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Richard Branson backs FinTech50 company Transferwise

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Richard Branson backs FinTech50 company Transferwise

Transfer tmag Article

10 Jun 2014

Great to see this investment from Richard Branson into TransferWise, one of our FinTech50 2013 & 2014 companies. TransferWise, offers foreign exchange transfers without large bank fees,

Read the full story by Mark Scott of the New York Times

Photo credit: Andrew Testa for The New York TimesThe British capital is staking a claim as a global leader for financial technology start-ups.

On Monday, TransferWise, one of the city’s most prominent financial technology companies, said it had raised $25 million from a range of investors, including Peter Thiel, a co-founder of PayPal, and the British billionaire Richard Branson.

Started by two Estonian friends in 2011, TransferWise uses peer-to-peer technology that allows individuals around the world to swap currencies without incurring large bank transfer fees.

The company says it has processed roughly 1 billion pounds, or $1.7 billion, of transactions over the last three years, saving its customers around £45 million in banking fees that would have been incurred when sending money to another country.

The London-based start-up, which in 2013 raised $6 million from investors, including from Mr. Thiel’s venture capital firm, Valar Ventures Management, offers foreign exchange transfers across Europe but has yet to break into the United States. (The company offers a limited product for dollar transactions that does not include using peer-to-peer technology to match customers in different countries.) The company’s largest markets are currently Britain, Germany and France.

“The U.S. is an interesting market,” said Taavet Hinrikus, a co-founder of the company who previously worked at Skype. He said that receiving an American banking license was a major hurdle to entering the market. “Nonbanking financial start-ups are expanding at a rapid pace. Banks aren’t doing anything innovative.”

Despite the tough talk against traditional lenders, Mr. Hinrikus, who started TransferWise with Kristo Kaarmann, a former management consultant, secured part of the new financing from Mr. Branson, who co-founded the British bank Virgin Money.

Mr. Hinrikus said that the deal showed that Mr. Branson was willing to invest in start-ups that could challenge how banks offer foreign transfers to their customers.

“There could be room for cooperation,” Mr. Hinrikus said, referring to Virgin Money.

TransferWise has also been rumoured to be in talks with Facebook for a service that would allow users to exchange money over the social network.

Mr. Hinrikus declined to comment about the potential relationship, saying that the additional funds would be used to expand the start-up’s operations in new countries, both in Europe and farther afield. The start-up currently employs more than 100 people in London and Tallinn, Estonia.

Along with American rivals like Square, a mobile payments start-up, and Stripe, an online payments company, a number of fledgling companies in Europe are trying to break into the banking sector.

That includes CurrencyFair, which was started by Brett Meyers, an Australian based in Dublin, and offers a rival foreign exchange service to TransferWise. The company says it has processed around 900 million euros, or $1.2 billion, in foreign currency transactions since 2009.

In London, one of the world’s largest financial centers, fledgling companies like Funding Circle and Zopa now offer so-called peer-to-peer lending, which allows individuals to lend money directly to companies or to people without using an intermediary bank.

And in the London financial district that is home to stalwart institutions like Morgan Stanley and JPMorgan Chase, a start-up incubator called Level39 has been set up to help financial technology start-ups — or FinTech — to tap into the city’s existing banking community.

“We are really just getting started,” said Eric Van der Kleij, who runs the Level39 co-working space and previously headed Tech City Investment Organization, the government body that promotes London’s wider start-up community. “FinTech is all the rage. The city’s expertise helps Britain to compete on a global basis.”

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