Having a great ‘birth story’ is a powerful engagement tool for customers and employees alike. When I worked at eBay Europe, we always loved to tell the story of how Pierre Omidyar invented the concept of online auction by accident. The first item he advertised for sale was a broken laser pointer and he was amazed that anyone wanted to buy it. Soon, other people were contacting him with goods that they wanted to sell online. Within a year, Omidyar was so overwhelmed with demand that he had to give up the day job to manage it. Stories like this are like gold dust. When you work for a company like eBay, you quickly discover the enthusiasm and passion that customers have for the product. Everywhere you go, you meet people who want to share their own eBay stories with you. It can be a humbling experience.
Last week, I had a similar feeling when I listened to Taavet Hinrikus, Skype’s employee number 1, talk about the birth of his latest business. Transfer Wise, a peer to peer fx company, was inspired by his frustration at getting ripped off by banks every time he transferred money from London back to Estonia. Here is an article that I wrote about his story for the PurpleBeach website.
Why not change money with common people like you?
Taavet Hinrikus couldn’t work it out. Every time he transferred money from Sterling into euros, some 3-4% went missing for no good reason. As Taavet explains it, sending money is about as technically complicated as sending an e-mail, so why do banks take such a huge cut? In airports, you can lose up to 15% of the value of the exchanged. Even when banks advertise zero commission rate, it’s usually only to disguise the fact that they offer a ridiculous exchange rate. He concluded that the whole fx business was simply ‘a racket.’
Then Taavet had an idea. While he needed to transfer Sterling to euros, a friend had to transfer euros to Sterling. So they agreed to put the money in each other’s bank accounts at the published exchange rate without any commissions. With this simple wheeze, the two friends cut out the middle man, saved a bunch of money and a business idea was born.
You’ve heard before of garage businesses? ‘Transfer Wise’ was cooked up in a kitchen. It offers the opportunity to ‘change money with common people like you,’ (a tribute, no doubt, to the classic Pulp song sung by Jarvis Cocker.)
So far, Transfer Wise has transferred £100m and the amount of transfers has doubled in last 4 months. They exchange 8 currencies and soon will be add a further 10-15. All the growth has come from personal recommendation.
The initial charge of £1 per transaction was, according to Taavet, ‘great marketing, but a bad business plan.’ They have since introduced a charging system of £1 on exchanges up to £200 and 0.5% charge on amounts above that. Taavet contrasts the high fees of banks with the Transfer Wise mindset of ‘how little can we charge to build a global business.
According to Taavet, there is a huge potential market for peer2peer fx, with 200M people worldwide who live, work or study abroad. Taavet says, “Our enemy is the banks. Our target is the 99% of people who go to banks and get ripped off everyday.”