U.K.'s TransferWise, once a rival to banks, launches with U.S. FIs

U.S. financial institutions seeking a way to provide their customers with a cheaper way to make international remittances now have an ally in TransferWise.

The London-based international remittance company is enabling U.S. banks and credit unions to integrate an application programming interface with their back-end systems to give consumers the ability to initiate transfers without leaving the confines of their institution’s mobile app.

Novo, a banking platform for small businesses, and Stanford Federal Credit Union will be the first two institutions to roll out the TransferWise for Banks platform in the coming weeks.

“TransferWise has always been about giving people and businesses access to the best possible payments experience that we can provide them,” Murali Akella, head of banks for TransferWise, said before an event in New York on Wednesday.

“The more we thought about it, the most logical place to expand our services to was banks and credit unions, and make this available to those entities," Akella said.

TransferWise launched in 2011 and has had a U.S. office since 2015, back when it marketed itself as a Robin Hood-style rival to banks. Upon opening its U.S. office in New York, it staged a publicity stunt taking aim at hidden bank fees, as its staffers stripped to their underwear and ran through the streets in February weather to show they had "nothing to hide."

TransferWise, which has long touted low and transparent fees, eventually warmed to working with banks. It already has similar partnerships with challenger banks in Europe including Bunq, Monzo and N26.

The company also provides the service to LHV in Estonia and recently signed an agreement with Group BPCE, the second-largest banking group in France.

Harsh Sinha, the chief technology officer at TransferWise, said the idea to essentially turn itself into a platform for banks outside its normal operations came from customer feedback.

“We continued to iterate on what customers were telling us they wanted,” Sinha said. “We started hearing from customers, why can’t you be in my bank app?”

Banks thought the same thing.

Michael Rangel, Novo’s CEO, relayed a story about approaching TransferWise executives at an industry conference in October 2018.

“I needed a way to figure out how to integrate TransferWise into our systems to offer small businesses international payments and transfers,” Rangel said. “We knew who we wanted to partner with, but we didn’t know how it was going to happen.”

Rangel said in the months after the meeting, TransferWise approached him about testing the bank service.

In addition to servicing small businesses, Novo also has a technology partnership with Middlesex Federal Savings in Somerville, Mass.

Rangel said Novo is in the process of integrating the TransferWise API with the $420 million-asset community bank.

For Stanford Federal, its newfound relationship with TransferWise didn’t happen by accident.

Paul James Jockisch, the chief financial officer for the $2.6 billion-asset credit union, said the institution saw its members were already using TransferWise to make international remittances.

Part of the reason for this was that the Palo Alto, Calif.-based Stanford Federal partners with the likes of Wells Fargo and Western Union to access the international payment rails needed to make such transfers. That added extra cost on top of the normal foreign exchange rate fees.

“One of the questions that we get from members is, why am I not getting the exchange rate that I Google online?” Jockisch said. “That is a question that happens every single day.”

Jockisch said Stanford Federal sees its members, which includes engineers from some of the top tech companies in Silicon Valley, initiate between $100 million and $200 million in international transfers per year.

The TransferWise partnership will significantly cut the costs associated with those transfers for its members.

“We’re getting into a relationship with an organization that has a lot of the same values as a credit union,” Jockisch said. “I'm trying to be transparent. I'm trying to have low fees. I'm trying to do what's in the best interest of our members.”

Stanford Federal is still in the process of integrating TransferWise into its back-end systems. Once that happens in the coming weeks, members will be able to initiate TransferWise remittances through the credit union’s mobile app.

Akella and Sinha both said their company’s bank service is not limited to smaller institutions and is willing to work with the largest banks on international transfers.

“The way we’ve built the platform, it works for the smallest institutions all the way up to the largest banks,” Akella said. “It’s a flexible API.”