#GROWTHSTORY How TransferWise Is Building a New Global Financial Services Brand
It’s no secret that the fintech space is a tough one to play in, yet TransferWise has been able to build a massively successful company in a span of just a few years.
Not the first startup to tackle the estimated $5-10 trillion market for individual and SMB international money transfers, it found a path to scalable growth where scores of others have failed. To put things in perspective, the seven-year-old company is on track to generate over £100 million in revenue this year and has become profitable.
Savvy investors recognized the company’s potential early on. Now valued at $1.6 billion, TransferWise received an early vote of confidence from the likes of Andreesen Horowitz, Peter Thiel, and Richard Branson.
How did TransferWise succeed in a highly competitive space? The answer is far from surprising: by having a clear purpose and building a culture, product, and marketing strategy around it.
This is a story of how a mission-driven insurgent has become a fintech unicorn that’s shaking up the entire banking industry.
The idea: a modern take on the age-old business model
Like most great products, TransferWise was created to solve the founders’ problem. When Taavet Hinrikus and Kristo Käärmann were sending money between the UK and their home country of Estonia, a lot less money arrived than expected. Each time the bank took a fee, hidden inside the exchange rate.
They worked out a simple solution: Taavet put his euros into Kristo’s Estonian bank account, and Kristo topped up Taavet’s UK bank account using his pounds. The funds never crossed the borders, so neither paid obscure charges and both got the currency they needed almost instantly.
It seemed that many people faced the same problem. Having validated this hypothesis with their friends in Estonia and London via a simple Skype chat, they decided to take their personal money savings model to the broader market and came up with TransferWise.
The company’s peer-to-peer model is not entirely new. It traces its roots to hawala, the traditional money transfer system that underpinned international trade throughout the Muslim world before the advent of modern banking.
Thanks to the crowdsourcing approach, the company is able to charge 5-10x less in fees than traditional banks.
When a peer-to-peer match is not possible, TransferWise becomes a market maker, using its own capital or relying on intermediaries to complete the transfer. By maintaining liquidity in countries where customers are transacting, the company avoids higher international transfer costs and is able to offer customers a faster and cheaper solution even on non-P2P routes.
Early traction: hustling to build momentum
Still not sure anything would come out of this, they hired a freelance engineer to build an MVP and launched in January 2011.
What was their launch strategy? Other than spreading the word among their network, they got a break with PR. A friend helped them get coverage in TechCrunch, and within 15 minutes of the post going live they had their first customer.
Kristo Käärmann adds:
In the next half an hour we had someone send us €1,000. Then we had some pounds again, and euros again, and at the end of the day we had a business.
The company’s win in the Seedcamp program later that year gave them a boost of confidence and helped them land their first investment round.
Early-stage growth came mostly on the back of word of mouth, since product economics did not support paid marketing. Nilan Peiris, TransferWise’s VP of Growth, recalls how the company went after its target audience:
We tried a few “growth hacks” to get things going – e.g. going to universities with high proportions of foreign students and giving them referral bonuses if they invited their friends; hitting HR directors of businesses that paid people in Euros and telling them they could give their employees a pay raise by paying with TransferWise. We realized these hacks only worked when the person who was hustling on our behalf was an existing customer.
Despite the company’s best efforts, growth was painfully slow for the first two years, and the company was in what Nilan Peiris calls a “death zone”. Something was missing, and that something was a story that would get the people to talk about the product and align behind the brand.
Building a brand with a consistent narrative
TransferWise’s marketing pitch had focused primarily on the rational benefits of its product: cost and speed. But the company learned that emotional hooks are much more powerful.
The insight came from testing the messages its customers used to recommend the service to their friends. The message that centered on the dissatisfaction with the banks and the hidden fees they charge had a much stronger conversion rate.
The company decided to build its PR campaign around the issues of transparency and fairness, marketing itself as a challenger brand, using a revolutionary rhetoric, and lambasting established institutions that overcharge customers.
