Payments

With debit card, Transferwise moves closer to becoming a bank

  • Transferwise is piloting a cross-border debit card for borderless account customers, letting them withdraw funds in local currency
  • Banks aren't interested in competing products, because the market isn't large enough
close

Email a Friend

With debit card, Transferwise moves closer to becoming a bank

Transferwise, the payments startup that once campaigned on an anti-bank message, launched a “borderless” bank account this week, demonstrating that for financial services companies, all roads eventually lead back to banks.

The company is piloting a Mastercard debit card tied to a “borderless” account from which people can withdraw funds in local currency and hold funds in 28 currencies. In doing so it’s inching closer to bank territory while stopping short of becoming a bank. The debit card product is in a beta phase with 1,000 customers in Europe, but the plan is to roll out the product globally by early next year, said Joe Cross, head of global marketing and public relations at Transferwise.

“We’re not going to apply for banking license, but with the physical card, in theory, it replaces your bank,” he said.

Similarly, SoFi, whose tagline was “Don’t bank, SoFi,” ultimately sought a banking license itself though it has since backtracked on that endeavor because of a company scandal surrounding then-CEO Mike Cagney. No matter what the entry point is — personal loans, payments processing, small business loans — the direction seems to be the same: offering a more diverse suite of financial services products.

Transferwise’s more obvious key competitors in the $429 billion global remittance market are money transfer companies like Western Union and PayPal; like any company, it needs to work with network of partner banks to deliver its product. Banks aren’t likely to launch a competing product because the market is too small and the international wires are a profitable revenue stream.

“Transferwise is coming at [the market] aiming at a problem they’ve identified that is a small part of most banks — the thinking is ‘we can build a product that addresses this problem,’ and it’s not a big part of any bank’s business that they’ll want to come at us,” said David True, partner at PagGility Advisors. 

For now, the international remittance market is the domain of startups. Moreover, international currency transfers generate bank revenue from fees, leaving them with no incentive to compete with startups by launching cross-border debit cards or similar digital transfer services. Apart from what’s seen as limited profitability for banks to launch similar products, rolling out a competing product would be also be hard for banks because of regulatory hurdles.

“Banks wouldn’t do this for two reasons — one is the size of the market they would go after, and banks make a ton of money off of cross-border fees,” said Andrew Luca, a partner at PwC. “There’s really not a lot of incentive for a financial institution to give you products that reduce that fee income.”

0 comments on “With debit card, Transferwise moves closer to becoming a bank”

Outlier OpinionsMakers

Finance Everywhere, Payments

Google launches digital wallet: 5 questions with Payments GM Arnold Goldberg

  • Google launched its digital wallet and virtual cards at its latest I/O developer conference, marking its first move in the payments space since the Plex project was scraped late last year.
  • Tearsheet spoke with Google's head of payments, Arnold Goldberg, about what this means for the Big Tech's journey in financial services.
Iulia Ciutina | May 13, 2022
Member Exclusive, Payments

Payments Briefing: ‘We penetrated the blue ocean opportunity of the Spanish-speaking market’ – NovoPayment’s Anabel Perez

  • This week, we take a look at Miami-based BaaS provider, NovoPayment.
  • We also discuss Bumped, a firm that rewards customers with equity in the brands they shop from.
Ismail Umar | May 12, 2022
Payments, Podcasts

What’s Happening in Payments Ep. 6: Quontic’s payment ring, Visa’s move into NFTs, and the new Square Stand POS system

  • This week, we discuss why Quontic Bank decided to launch a contactless payment ring.
  • We also talk about Visa's recent crypto and NFT-related activities, as well as Block's upgraded Square Stand POS system.
Ismail Umar | May 05, 2022
Payments

Rewarding shoppers with brand ownership: Bumped expands with a new browser extension

  • Bumped runs a service that rewards customers with fractional ownership of partner brands that they shop from.
  • The firm’s new browser extension notifies online shoppers every time their purchase is eligible for a stock reward.
Subboh Jaffery | April 27, 2022
Member Exclusive, Payments

Payments Briefing: ‘We want to be the bank that got people into wearables’ – Quontic Bank’s Steve Schnall

  • This week, we discuss Quontic Bank’s new contactless payment ring.
  • We also take a look at Square’s upgraded Square Stand POS system.
Ismail Umar | April 25, 2022
More Articles