Mike Collier in Tallinn -
Taavet Hinrikus - co-founder and Chairman of TransferWise, the most hotly-tipped of Estonia's numerous online start-ups and a company that has already attracted investment from the likes of Richard Branson, Peter Thiel and Max Levchin - turns up to interviews in shorts and barefoot. Such sartorial slumming is a small example of what he calls the business' core characteristic: disruption.
"Over the past 15 years a number of industries have been disrupted. Skype disrupted telecommunications - something I know very well as I was their first employee; Spotify disrupted music; online comparison websites disrupted travel agencies. Consumers really want things like Skype and Spotify. Simple, everywhere, easy to use and transparent," Hinrikus says as he fiddles with a set of Lego on the table.
Now it's the turn of the banks, according to TransferWise. The company describes the banking sector on its website as "a $100 billion industry that's thrived on confusion and deception for way too long."
"Banks have been good at using technology to their own advantage to make trading faster by milliseconds, but they're still living in the past," Hinrikus insists. "Banks are still thinking about branches, but do you know anyone who actually enjoys going to a bank branch? There's no getting around the fact that the human touch is important but you've got to get away from this way of thinking. We aim to provide a simple service without asking too much of our customers."
TransferWise has grown rapidly. "That's partly down to us, but it's also about how shit the banks are," claims Hinrikus. "They are really doing a poor job in modernizing themselves. The reason we exist is to provide better financial services. We had a personal frustration with money transfer, so we decided to go and fix it."
That "personal frustration" has become local legend, yet Hinrikus insists the story is absolutely true.
Living in London but being paid in euros, he met Kristo Kaarman (now TransferWise's CEO), who received his salary in sterling but had a mortgage in euros to pay in Estonia. To save on exchange fees, the pair set up a mutual currency swap. It didn't take them long to realise others might be interested, and they cooked up an algorithm to do the hard work of price matching.
TransferWise's basic pitch, that they can transfer money for you far cheaper than the banks, is so simple it seems incredible no-one has seriously attacked the niche before. Basing the exchange rate on the Reuters mid-market rate of the day, the company aims to save huge fees charged by the banks. For instance, TransferWise charges GBP5 to transfer GBP1,000 to a euro account; UK high street banks would typically charge around GBP50 via a mixture of fees and exchange rate dodges.
"We started with the two of us. Then we had a Skype chat with a bunch of Estonian expats, which we called our virtual trading floor. Someone would say 'I need to €10,000 and someone else would say 'Okay.' Then we thought bloody hell, there really are no alternatives out there! We're not taking credit for inventing it - the Islamic system of Hawala has been around a very long time - and there must have been other groups of people doing it themselves. But we were the first to think 'Hey, this is a process, a methodology which we can actually industrialise and help those people who don't have the trusted friend abroad.'"
Walking around TransferWise's Tallinn office is a bit like touring the set of Logan's Run - at least to anyone old enough to have been liquidated under the rules of that particular dystopia. Most of the company's 130 staff are based here, with others in the London office (the company is registered in the UK and regulated by the FCA, it's best defence against inevitable money-laundering concerns).
Getting Sir Richard Branson on board as part of a $33m investment by a group of leading IT investors, coupled with widespread social media advertising, has helped send TransferWise's profile soaring as high as one of the Virgin Group head's balloons. There are billboard campaigns in London featuring the bearded business guru.
"He's the original disruptor," Hinrikus says of Branson. "Everyone who really tries hard has successes and failures. He's not scared of that. He's done so much disruption, we didn't need much convincing to get him on board, it was a no-brainer to get him to be a supporter."
As for the future, Hinrikus prefers not to talk specific figures. He says TransferWise has already moved "more than a billion dollars" around the world, that it has saved its customers GBP45m in banking fees since it was founded in 2011, and that it constantly receives requests to transfer money to and from markets in which they do not yet operate.
The mention of Hawala is intriguing and suggests TransferWise might have something to offer the world of Islamic finance too, but again Hinrikus dodges the question as he completes the construction of his Lego jet. He hints that the company is interested in working in all major currencies, and not just via transfer matching.
"If we only work with balanced currency flows that will severely restrict the appeal of the service. People come to us saying they want to move money to Mumbai, to Australia, to the Philippines. It's our duty to find a way to make it happen," he says. "We're a venture-backed company, so we're primed for high growth. Our investors expect serious returns. This is just the beginning."
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