Wise: Moving Money Around the World - [Business Breakdowns, EP. 99]

183 snips

Mar 1, 2023

In this discussion, James Revell, a former payments executive and investor at TDM Growth Partners, breaks down Wise's game-changing approach to international money transfers. He reveals how Wise's closed-loop system outpaces traditional banking by slashing fees and speeding up transactions. The conversation also delves into Wise's remarkable growth and its direct listing on the UK stock exchange, showcasing how it builds brand trust and maintains profitability. Revell highlights the empowering team culture at Wise, enhancing collaboration and scalability.

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ANECDOTE

Wise Founding Story

Wise's founders, two Estonians living in London, faced issues with traditional bank transfers.
They developed a system to exchange currency between their Estonian and UK accounts without money crossing borders.

INSIGHT

Wise's Competitive Advantage

Correspondent banking, the system banks use for international transfers, is inefficient and costly, leading to high fees and slow transactions.
Wise's closed-loop system bypasses this, offering significantly cheaper and faster transfers.

INSIGHT

Wise's Closed-Loop System

Wise's closed-loop system involves a network of domestic bank accounts, eliminating the need for money to cross borders.
This reduces costs, increases speed, and makes the entire process transparent for the customer.

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This is Zack Fuss, an investor at Irenic Capital, and today we’re breaking down Wise. Wise helps individuals and small businesses move money across borders. It offers significantly faster and cheaper international transfers than traditional banking routes because of its innovative closed-loop system. Twelve years after its founding, Wise serves six million customers and earned close to £1 billion in income last year. Investors currently value the business, which is listed in London, at £6 billion.

To break down Wise, I’m joined by former payments exec and now investor at Sydney-based TDM Growth Partners, James Revell. We cover the broken system of correspondent banking, which has led to slow, opaque, and expensive transfers and then explore how Wise has counter-positioned itself to take advantage of this large market. Please enjoy our breakdown of Wise.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes

[00:02:27] - [First question] - Overview of Wise, their key product, and core competency

[00:04:17] - The founding story of Wise and the road leading to today

[00:09:18] - Wise’s size and scale today compared to 2011

[00:11:07] - Their competitive advantages and how it informs their goals

[00:19:24] - Exploring Wise’s closed loop system and why their model can’t be copied

[00:21:28] - Unique characteristics of their business model that allows them to capture such robust margins

[00:25:32] - Overview of Wise’s unit economics and their revenue model

[00:34:49] - Interchange fees and how Project Zero guides the business

[00:36:44] - Why their lower take rate doesn’t destroy the industry

[00:38:24] - Ways Wise’s business model can’t simply be copied and replicated

[00:44:35] - Thoughts on who their true competitors are

[00:48:10] - Their customer acquisition flywheel

[00:49:49] - Float, increasing net margin, and how they contribute to durability

[00:53:55] - Key risks associated with Wise when evaluating the business

[00:58:35] - Reasons behind the decision to raise money as a direct listing in the UK

[01:01:03] - How people looking at Wise should think about margins over time

[01:03:32] - Lessons for builders and investors when studying Wise’s story