppliers. A business card is slated to roll out later in the year. Expansion into Asia Pacific is also on its radar.
TransferWise is betting its debit card will be embraced in the U.S. in large part because of its low fees. The company charges anywhere from 0.45% to 3% to convert currencies and 0.2% to add money to an account via direct debit. There are no other fees. Customers get free international bank details for the UK, U.S, Europe, Australia and New Zealand, which means unique account and routing numbers. The debit card saves customers money by automatically choosing the cheapest option from available balances when there isn't enough currency in the account.
TransferWise says its fees are much lower than traditional banks, its main competition. Based on research commissioned by TransferWise, sending and spending money abroad is four times cheaper on the TransferWise debit card. Its 12 times cheaper to send money internationally than from a bank account. According to the FinTech, it costs $7.25 to send $1,000 GBP using the TransferWise debit card. At Bank of America, the transfer fee is $63.88, $70.41 at Wells Fargo and $34.64 at PayPal. Receiving $1,000 in GBP is free with the TransferWise debit card and $16 at Bank of America and Wells Fargo. Withdrawing cash is also cheaper, costing $1.62 with TransferWise, and $12.50 at the other two banks, the company claims.
Taavet Hinrikus, co-founder and Chairman of TransferWise says it’s able to charge lower fees because it doesn’t have the overhead associated with branches and built the company from the ground up with advanced technologies. "We're not greedy, were focused on providing the service in a low-cost way and running a profitable business,” says Hinrikus. “We’ve done a number of price drops in the last two years to reach lower prices for consumers.” The strategy has worked in the UK. Since the debit card’s debut in the UK and EU customers have deposited more than $2.5 billion in their accounts and spent more than a half a billion dollars on their debit cards.
But TransferWise isn’t the only FinTech helping consumers handle money internationally. It faces competition in the wire transfer business from the likes of Veem and Remitly and many others. They too are being aggressive on price, forcing all of them to continue to differentiate and innovate.
TransferWise was created eight years ago to take on the banks, determined to offer customers a lower cost and more transparent international money transfer service. Its early customers included immigrants who were sending and receiving money across borders. Since then business is booming, which hasn't been lost on venture capitalists. It has amassed a valuation of $3.5 billion and is now Europe’s most valuable FinTech.
TransferWise is betting the success in the UK and Europe will be duplicated in America. Hinrikus says the market is equal in size to Europe and the U.K. With business in the UK doubling in the past year and processing volume increasing from $4 billion to $5 billion a month, it has reason to be optimistic. “The U.S.will probably be our biggest market very soon. I think there is lots of potential," says the executive.