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My co-founder and I launched TransferGo 2 years ago now, with no money in our pockets, but huge ambition in our hearts…and utter ignorance of the challenges that lay ahead. We wanted to disrupt the international money transfer industry, where, traditionally, success was built on monopolisation, rather than a superior consumer experience. Fast forward to the present day and the company has already surpassed the US$1m revenue mark and has grown to incorporate a fantastic team of 20 employees — and this is just the beginning.
But that’s not really what this article is about. I want to point out that our success might not have happened, for one very important reason: FinTech was, and still can be, an industry where you can be too small to innovate. Here’s our story.
In 2011 my co-founder and I established a more traditional import/export business, which meant we had to make regular international payments to our suppliers. Back then, banks were our only option and, oh boy, it was a nightmare. Needless to say, we were charged up to 15 times more than now for seven-day settlements, but there was a general sense that customer satisfaction wasn’t really something major UK banks paid a great deal of interest to. One fine day, one of the UK’s major banks managed to send our money not only to the wrong country, but also in the wrong currency, which meant we lost our supply-chain partners, were subject to penalties and our credibility took a solid blow. Following this painful experience, we approached the bank in question for compensation. As a result, we received a rather disturbing letter from the bank, which basically said that they agreed that it was their mistake, but that it was “against their policy” to compensate us. That was the final straw; we decided to build TransferGo, to make sure that no one has to go through that kind of experience again. Little did we know what challenges the journey we were about to embark upon would hold — which turned out to be a virtue.
The journey began by asking permission for many things, from many institutions, which generally seemed rather reluctant to grant them, for many reasons. We got through this owing to incredible determination and no small amount of luck.
The first permission we required related to licensing, and it took us six months and close to US$30,000 of investment just to get to a point where the regulator had begun to consider our application seriously. It’s perfectly reasonable that regulatory oversight be required to deal with consumers’ hard-earned money. However, a green light from the regulator that your company complies with the regulations is not enough. You also need to sell your business idea to banks in order to be granted a special ring-fenced account to hold your customers’ money, without which you can’t be licensed. After six months of the regulatory process, we then had to spend around four months trying to find a bank who could work with us — 99% of them said they would not.
Obtaining permission from the regulator at that point already seemed like a trivial exercise, considering that we also had to obtain permission from a bank to enter their competitive market. It was only due to personal connections in some innovative Scandinavian banks (and, as usual, a lot of luck) that we were able to secure that elusive account to start operations. It came to a point where one bank had to divert from their usual practice and issued an official letter saying that they would bank us, provided that we obtained a licence. It almost goes without saying that this is something that banks hardly ever do, but, nearly a year later and having completely exhausted our personal savings, we were able to begin operations. Still, there’s something inherently wrong with this process, don’t you think?
So, twelve months into our operations, we were doubling in size every quarter, getting great feedback from our customers and starting to feel that everything was going to be okay. Shockingly, one beautiful summer’s day, we received yet another unexpected, but potentially fatal letter from a major UK bank. It stated that they had decided to shut down our business and personal bank accounts. This would come into effect within three months and we should not reach out to them for clarification, because their decision was final. At that time, it was the only UK bank with which we had accounts and, therefore, we effectively had 90 days to save our business. Just to reiterate, we were a licensed, fully compliant financial institution, with every right to operate in the UK. Again, it was “not within the bank’s policy” to articulate objective reasons, or, indeed, any sort of reason. They did it because they could.
The 90-day window, a strong risk-management history and (once again) start-up luck were the main factors that helped us save the company by finding another bank who would be willing to open an account for us. At the same time, around 70% of our UK competitors went out of business because they had received 14-day notices. It seems that the difference between life and death, in business terms, can actually be 76 days. Walking on thin ice can be exhausting and depressing at times, but, at the end of the day, it was worth the effort, because our business has a meaningful impact on our consumers’ lives.
There are a lot of tech companies out there, most of which improve our lives in some way. Some of them enable us to share moments with friends and family; some of them help us to park our cars more conveniently; some of them even increase the utility of our pets in some way. With Fintech innovation, you can actually help people become more prosperous, which, if you ask me, is not a bad mission statement. Let’s take our consumers as an example.
On average, a blue-collar migrant worker in Europe sends around US$12,000 back home every year, which amounts to an additional minimum salary sent to their loved ones. Migrants’ money is incredibly important, considering that their families back home on average earn only around US$20,000 per year. This money is the difference between barely making ends meet and entering a middle-class lifestyle. Only a couple of years after our journey began, blue-collar migrants can now save more than 90% on their money-transfer costs and can deliver the money to their families on the same business day, which is a huge step forward, and we are very excited to be a meaningful part of this transformation.
This example shows exactly how important the impact of a Fintech innovation can be to the lives of the average man or woman. Similar transformational stories could be articulated in various verticals, including: lending, investing, innovation in insurance, etc. Unfortunately, from numerous off-the-record conversations we have had with other start-ups in the spaces, they still have to jump the same hurdles that we did when we started.
On a positive note, there have been a lot of promising changes over the last couple of years. Emerging Fintech companies have shown that consumer satisfaction can be more important than building monopolies. The regulator has also recognised that new doesn’t necessarily mean too risky. Innovative banks look to Telcos as an example of a successful reinvention conducted over the course of the last century and recognise that many new market entrants are actually good prospects and bring more business into banking at manageable risk levels. That’s why banks are more open to partnering up than ever before. In the last two years, we’ve successfully grown our bank-partner network to close to 30 global bank brands. They have become our partners who send expensive Swiss chocolates to us over the Christmas period and thank us for being a valued partner and customer. What a transformation, right?!
Incredibly supportive accelerators, such as Level39 (our home in London) and Fintech innovation organisations, such as Innovate Finance (of which we are a proud founding member), have played an important role in supporting determined entrepreneurs going through hard times, allowing them to build some amazing Fintech innovations. The movement is growing stronger every day.
To sum up, regardless of recent, positive changes, Fintech can still be an industry where you can be too small to be permitted to innovate. That needs to change, because this decade is likely to witness the biggest financial transformation since the emergence of traditional banking, bringing prosperity to millions of people around the globe. The engine for transformation is going to be new market challengers, who will disrupt the system one niche at a time and work together with the more innovative incumbent players. Historically, our lives were changed by new big ideas delivered by small determined teams. Let’s make sure that, going forward, FinTech is not an exception.
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