Chapter 2 Identifying Business Needs

Case Study Chapter 2: TransferWiseTransferWise ( https://transferwise.com ) was born out of frustration. By employing the peer-to-peer model of matching the people that need money in different currencies, TransferWise is able to undercut the banks and other competitors when sending money abroad.

Overview

The founders of TransferWise, Tavvet Henrikus and Kristo Kaarmann are two friends who believe that money is meant to flow freely. But in the absence of a global currency, it doesn’t. TransferWise developed a web platform enabling customers to transfer money more quickly and cheaply than any of its competitors, particularly the high street banks. The banks are often cited as one of the biggest industry spenders on IT and yet banking is not isolated from disruption. Digital technology has not yet transformed the sector the way it has other industries.

With TransferWise, customers can send money from 59 different countries including European countries, the USA and India, covering 504 currencies routes.

The aim of TransferWise is to:

● Implement a disruptive business model that challenges the existing banking services to transfer money from one country to another at a low cost, high speed and conveniently.

Source: Heinze, A., Fletcher, G., Rashid, T., & Cruz, A. (Eds.). (2017). Digital and Social Media Marketing: A Results-Driven Approach. Routledge. Accessible online http://mastersindigitalmarketing.org/book/ #passion4digital This work is licensed under a Creative Commons Attribution 4.0 International License.

Implementation The TransferWise business model is peer-to-peer (P2P), a model also adopted by eBay, Airbnb and Snapcar. The companies enable customers to buy and sell products and services from each other or share them. The model is in accordance with the trend of collaborative consumption. By employing the P2P model of matching the people that need money in different currencies, the start-up is able to undercut the banks and other competitors when sending money abroad.

The company employs over 500 people located in Tallinn, London, and the US (New York and Tampa). The average value per transaction is GBP 1,500. In the US, it typically charges a flat one percent transfer fee for transfers between $300- $5,000. Anything above $5,000, the company charge 0.7%, and anything below $300, a flat $3 fee. All transfers are made using the interbank exchange rate. Banks often have hidden tax charge fees to send money and use slightly less favourable exchange rates.

The advertising strategy is quite challenging to the Advertising Standards Authority in the UK. It attacks the banks, trying to expose their expensive decisions concerning money transfers. TransferWise has put together a Pinterest “Board of Shame” featuring its competitors’ advertising

Bank researchers consider that TransferWise faces some challenges from the business environment in the countries where it operates due to the unstable economic environment and fluctuating exchange rates. Bank disruptors like TransferWise may not be successful because they offer just one service compared to banks and the cost may hinder future growth.

The major competitors of TransferWise are London-based Azimo, which lets people link to Facebook to transfer funds, and CurrencyFair, which is based in Dublin.

Results

TransferWise customers send £500m every month through the platform, meaning they save £22m every month.

Taavet Hinrikus considers that the key to success is the simplicity of the design. "Banks are really bad when it comes to building consumer-centred products. People expect systems to be as simple as Skype, which we had experience in building. We've been working on this system for four years - it's quite a piece of art."

Source: Heinze, A., Fletcher, G., Rashid, T., & Cruz, A. (Eds.). (2017). Digital and Social Media Marketing: A Results-Driven Approach. Routledge. Accessible online http://mastersindigitalmarketing.org/book/ #passion4digital This work is licensed under a Creative Commons Attribution 4.0 International License.

Since its inception the company has won a number of awards including The Financial Times Boldness in Business 2014 award. In recognising the uniqueness of the TransferWise business model, the Financial Times stated: “TransferWise is looking to use the internet to spark a digital revolution in current financial services.”

Further accolades came from The Economist which added “TransferWise has every chance of carving out a sizeable niche in the currency exchange market.” and WIRED, “Smart tech and sharp thinking are disrupting high-street banks.”

Further Information

1. Akande, G. (2015) How Peer to Peer Companies Change the Business Model Canvas, [Online] Available: http://i360institute.com/2014/06/peer-peer-companies-change-business-model-canvas/

2. Cava, M. (2014)USA TODAY, London's TransferWise aims to disrupt banking , August 18, 2014, [Online] Available: http://www.usatoday.com/story/tech/2014/08/16/transferwise-takes-on-banking-money-transfer-fees/13622337/;

3. Davies, S. (2014) TransferWise fundraising could value London start-up at nearly $1bn,

4. http://www.ft.com/cms/s/0/e9dab1b6-68d9-11e4-af00- 00144feabdc0.html#axzz3OGo1ynEi

5. O'Hear, S. (2014) Now Backed By Sir Richard Branson, TransferWise Raises $25M For Cheaper Money Transfers, [Online] Available: http://techcrunch.com/2014/06/09/cheeky-transferwise/;

6. Salter, Ph (2014) [Online] Available: TransferWise's Cofounder On Banks, Bitcoin and Branson, http://www.forbes.com/sites/philipsalter/2014/11/30/transferwises-co-founder-on-banks-bitcoin-and-branson/;

7. The Secret of Success 2014-2015 Europe’s Digital Icons: Transforming Our Economy, Executive Agency for Small and Medium-sized Enterprises (2014) y, [Online] Available: https://www.compumatica.com/upload/files/61_Secret_of_Success_14_15.pdf

8. http://www.bbc.com/news/business-31639262 9. https://www.youtube.com/watch?v=Fm4L5Rwauv4 10. https://www.youtube.com/watch?v=XXvS6JnNJ30 11. https://www.youtube.com/watch?v=7FEo3X39YM0 12. https://www.youtube.com/watch?v=6pbw_U0Djjw 13. https://www.youtube.com/watch?v=ZcU945Ex7Zs

Source: Heinze, A., Fletcher, G., Rashid, T., & Cruz, A. (Eds.). (2017). Digital and Social Media Marketing: A Results-Driven Approach. Routledge. Accessible online http://mastersindigitalmarketing.org/book/ #passion4digital This work is licensed under a Creative Commons Attribution 4.0 International License.

Discussion questions

1. What is the impact of the external environmental factors on the TransferWise business?

2. What do you believe are the key strengths and weaknesses of TransferWise?

3. Identify the strengths and weaknesses of the major TransferWise competitors.

4. Compare the implementation of P2P business model by contemporary companies like

eBay.

5. Create a buyer persona spring model for the TransferWise case.

Class activities1. Imagine that you are CEO of a leading British bank. What is going to be your strategy to

compete with the disruptors of your business like TransferWise?

2. In what other industries and service sectors can the P2P business model be

implemented?

Source: Heinze, A., Fletcher, G., Rashid, T., & Cruz, A. (Eds.). (2017). Digital and Social Media Marketing: A Results-Driven Approach. Routledge. Accessible online http://mastersindigitalmarketing.org/book/ #passion4digital This work is licensed under a Creative Commons Attribution 4.0 International License.