Kristo Kaarmann, cofounder and managing director of the company TransferWise, was not content to be “incredibly stupid” when he had the idea that would give rise to the business valued today at more than 1.2 billion pounds, equivalent to about R $ 6 billion.
This happened in 2008 when the 28-year-old Estonian worked in London as an administrative consultant and received a £ 10,000 Christmas bonus.
As interest rates were higher in Estonia, he decided to transfer the money from his checking account in the United Kingdom to his home country, where he would yield more.
“I paid a £ 15 fee to my bank in the UK and I transferred £ 10,000. A week later I saw that £ 500 less arrived than I had expected in my account in Estonia,” says Kristo, now 38 .
“I started researching what had happened and realized that I had been incredibly stupid.”
“I naively hoped that my UK bank would apply the commercial exchange rate I saw when I looked at Reuters and Bloomberg.”
“Instead, the bank used a 5% less favorable exchange rate, which is how all banks profit. It was my mistake.”
Irritated with himself, Kristo vowed to create a way to transfer money abroad, excluding banks from the process.
Initially, the strategy involved only him and his Estonian friend Taavet Hinrikus, who at the time was director of the Skype telecommunications company, informally transferring money to each other.
It worked because Kristo often wanted to exchange pounds sterling for kroons, the Estonian currency at the time, and Taavet needed the reverse process. They simply used the average exchange rate of the day market.
Soon they built a network of Estonian friends – who lived at home and abroad – who did the same thing. That’s when Kristo and Taavet realized they could make this a business.
In 2011, they launched TransferWise, a Fintech (financial services technology company) based in London. The site allows users to transfer money abroad in a different currency at the average market exchange rate for a flat rate of 0.5%.
Today, TransferWise is a global company, and its investors include Virgin founder Richard Branson and PayPal co-founder Max Levchin.
In the first year, Kristo and Taavet expanded the business organically, using their own economies.
The first customers arrived thanks to word of mouth, but increased dramatically after a positive analysis on a technology site.
To avoid legal problems, Kristo and Taavet obtained authorization and license from the Financial Services Authority, the UK’s regulatory agency, prior to launch.
“It was the first time they saw something like that,” says Kristo. “But they saw enough so they would not be worried we might be doing something dubious.”
In early 2012, Kristo and Taavet began looking for their first investors, but they had difficulty.
“We talked to about 15 investors in total, but we were rejected by everyone,” says Kristo. “No one in Europe would get involved with us – European investors at that time were far more risk-averse than Americans.”
“We then received our first funding from a small fund in New York called IA Ventures.”
As TransferWise grew steadily, other investors appeared. The company has already raised 305 million pounds ($ 1.5 billion) in total.
Meanwhile, its website and application have been used by more than four million people and are available in 50 countries and 49 currencies. According to the company, 3 billion pounds are transferred through its services every month.
With its second largest office in Tallinn, the capital of Estonia, and eight others in cities such as Budapest, Hungary and Tokyo, Japan, TransferWise saw revenues grow 75% this year to 117 million pounds (to the end March 2018).
The company’s annual profit remained stable at 6.2 million pounds. Before March 2017, the company always recorded loss, since the funds were invested in its expansion. The company now has 1,400 employees.
Chris Skinner, author and commentator at Finanser, says TransferWise has grown so fast because the service is cheap for users, and there are no hidden fees.
“Add to that some of the top heavyweights who invest and support the business, and you have potential success at hand,” he says.
“I say potential because even with a good idea, good marketing, good investors and good support, nothing is guaranteed in this world.”
“However, along with Monzo, Starling, Revolut and a few other fintech start-ups in the UK, TransferWise stands out in the crowd and is transforming financial services towards customer satisfaction at the lowest cost through” , adds.
While serving as chief executive, Kristo says he and co-founder Taavet, 37, “have been involved in everything from the outset.”
“We overlap a lot in what we do,” he said.
When he is not working, Kristo likes to relax practicing kitesurfing, and he spends Christmas and New Year doing motorcycling in Africa with his brother.
“There were a lot of unknowns when we started,” he says. “Would anyone trust this site created by two guys from Estonia? Anyone else have this problem we wanted to solve?”
“And all these people around the world had the same problem and they trusted us.”