The emphasis on building a strong brand was a smart strategy for TransferWise, which essentially competes in a commodity-like space. With the high cost of comparing alternative remittance services, the company’s messaging allows the users to take mental shortcuts and go with the brand that has built a reputation of being fast, cheap, and convenient.
Making noise with guerilla marketing
Having found the higher purpose it needed to serve, the hungry young startup needed to deliver to the market a strong and compelling message, and it wasn’t going to be able to do that only through PPC ads and content.
It demonstrated its raison d’etre by launching a Stop Hidden Fees campaign and lobbying the UK government on implementing rules on fee transparency. To make sure its efforts were visible, it put eye-catching ads across the city and delivered bold and expansive guerilla marketing campaigns.
The numerous stunts to support its campaign on fee transparency included people stripping to their underwear in front of London landmarks, participants in beds “waking up” to hidden fees outside of Bank subway station, and protesters staging a mass bath time calling for a clean-up of the current banking system.
100 Naked Protesters Celebrate End of Hidden Bank Fees
The company staged similar stunts in Paris, Barcelona, New York, and Toronto, and while some questioned the company’s provocative tactics, this was exactly the image that a young brash startup wanted to project. As Nilan Peiris points out,
Building trust in an industry that has systemically eroded it requires extremes. You have to go out and prove you are not trying to build another bank. If you are trying to innovate and build trust in fintech, you have to go all the way out there to prove you are different.
Creating evangelical customers
The company’s brand-building campaigns created a buzz and got things going, but growth was still erratic. The strategy of creating memorable visual experiences causes enormous peaks in terms of attention you are getting but does not form a continuously strong bond with your target group.
A turning point in the company’s growth journey happened when TransferWise sent out a manifesto to the entire customer base in connection with its re-branding to a flag symbol that talked about the world they wanted to build. They acquired more customers from people forwarding this email than through any other routes.
The company recognized that no matter how much it spent on marketing, it would never create the same level of trust as when people hear about the product from their friends.
To jump-start organic word of mouth, TransferWise needed to create evangelical customers. The company developed the narrative of a mission-driven startup that is looking to bring about a change in the world and infused with it the company’s culture, product and marketing.
It used the NPS framework to measure the effectiveness of its efforts, and learned that moving someone one notch on the NPS scale doubles the number of people they tell about the product.
Great, but how do you grow NPS? Here is the formula that it found:
10x product + Cause-driven marketing = Explosive word-of-mouth growth
According to Nilan Peiris,
To achieve advocacy, your product needs to be an order of magnitude better than the alternative.
The company found that its primary growth levers on the product side are speed, price, convenience and currency coverage, and it’s not surprising, then, that it’s defining its long-term mission as “enabling money to move around the world almost instantly at almost zero cost”.
On the brand side, TransferWise had to inspire people with their cause. But highly visible stunts aren’t enough to create a movement. You also need to invest in other types of content.
In its own take on YouTube’s Hero, Hub, Hygiene marketing framework, TransferWise adds to the stunts (hero content) a regularly-published Inside the Revolution blog (hub content) and uses the power of social media to drive engagement with the brand (hygiene content).
Fueling the referral engine
Many companies implement a referral program to acquire customers but only see marginal returns. For the program to work, your product has to be good enough for your customers to refer it naturally.
Once your product has a high NPS, building a formal referral mechanism on top of it is like adding fuel to the fire.
TransferWise experimented with monetary and non-monetary incentives for its referral program, and at the end of the day, money works best. While organic word of mouth is certainly preferable, incentivized referrals have been particularly effective in accelerating growth in new markets.
TransferWise leverages the power of Facebook to amplify referrals. Its Lookalike Audiences feature helps the company reach its customers’ friends and re-inforce word of mouth.
