Businessmodel of TransferWise

Customer Segments

TransferWise has a mass market business model, and does not make significant distinctions between different customer segments, as all have the same need.

Its early customers were expatriates, international students, and pensioners who moved to a different country; however, it is increasingly used by small and medium-sized businesses also hoping to avoid currency conversion and transfer fees.

Value Proposition

TransferWise offers two primary value propositions: innovation and cost reduction.

The company created a solution that consumers never imagined was possible for their problem – paying high bank fees for frequent transactions. In that sense, they introduced an innovation that disrupted the banking industry by bypassing the institutions themselves.

The company helps consumers reduce costs. The first way is by redirecting the flow of money (as previously described) to ensure that the right currency is sent from the sender to the recipient (avoiding conversion fees). The second way involves reducing transfer fees. All TransferWise transfers are handled using the real mid-market exchange rates that banks use. However, while banks charge transfer fees for hidden services, TransferWise applies a low, nominal flat fee for small transfers (just £1 on transfers up to £300). Between the system’s launch in January 2011 and April 2012, it saved users over half a million pounds. As of 2016, it has saved them over £135 million.

Channels

TransferWise’s main channel is its proprietary software platform, through which its customers carry out most of their tasks. However, it also operates through the mobile channel. Customers can utilize its mobile app, TransferWise Money Transfer, to conduct their transactions on-the-go.

The company markets its services to consumers through its main website and social media pages, and addresses any questions through its customer support phone lines.

Customer Relationships

TransferWise’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service through the main platform while having limited interaction with employees. That said, there is also a personal assistance component as they can speak with its customer support team if needed.

Key Activities

TransferWise’s key activities focus on platform management. The company’s business model entails maintaining a common platform between two parties:  the sender of currency and its recipient.

Key Partners

TransferWise maintains an affiliate program. Members of the program who bring new customers to the company receive a commission. The firm provides partners with all of the tools and support they need to accomplish this task.

Key Resources

TransferWise’s main resource is the technology staff it employs to maintain its software platform.

It also depends on its customer service staff to answer user queries.

Lastly, the company is supported by a team of investors; these include IA Ventures, Valar Ventures, Kima Ventures, Index Ventures, Virgin, Seedcamp, and Andreessen Horowitz.

Cost Structure

TransferWise has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions.

Its biggest cost driver is a fixed cost, transaction expenses, due to the nature of its business.

Other major expense drivers are customer support and operations and sales and marketing expenses, both fixed costs.

Revenue Streams

TransferWise has one revenue stream, the fees it charges customers to conduct transactions through its platform.

It applies whichever amount is higher between the fees charged to the sender and the recipient. For example, the fee for pounds is 0.5%, and the fee for Indonesian Rupiahs (IDR) is 1.5%. This means that a transfer from pounds to IDR would be charged at the 1.5% rate.