Competition for bank transfers heats up

TransferWise CEO and co-founder Taavet Hinrikus. Photo/Supplied.

Competition for transferring money between countries is about to heat up with a new provider launching into New Zealand.

Transferwise - a UK-based company which has the financial backing of Sir Richard Branson has just gone live in New Zealand offering to provide a service five to six times cheaper than the banks and much faster.

Chief executive Taavet Hinrikus co-founded the money transfer business five and half years ago after moving from his home country Estonia to London in his previous job as head of strategy for Skype.

Hinrikus said he became frustrated with the cost and time it took to move money between Estonia and England.

He met up with fellow Estonian Kristo Käärmann who was also working in London but transferring money back home and the idea to by-pass the banks by agreeing an amount between them was born.

"We realised hundreds of millions of people around the world were in the same position as us."

Hinrikus, who was Skype's first employee, used money from selling his stake in Skype to set up Transferwise and is now on a mission to expand the company globally.

Last year the business launched in the US and Australia and this year it has hit Japan, New Zealand and Singapore.

The company has 600 employees and eight offices around the world and does 600,000 transactions every month.

Hinrikus, who is in New Zealand for just three days, said it had an 8 per cent market share in the UK and hoped to capture 5 per cent of the New Zealand market within two to three years.

The company must follow the same anti-money laundering laws as banks which include checking a person's identity, address and why they are transferring the money.

Hinrikus said trust was a major issue in getting people to switch from the main banks to online transfer companies and much of its business was done via word of mouth.

"Most people come to us because a friend recommends it."

But he predicted that would change over time because the service banks provided to consumers was not as good as it could be.

"Tech companies are chipping away at different areas one step at a time."

"One after another tech companies are eating the bank's lunch."

He said the world of financial services would change dramatically over the next 10 years.

"A large chunk will be owned by tech companies."

Transferwise has no minimum transfer amount.