How Does Wise Make Money? The Wise Business Model In A Nutshell

  • Wise is a fintech company founded by Estonian businessmen Kristo Käärmann and Taavet Hinrikus in 2011. The pair created Wise to help consumers avoid currency conversion fees and unfavorable exchange rates.
  • Wise makes money via money transfer fees and ATM withdrawal fees if customers exceed a monthly limit. What’s more, the company charges a holding fee for account balances that exceed €15,000 for individuals and €70,000 for businesses.
  • Wise also charges a fixed wire payment fee to users who want to receive U.S. dollars. Lastly, the company charges a 0.40% annual fee for its Wise Assets investment service.

Origin story

Wise, formerly TransferWise, is a fintech company founded by Estonian businessmen Kristo Käärmann and Taavet Hinrikus in 2011. 

The idea for the platform was conceived while friends Hinrikus and Käärmann were working in London.

Hinrikus, who was the first employee at Skype, was paid in euros but needed British pounds to pay his bills.

Conversely, Käärmann worked for Deloitte and was paid in British pounds but had a mortgage in euros back in Estonia.

As a result, the pair found moving funds between bank accounts to be an expensive process – a fact exacerbated by poor exchange rates.

To remedy this problem, the pair first looked up the real exchange rate on Reuters each month.

Hinrikus then transferred his euros into Käärmann’s bank account, while Käärmann did the reverse with his British pounds.

Both received the currency they needed almost immediately and were able to avoid poor exchange rates and other unscrupulous charges.

Quite by accident, the pair had discovered a new business model.

Despite neither co-founder actually wanting to start a company, the idea quickly spread amongst other Estonian ex-pats.

TransferWise was launched in 2011, with one customer making a transfer just fifteen minutes after TechCrunch posted an explainer article on the platform. 

The pair quit their jobs and self-funded for a while before turning the corner a year later, with billionaire disruptor Peter Thiel leading a $6 million round of Series C funding.

A subsequent round of $25 million was raised in June 2014, with Richard Branson one of the investors.

As the platform grew, more features were added such as a debit card, business account, and multi-currency account.

Over 11 million people now use Waze to transfer more than £6 billion every month.

Wise was valued at $11 billion after debuting on the London Stock Exchange in July 2021, becoming that exchange’s largest-ever tech listing.

Wise revenue generation

Wise operates according to the multisided platform business model, which entails developing a technology or product that lets two or more customer groups have direct interactions.

Wise now makes money via money transfer fees, withdrawal fees, currency conversion fees, holding fees, wire transfer fees, and fees associated with its stock management functionality.

Money transfer fee

Users who sign up for a Wise account are not charged a subscription or any other recurring fee.

However, the company does charge a money transfer fee that varies according to the transaction currency.

The fee starts at 0.35%.

Withdrawal fee

Users can also enjoy free ATM withdrawals up to a certain limit. 

In the United Kingdom, for example, there is a 1.75% fee plus £0.50 if the withdrawal amount exceeds £200 per month.

Currency conversion fee

Currency conversion fees are also charged in certain circumstances. Like money transfer fees, currency conversion fees start at 0.35% and vary according to the currency transacted.

Holding fee

Users who hold more than the equivalent of €15,000 are also charged a 0.4% annual holding fee which is billed monthly.

For businesses, the same fee applies but for a holding that exceeds €70,000.

Wire payment fee

Users can receive money in up to 10 currencies for free, including but not limited to EUR, GBP, AUD, NZD, and CAD. Businesses are charged £16 to receive money in the same 10 currencies.

For those who wish to receive their funds in USD, there is a fixed wire payment fee of $7.50.

Wise Assets

Wise Assets was released in September 2021 and gives users the ability to convert their funds into a stockholding.

The company charges a 0.40% annual fee for this service, billed monthly. Users who hold more than €15,000 in stocks can avoid the holding fee we explained earlier.

Businesses are charged a 0.55% annual fee.

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