Co-founder & Chief Executive Officer (CEO), Wise plc
Kristo Kaarmann on Wise’s way to dealing with high bank money transfer fees | Lunch with Sumiko
Mr Kristo Kaarmann believes the transparency and speed that his company embodies will have a lasting impact on the industry.
About Kristo Kaarmann
In a 2018 interview, Kristo Kaarmann, co-founder and CEO of TransferWise (now Wise), stated that banks "haven't really treated their users transparently" regarding international payments. He described his personal experience of losing approximately 500 euros on a transfer through HSBC, which he attributed to banks using an exchange rate that adds about 5% on top of the real rate. Kaarmann expressed a desire for more competition in the cross-border payments market, saying he would "recommend them wholeheartedly" if another company could perform some routes better than TransferWise, as he believes "users deserve to have the best option available." Kaarmann also outlined the company's "mission zero," which he defined as the goal of moving money "nearly at zero cost between any two countries and currencies and nearly instantly." He noted that TransferWise does not take positions in foreign exchange or support currency speculation, and that the company remains focused on cross-border transfers rather than domestic services.
Transcript (11 segments)
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Interviewer0:08
The main problem with using banks and others is they might tell you it costs 10 or 20 dollars, or maybe they say it's free, but the truth is they really hide their fees in the exchange rate. In 2011, Estonian Kristo Kaarmann and a friend started a money remittance business called TransferWise. It is now known as just Wise, with its headquarters in London and offices around the world, including in Singapore. Its selling point is how customers can send money at the real exchange rate with no hidden fees. Mr. Kaarmann was in Singapore in February to visit his office here, and we had lunch at New Urban Seafood at Chimes over a meal of local favorites such as Hokkien mee and garlic crab. He talks about his business and also his very interesting early years growing up in Estonia. And what are the key features of Wise?
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Kristo Kaarmann1:06
The problem that we're solving for people and businesses is how do they get money in one country in one currency to another country in another currency without costing an arm and a leg with a bank and being really inconvenient. So people come to use Wise for speed. We're now able to move money between countries in less than 20 seconds. And for cost, the main problem with using banks and others is they might tell you it costs 10 or 20 dollars, or maybe they say it's free, but the truth is they really hide their fees in the exchange rate. They just give you a different exchange rate to what you see on Reuters and other places.
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Interviewer1:46
Do you think what you're doing would change the industry in any way?
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Kristo Kaarmann1:49
I think it will. I think it's very hard to go back, it's very hard to put the genie back in the bottle. As we've demonstrated that it's possible to move money infinitely faster than it was before and do it without any hidden fees, it's very hard for the millions of people now relying on wires to go back and accept that it's okay that this takes five days to get money from Singapore to Australia and it's okay that they're being told it's free but actually there's a five percent markup on the exchange rate. I don't think the world is going to accept this. I think there's only one direction where it's just going to get so much better for people and businesses in the future. We'll have a role in this, but there's lots of others who will as well.
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Interviewer2:38
Why did you decide to set up shop in Singapore?
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Kristo Kaarmann2:41
As we're moving money across countries, we have to be a global enterprise. Businesses in Asia are almost always international almost by design, just because there are many markets where they operate within the regions, usually across countries, so there's a lot of demand for our services from Asia anyway. And we ended up setting up in Singapore about five and a half years ago as our hub, where we now have 250 people in Singapore, where we service both the Asian countries and Australia, New Zealand.
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Interviewer3:16
What was it like growing up in Estonia, and do you think it affected your career and business in any way later on?
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Kristo Kaarmann3:26
I was born in the 1980s. I was nine years old when the Berlin Wall fell, and I was 11 years old when Estonia regained its independence from the Soviet Union. And it was definitely the years of my teens where the country went from having no businesses, no services, almost nothing at all, other than some of the things that we inherited from the Soviet Union and then had to rebuild on its own. So it was definitely an interesting time where everyone kind of had to be an entrepreneur and things had to get produced because if you're not doing it, then no one else is. So looking back at this, it was inspiring to see so many new things being developed by really ordinary people.
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Interviewer4:14
Do you think there are any similarities between Estonia and Singapore?
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Kristo Kaarmann4:19
We're both very small countries. I think one thing that Estonia did in the early days, 10, 15 years ago, is we developed a digital identity system which we're all very proud of and it works really well for people interacting with governments and tax authorities and these kind of things. But it was only possible because we're a small nation and relatively well organized. I see that the same has happened in Singapore, where you develop the same path? and small nations have to be in some ways very organized and also very international, because otherwise we're just very small.
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Interviewer4:57
Thanks very much for having lunch. Thank you.