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Digital payment service provider TransferWise has increased its valuation to $5 billion and is now ranked among top European fintech companies.
London-based fintech startup TransferWise has seen its valuation increase to $5 billion following a recent $319 million secondary share sale. The valuation shows a 43% increase since the company’s past valuation in May 2019. Earlier this month, it was reported that TransferWise could hit the impressive valuation as it was attracting global investors with the new share offering.
Now ranked among Europe’s top fintech companies, TransferWise has seen an increase in online payments owing to the growing demand spiked by the coronavirus pandemic. The recent funding round enables TransferWise’s current shareholders to shed their shares for new investors to come in.
“We’ve been funded exclusively by our customers for the last few years and we didn’t need to raise “external funding for the company,” says co-founder and current CEO Kristo Käärmann in a statement. “This secondary round provides an opportunity for new investors to come in, alongside rewarding the investors and employees who’ve helped us succeed so far.”
Among the company’s new investors include Vulcan Capital, D1 Capital partners while its already existing shareholders Lone Pine Capital, Baillie Gifford, Fidelity Investments, and LocalGlobe increasing their existing holdings.
Tracking History and Valuation of TransferWise
TransferWise is the invention of two Estonians Taavet Hinrikus and Kristo Käärmann who founded the company in 2011. The stress the duo experienced moving money from Estonia to the United Kingdom inspired them to develop an alternative to the then existing alternatives. Experiencing a steady growth since inception, transactions through TransferWise amounted to about €10 million in its very first year of operation and by May 2017, the company announced its customers were sending over £1 billion every month using its platform, representing the first time the company posted a profit.
TransferWise has developed unique capabilities to stay relevant in a highly competitive ecosystem. In its Q2 2020 mission update, TransferWise reveals that it has about 1 million customers using its debit card with a total account holding of over 2 billion pounds. In the coronavirus laden quarter, 28% of transfers with TransferWise arrived instantly – i.e., money left customer’s bank and arrived in the recipient’s bank account, in a different country, and a different currency in less than 20 seconds.
The firm designed a borderless account and debit cards for international businesses, freelancers, and people without borders made the company attractive as the COVID-19 pandemic redefined the future of work and contributed to the company’s record 8 million customers globally.
TransferWise and Its Europe-based Competitors
Both Revolut and Klarna among the major payment start-ups in Europe who has achieved a similar impressive valuation in recent time. While Klarna hit a $5.5 billion valuation in August last year, Revolut achieved a similar feat this year just before the pandemic took hold in February after a $500 million funding round.
In terms of profitability among the three startups, Klarna has shown consistent profitability since its inception in 2005 but revenues hit hard rocks as it reportedly launched its global expansion in 2019. Revolut is on course to record a profitable 2020 financial year joining the list of firms hopeful as demand for digital transactions surged during the COVID-19 era. TransferWise became profitable since 2017, a position it hoped to maintain.
With the changing digital economy landscape and growing niche demand, the future profitability of these and more firm will be dependent on the innovative and customer-oriented offering each is capable of dishing out