FinTech Is Scaling Up: UK Banks to Enable International Remittances in Mobile App Using TransferWise’s API

Moving around $778 million internationally every month, TransferWise is turning out to be the next FinTech startup to partner with banks to provide its services to the banking customers via a bank’s mobile app. Until now, the company has taken more than 2% of the London global remittance market over a period of four years since its launch. Banks charge high fees for sending money internationally, but with TransferWise, anyone can send more at a fair rate. The pricing is transparent and the exchange rate is real. The small fee is easy to spot as well.

We recently included TransferWise in our FinTech unicorns list; this big news from TransferWise followed soon after. TransferWise has partnered with one of Estonia’s largest bank, LHV, to incorporate its money transfer technology in LHV’s mobile banking app. The service is expected to launch in early 2016. This technology is nothing but recent APIs released by TransferWise that can be easily used by developers to insert in other applications. Sources reveal that TransferWise is planning similar partnerships with a few other banks in the UK and with some of the biggest lenders in the UK. As LHV’s 70,000 customers start using TransferWise, it is expected that TransferWise’s market share in the international remittance industry of $581 billion will rapidly increase as it partners with more banks and lenders in 2016.

Financial technology startups partnering with banks is not an unusual trend in the FinTech industry. One of the reasons banks have been partnering with FinTech startups is because of the fear of losing their customers to these startups. Since the past three years, banking customers have been moving towards non-banking services like P2P payments (Venmo, Google Wallet) and P2P lending (Lending Club, SoFi), taking away banks’ profits and their relationship with the banks. To overcome this, banks have started partnering with FinTech startups to provide the same services to their customers via the banks’ channels. This will not only bring simpler processes to banks but also cost lesser than their traditional models. And we have seen this happening quite lately.

- JPMorgan Chase & Co., the biggest US bank, recently collaborated with On Deck Capital Inc. to dramatically speed up the process of providing small business loans to some of the lender’s 4 million customers.

- In April 2015, BBVA Compass announced an agreement with P2P payments service provider, Dwolla, allowing its customers to use Dwolla’s real-time network to make money transfers.

- In May 2015, the UK’s Metro Bank also joined hands with P2P lending platform Zopa to lend money through Zopa’s platform.

- Exactly a year ago in 2014, TD Bank, one of the largest banks in the US partnered with Moven, a personal financial management app that lets people manage their finances. With this partnership, more than 5 million customers are using Moven’s technology in three different countries.

This clearly indicates that FinTech is scaling up. FinTech startups rose to fill in the gaps and loopholes in the traditional banking system and now banks are partnering with these startups as banking customers have started noticing the loopholes and becoming less loyal to banks.

TransferWise has taken a big step in the international remittance industry. While its partnerships with banks have an intuitive business model, it will be interesting to see how it partners with the lenders in the UK. In January 2015, the company received a funding of $58 million in its Series C funding round led by US venture capital firm Andreessen Horowitz. The investment also included backing from existing TransferWise backers Sir Richard Branson, Peter Thiel’s Valar Ventures, Index Ventures, IA Ventures and Seedcamp. The company plans to use the new fund for international expansion. Apart from the US, the recent currency routes served by TransferWise include transacting money to Pakistan, Brazil, Nigeria and Morocco.