Co-founder & Chief Executive Officer (CEO), Wise plc
Fairness in financial services? - Kristo Kaarmann, TransferWise & Carlos Eduardo Espinal, Seedcamp
TransferWise's vision is one of fairness in financial services. But how does this look in reality? Purchase tickets for Web Summit ...
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 (23 segments)
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Interviewer0:11
Hopefully everyone is awake after some great parties last night. How many of you like to lose money on transferring money somewhere else? Raise your hands. Excellent. Well, I'm delighted to be next to Kristo, one of the founders I've had the privilege to work with over the years in Seedcamp. I want to share his story. All good stories begin with a dramatic origin. How many of you here are solo founders? One guy Dan Kadesha, I see him there. Kristo started in the same light. So maybe Kristo, you can share the early challenges of being a solo founder and attracting a team to build TransferWise.
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Kristo Kaarmann1:01
Yeah, good to see everyone. I'm surprised you don't party hard. It's ten o'clock and you're already here. But being a solo founder: it's quite hard, so I wouldn't recommend it to everyone, but also wouldn't stress about it. The biggest advice, especially early days: don't stress about not having a co-founder. It's good to have one, but if you don't, you'll find people you love to work with and they'll join you. If you don't have engineers, you'll find some. That was the approach I was lucky to take. And as Carla said, starting alone, quickly there was a team around me working on the same thing.
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Interviewer2:11
How did you motivate that team around the idea of money transfers? Now it seems obvious, but back then people might have said, 'I don't know if I want to compete with Western Union.' What was the reaction from early investors and early customers? Was it a small thing or was it obviously big?
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Kristo Kaarmann2:33
Let me tell you about early customers. I built the first website and tried to convince 30 friends to use it. Only five used it, with a lot of pressure. I had no expectation whether people would use it. When we launched on TechCrunch in January 2011, we didn't know what to expect. That was the aha moment. Everyone says put the product out there and you'll know. So we did. 15 minutes later, someone sent us 2000 pounds to France. That was a big leap of faith. But it didn't just extend to customers; we also needed to work with banks and local infrastructure.
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Interviewer3:38
Tell us about those early challenges. How do you bridge into legacy systems and banks, and then create innovation on top of that?
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Kristo Kaarmann3:50
That's a very good question. It's incredibly hard, especially in banking because the infrastructure is not good and very localized. That's why we haven't had a global fintech company since PayPal. Now maybe Stripe or Adyen are getting there. We launched with pounds to Europe, had a bank account in Ireland and London, and could transfer from US to pounds and euros. That was our MVP. Now we have 400 currency routes. We got there month by month, adding routes, convincing banks, getting licenses. You take it step by step and be clever about your MVP.
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Interviewer5:00
What one tip would you give to founders negotiating from a position of weakness against big players who are waking up to disruption?
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Kristo Kaarmann5:11
It's hard to give advice because banks didn't take us as competitors for a while. They barely recognized us; smaller ones put us in the Western Union bucket. So the advice: find an equivalent to sell yourself as, even if you're not. For bigger partners, tell a story that you're a new version of X, so they know how to work with you.
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Interviewer5:58
We'll come back to banks. Let's jump to investment. Seedcamp was privileged to be an early investor. What was your process for selecting investors?
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Kristo Kaarmann6:24
If you're a solo founder negotiating with VCs, start with Carlos. That was my first negotiation, and it taught me a lot. We bootstrapped for the first year, had thousands of customers before taking Seedcamp's money. Then a year in, we talked to European VCs in London but no one took the bait. Then OYE Ventures and Roger Berg in New York invited us for lunch on a Friday, and by Monday we had a term sheet. We were stunned. Two months of talking to London VCs, and then a lunch in New York. A lot comes down to having a strong brand.
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Interviewer7:53
Your brand advertising is fresh and sometimes outlandish—nudity, trucks, Spiderman. What was the origin of your branding strategy? Surely there were hiccups.
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Kristo Kaarmann8:15
Oh yes. Neither I nor my co-founder were marketers, but we learned rationally. The problem we solve is getting people to understand they're being ripped off. When you send 5000 pounds abroad, the bank charges 15 pounds but takes 200 in the exchange rate. Once people get that, using your product is trivial. So the hardest part is making that point in a fun, engaging way.
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Interviewer9:25
Engaging people in a fun way must vary by culture. How do you handle internationalization?
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Kristo Kaarmann9:36
We're still doing it. In the US, people don't like being proven wrong. In the UK, after PPI, they expect banks to screw them a bit. So we need different messaging for the US. Once we reach Japan, that will be interesting.
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Interviewer10:21
How has internationalization affected operations, like scaling your US team?
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Kristo Kaarmann10:34
Good question. Startup is throwing spaghetti on the wall. We open things up and see what sticks. The best thing is when customers invite others. We had a feature where you type why a friend should use TransferWise. Reading that was the most illuminating. For internationalization, we open as many routes as possible. We don't know which will be big. We have many Turkish people in London but barely any traffic on that route, yet we have a massive market share in Hungary. So you start with what sticks and then amplify.
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Interviewer12:14
Growth requires staff. What were the major inflection points in headcount—from 50 to 100? What challenges did you face?
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Kristo Kaarmann12:29
It happened so quickly I can't pinpoint inflection points. We doubled headcount every six months and now have over 400 people. As a founder, I spend 90% of my time hiring, getting people behind the mission. My philosophy: I'm not a great general leading 400 people, but if you get 400 smart people, they can figure out how to win. So we operate with independent units, like a speed team whose only KPI is to make money move in 17 seconds between any country.
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Interviewer13:51
To wrap up, you've focused on FX for a large part of the world. What are your thoughts on being a single-product company versus expanding?
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Kristo Kaarmann14:16
That's hard. People get excited about new products. Friends ask, 'You still working on TransferWise? You solved that already.' Then you read a McKinsey report saying banks take 300 billion dollars a year moving money, and we've solved half a percent. You have to be rational. This is a huge problem. Let's solve it and not get distracted. Once you solve this, other opportunities get bigger.
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Interviewer15:10
Do you feel investor pressure to expand, or can you stick to this?
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Kristo Kaarmann15:17
That's why you choose smart investors. They see the traction and growth. They understand that the better you get at solving this one problem, the bigger the other opportunities become.
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Interviewer15:41
Excellent. Thanks for joining us, Kristo. Thanks everyone.