TransferWise, the 'Robin Hood' of payments, teams up with the sheriff

TransferWise will integrate its cross-border P2P service directly with France’s second-largest bank, BPCE Groupe, in a move that marks a departure from the transfer company's anti-bank philosophy.

London-based TransferWise's business model has been to undercut traditional banks’ foreign transfer fees, and the company's marketing has long emphasized its role as a plucky rival to banks — going so far as to invoke a comparison to Robin Hood. But the company's offering can also benefit the banks that see value in making peace with an upstart.

Akio Kon/Bloomberg

For BPCE, the benefit of the deal is that it can offer its customers low-cost transfers outside the euro zone leveraging TransferWise’s digital technology.

TransferWise is in the process of integrating its API with BPCE’s mobile banking service to enable BPCE to offer the U.K-based firm’s money transfers to its 15 million retail customers. Due to be launched in early 2019, the service will enable customers of BPCE’s subsidiaries Banque Populaire and Caisses d’Epargne to send funds to over 60 countries at the interbank (mid-market) exchange rate and at TransferWise’s standard fee of 0.50 percent.

TransferWise, which says it transfers around $2.5 billion a month for its 3 million customers worldwide and saves them around $80 million a month compared to using their bank, is working with BPCE’s payments subsidiary Natixis Payments on the initiative.

“Our deal with BPCE marks the first time a major bank in Europe will directly integrate our API into its mobile banking app,” Stuart Gregory, business product lead at TransferWise, says. “TransferWise and BPCE share a common vision to innovate an outdated financial system and provide a fair, transparent banking experience.”

BPCE that its partnership with TransferWise is in keeping with the bank’s strategic plan to embrace digital innovation and tackle the digital revolution head on. "Integrating Fintech services in the payment journey is an integral part of Natixis Payments’ DNA, allowing us to build better payments,” said Pierre-Antoine Vacheron, a member of Natixis’ Senior Management Committee who is responsible for payments, in a press release.

Currently, the only other banks which have integrated with TransferWise are German challenger bank N26 and Lithuania’s LHV. But not all of TransferWise's partnerships have gone smoothly.

U.K. challenger bank Starling Bank last month cancelled an agreement to integrate with TransferWise, as it has launched its own cross-border transfer service within its mobile banking app. Starling Bank, which recently became Mastercard’s U.K. settlement partner for domestic Mastercard Send card-to-card transfers, said its cross-border transfer service would compete not just with traditional banks but with non-bank providers such as Revolut and TransferWise.

Nevertheless, many banks would benefit from collaborating with TransferWise, says Talie Baker, a senior analyst at Aite Group.

“A lot of banks have got out of the business of consumer cross-border transfers because the cost of KYC and AML compliance isn’t commensurate with the revenues generated by these services,” Baker says. “By outsourcing P2P cross-border remittances to a licensed service provider such as TransferWise, a bank reduces its costs but can still offer the service to its customers. So I think that a lot of banks are going to offer integrations with the likes of TransferWise as, otherwise, their customers will go outside their bank to non-bank remittance providers. This way, the banks won’t lose the customer relationship.”

Some of the P2P service providers Baker has interviewed for her research are seeing a major move from desktop PC-based P2P remittances to mobile remittances, which will benefit mobile app-based solutions such as TransferWise’s, she says.

“I estimate that 27 percent of U.S. consumers perform cross-border transfers via mobile apps. So, in countries where mobile phones are even bigger part of the consumer experience than in the U.S., this percentage is likely to be even higher," she says.

Despite originally marketed itself as a rival to banks in the cross-border transfer space, TransferWise is now actively courting incumbents to embed its API within their platforms.

TransferWise's Gregory says that partnering with banks enables TransferWise to offer its services to a wider range of customers. “We will provide our bank partners’ customers with all the benefits of our service: the same low-cost up-front fee, the same mid-market exchange rate, the same speed and the same simple process,” he says.

In addition to its integration with BPCE, TransferWise is in discussions about integration with a number of traditional and challenger banks, and that the company will be announcing new bank partnerships in the near future, Gregory says.

Gregory declined to comment on a report in TechCrunch that TransferWise may be planning to integrate its API with U.K. challenger bank Monzo, but confirmed that Starling Bank had chosen not to partner with TransferWise. “It’s fantastic to see that Starling Bank has announced a policy of price transparency with a real exchange rate and clear separate fees for its international money service,” he says.

In April, TransferWise became the first non-bank to join the U.K.’s Faster Payments scheme.