TransferWise’s Mastercard deal drives Asia expansion

TransferWise has made the strategic decision to remain focused on payments, whereas rival fintechs are extending into broking and lending.

To make this doubling down on its original business work, the U.K.-based fintech has partnered with Mastercard. Now the two are gearing up in Asia Pacific, where TransferWise is already expanding.

The push is baked into Venkatesh Saha’s job title, as TransferWise’s head of Asia Pacific and Middle East expansion. Based in Singapore, he told DigFin that this growth involves two prongs: new markets and new features that fit the region, which may vary from what works in Europe.

“Many domestic banking systems are not suited to our international Internet-driven lives,” Saha said.

Pure payments play

New features, though, will not mean stepping into areas such as credit, broking, or crypto – differentiating TransferWise from other fintechs such as Revolut, which has added these.

Like Revolut, TransferWise got its start in the U.K. by providing consumers making international payments a good user experience and getting them rock-bottom foreign-exchange rates. And like Revolut, TransferWise is branching into catering for small businesses.

Unlike Revolut, however, TransferWise is profitable. It makes money charging a transparent fee on currency conversions and transfers. As an additional service, customers can hold money and spend money in its multi-currency accounts (Mastercard provides the debit card to these customers). This service is now being extended to businesses. Finally, TransferWise allows banks to access its global system of money transfers and exchange rates, bringing that service to their own customers, with TransferWise charging a fee for transactions.

In July, the company announced a valuation of $5 billion, a little below Revolut’s $5.5 billion.

The partnership

Mastercard enables TransferWise customers to access multi-currency borderless accounts. TransferWise is not itself a licensed bank: it operates a global network of its own bank accounts, which it uses to facilitate transactions for its customers without actually moving money across borders.

“Mastercard gives us a payment instrument that is linked to the store of value that customers can use whenever they’re traveling or using international e-commerce,” Saha said. Card users can put more than 40 currencies on the debit card and use it as a multi-currency digital wallet. TransferWise’s software enables users traveling overseas to spend in the currencies that attract the most favorable exchange rate.

We’re just getting started

Venaktesh Saha, TransferWise

In Asia Pac, the fintech has gone live with its account-based services (that is, the wallet and card) in Singapore, Australia and New Zealand, with Japan meant to launch by the end of 2020. It also offers remittance services in Hong Kong and Malaysia. Getting necessary money-operator or other required licenses takes time. Saha said the firm will be opening new markets but could not identify which ones when.

The aim is to provide Mastercard debit cards in all its markets, he said.

Mastercard’s opportunity

This is a big opportunity for Mastercard. “Beyond cash transfers, TransferWise is rolling out our MasterCard Send, which allows cardholders to send and receive money in near real time,” said Rama Sridhar, the payments company’s executive vice president for Asia-Pacific business development, digital and emerging partnerships, and new payment flows.

The payments giant sees small businesses in Asia as a growth opportunity, starting with debit cards for money transfers and installment-type payment schemes. Low-cost technologies such as QR codes and low-cost use cases like TransferWise can make a card look appealing to merchants that would otherwise not accept them, given the fees involved.

Another target for the TransferWise/Mastercard tie-up is the region’s virtual banks, which TransferWise can serve with its existing offer to banks. TransferWise has already won the mandate from Aspire in Singapore, a marketplace aimed at helping Southeast Asian SMEs secure working capital.

Real-time payments create further innovation across the fintech ecosystem

Rama Sridhar, Mastercard

It is also supporting Up, a Melbourne-based neobank that leverages the license of its parent, Bendigo and Adelaide Bank, to offer consumer banking.

TransferWise powers remittances for neobanks in Europe such as N26 and Monzo, while Mastercard has mandates from a range of Asia’s new or to-be-launched virtual banks, said Sridhar. She added that MasterCard uses its relationship with “the Pays” (such as Google and Apple) to open doors for TransferWise.

Asia features

What other features might TransferWise be eager to provide in Asia? Saha noted the fragmented market and regulatory nature of the region is a big difference to Europe.

So too is the growing proliferation of near-instant domestic payment systems. “Real-time payments create further innovation across the fintech ecosystem,” Sridhar said, noting Mastercard serves fintechs with a variety of services and technologies to help them grow.

“We want to solve for local needs,” Saha added. Examples include enabling payment in e-wallets. TransferWise has a partnership with AliPay to allow people outside of China send payments to AliPay accounts in China. It also facilitates payments into wallets in places like the Philippines and Indonesia.

“We’re just getting started,” he said. “There’s opportunity in the core business because people continue to lose billions of dollars in foreign-exchange transactions to banks’ markups.”