The company also directs a significant portion of its advertising to existing customers in order to stoke up their feeling about the brand and amp up their word of mouth. These efforts generate a better ROI than a PPC campaign designed to draw “cold” prospects into the top of the funnel.
Word-of-mouth has been the single biggest driver of growth for TransferWise. Today, 80% of new customers come after hearing about the company through someone they know, up from 20% three years ago.
Building a growth-driven organization
A key ingredient in the company success has been its ability to scale the team to 800 people while retaining the mission-driven spirit inside the organization. The way TransferWise did it is by implementing an unconventional structure with small autonomous, independent teams.
Each team is focused on a customer-facing KPI that drives growth. Payments operations team works on the transfer speed and cost, currencies team – on launching new currencies, conversion team – on the conversion flow, and so on.
The concept of devolving the decision making away from the management team to the people closest to the customers is an emergent way to structure fast-growing organizations that is being adopted by the likes of Airbnb and Spotify.
How they improve KPIs is up to the teams. Any team can change any part of the product, whatever gives them the greatest leverage on their KPI. While this approach breeds occasional conflicts, it yields significant benefits in terms of the teams’ ownership, speed, and agility.
What about a growth team at TransferWise? There isn’t one. Here is how Nilan Peiris thinks about it,
Everyone at TransferWise in some way helps craft the customer experience, and because growth is correlated to how strong that experience is, everyone works in growth.
Finding new growth levers
Having relied on NPS-driven growth over the last few years, the company is now seeing diminishing returns. To keep the business growing, it has to go beyond referrals.
“TransferWise everywhere” strategy
To move the needle on growth, the company is looking to leverage the power of other platforms and access previously untapped customer pools. Taavet Hinrikus points out that:
As much as we want everyone in the world to come to TransferWise, there are some people who will never come directly. We need to go to where the customers are and offer TransferWise experience within their existing tools and products.
Challenger banks are a natural partner for TransferWise. The company has already teamed with Estonian’s bank LHV, Germany’s first mobile-only bank Number 26, and UK’s digital-only Starling Bank to power their international money transfer services and is scouting for similar partnerships in other locations.
TransferWise also recently launched integration with Facebook Messenger which allows users to send money internationally right from within the app.
TransferWise is growing by aggressively adding new geographies and expanding currency coverage. But the company does not have a globally scalable product since each market has its own nuances in the way people move funds. It means that it has to change the product to adapt it to the needs of the local customers.
Today, the service is available in close to 60 countries covering over 500 currency routes, and the company’s latest $280 million funding round is aimed to facilitate its push into the APAC market.
Product offering for the business segment
Having built a strong brand in the consumer market, TransferWise has recently started marketing to small and medium-sized businesses that need to make foreign currency payments. Here is what it offers:
- Borderless account is aimed at businesses, sole traders, and freelancers who conduct business across borders and in multiple currencies.
- TransferWise Payouts allows international payouts directly from its API, giving marketplaces and other businesses direct access to the company’s proprietary payment platform.
- Companies can also cost-effectively meet international payroll requirements by making payments to overseas staff and contractors via its batch payments tool.
Key takeaways from TransferWise’s growth journey
- To achieve exponential growth, you have to solve a problem in a way that is conceptually different to how things work today.
- Define a clear purpose for your company and craft a story around it; then use that messaging to amplify your growth. As in the case of TransferWise, it may not come right away, but over time you need to figure out what you stand for.
- By understanding the drivers of NPS, you can align your product and marketing organization to drive organic word of mouth.
What’s next for TransferWise?
TransferWise has built a mission-driven business that moves over £1 billion every month for its customers, and it’s just getting started. With a strong and trusted brand and robust technology infrastructure, the company is in position to solve a broad range of customer pain points around payments.
Its near-term plans include launching a TransferWise debit card, a move that would see it take head-on another fast-growing fintech startup Revolut. And we can be sure that more initiatives are on the way, as the company looks to evolve into a broader financial services platform that will shape the future of the industry.
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