Working towards (nearly) free transfers

Back in January 2017, TransferWise started talking about “Mission Zero”. According to the company, Mission Zero stands for the goal of bringing the cost of money transfers down to zero. In their quarterly updates for 2019, TransferWise repeatedly aims for:

“Money without borders: instant, convenient, transparent, and eventually free.“

This stated goal has come under more pressure recently. After a period of sustained price reductions, TransferWise has seen its average cost of transfers rise during 2019, in part due to moving into higher cost corridors to service Asia and Latin America.

In addition, TransferWise has also tried to adapt its pricing model to closer reflect the different drivers of its cost, be it on a volume basis (e.g. liquidity) or transaction basis (ACH or processing fees).

In TransferWise’s full annual report released this September, Mission Zero was stated as:

“….our mission to bring the cost of sending money around the world to near zero.“

TransferWise has previously said that it wants to be a profitable business. We read the goal of zero-cost transfers to really be in line with the statement above. As TransferWise said back in early 2018:

“The price of money transfers should drop to zero, but it happens only as fast as the
costs move to zero.”

With an industry leader pushing for such tight margins and focusing on volume, what impact will this strategy have on the rest of the sector? At what point might TransferWise’s low-cost push start pulling margin from a higher-end focused player like Currencies Direct?

Moneycorp’s banknote business gets a boost

Direct access to US dollar banknotes from the Federal Reserve is unsurprisingly highly restricted and typically reserved for a small number of major banks worldwide. Kudos, therefore, to Moneycorp, who run a wholesale banknote business via their banking arm, and this past week achieved such access. Moneycorp Bank will become the first member of the Federal Reserve’s Foreign Bank International Cash Services program, due to go live in Q4 2019.

Previously, access to US dollar banknotes has been constrained. Only Bank of America Merrill Lynch and Credit Suisse were classed as tier one suppliers, meaning any other supplier would have to pay a margin to access the dollars.

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