TransferWise has become the first non-bank company to gain direct access to the UK’s Faster Payments Scheme, which TW says will help it compete with banks on sending money overseas.
TransferWise, one of several start-ups trying to tempt consumers and small businesses away from banks, said it would now be able to offer customers faster payments with lower processing costs.
Faster payments is a British banking initiative introduced in 2008 to help speed up the time it takes payments to reach the accounts of banks’ customers.
Fees to convert funds into foreign currency, send them overseas or withdraw cash abroad amount to billions of dollars in income for banks globally, but critics say services are slow, often contain hidden charges and are ripe for competition from outsiders.
“It is going to open the gates for tech companies to build much better product than they were able to do. Just because we were reliant on banks and couldn’t access the infrastructure directly,” Kristo Käärmann, co-founder of TransferWise.
Before getting a settlement account in the Bank of England’s Real Time Gross Settlement (RTGS) system, TransferWise was forced to rely on the traditional banking system to access the fastest network.
Käärmann said his company, which counts Old Mutual Global Investors, venture capital firms IVP and Andreessen Horowitz and British billionaire Richard Branson among its investors, had spent five years trying to get access.
TransferWise says it moves more than $2 billion globally every month, saving people some $80 million per month compared to using their bank.
Mark Carney, the governor of the Bank of England, said in a statement that giving TransferWise direct access to the UK’s Faster Payments Scheme would “stimulate competition and innovation” and reinforce financial stability by increasing “diversity and risk-reducing payment technologies”.
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