Cross-border payments platform TransferWise announced a $US319m ($446.9m) share sale earlier this week, giving the company an indicative valuation of $US5bn.

And the domestic head of the UK-headquartered company, Tim Cameron, says there’s an “outsized” opportunity for growth in the Australian market.

Rather than raising additional capital, the nature of the sale was to give existing shareholders and employees an opportunity to sell holdings in the secondary market.

Shares were picked up by existing TransferWise investors including Richard Branson and Lone Pine Capital, while new investors such as D1 Capital Holdings joined the register.

Stockhead caught up with Cameron this week to get his insights on the TransferWise story so far, as well as the outlook for Australia’s fintech scene.


Money on the table in Australia

Having started as a cross-border payments platform, TransferWise built an early niche by offering foreign exchange service based on inter-bank exchange rates. Instead of its own brokerage rate, it would charge a commission on top of the standardised rate.

The model has allowed it to build a global customer base of 8 million users. It’s also expanded to deposit-taking and holds around £2bn ($3.7bn) in “borderless” multi-currency accounts.

“It’s pretty unique in that you can provide customer account details in the US or UK and get paid like a local. So it minimises friction for people who are internationally mobile, or doing freelance work in different jurisdictions,” Cameron said.

While it has a global platform, Australia is also an important target market for the business.

“It’s a small population, but I think there’s an opportunity here due to money on the table and outsized profits banks earn,” he said.

“So for us it’s a pretty strong domestic focus. There’s an opportunity for disruption and increased transparency.”

Cameron said TransferWise is targeting business-to-business (B2B) channels with its cross-border payment and deposit platforms, with the rollout of multi-user access for small businesses.

The other approach is to “power international payments for domestic banks”, he said.

“So instead of a situation where customers leave the bank to use other low-cost providers, they can leverage our own cost base.”

“Effectively banks can integrate TransferWise into their own app using the TransferWise API (application programming interface).”

“Their customers can then get a transparent fee and the exact same service than if they came to our website, because there’s synergies in that product.”


Navigating regulatory hurdles

As a cross-border payments platform with a global client base, Cameron said TransferWise also had a front row seat to the challenges involved meeting fintech regulatory standards in different jurisdictions.

A good example is Singapore, where users weren’t allowed to create an account without visiting a physical store. That differs from the UK or Australia, where typically a new user would establish their identity by scanning a passport.

“So we set up a tiny shop in the centre of Singapore, then for a few years while we were operating the shop we were talking to the regulator and educating them about how it works,” Cameron said.

“So through that grind I think we’re at the frontier of what’s possible from a regulatory standpoint.”

On that front, Cameron said the company was closely following developments with Australia’s new Open Banking laws, which are lagging slightly behind the UK market.

“Right now all open banking in Australia is based around read-only access, which is great for comparing accounts and switches to get the best rate. So there’s definitely value for consumers to be informed,” he said.

However, “where we are leveraging Open Banking in the UK is around initiating payments”, Cameron said.

“Customers often need to send us large sums of money, and it’s cheaper to send that money via bank transfer rather than card. So they’ll often log onto their bank, enter our bank details, put in a reference and send it out.”

“But what Open Banking allows us to do, is use our app to receive money from the bank, which is automatically linked. Customers use facial ID to authorise it, the payment’s sitting there waiting and they just say ‘initiate’.”

“The reason that’s a better way to do it is it’s just a lot cheaper than processing a card payment, especially for higher value transfers. So we see the ability of fintechs to power those transactions.”

Cameron, who also sits on the board of Fintech Australia, said the industry group was following closely to see how initiation was going to work.

“In Australia right now there’s a government review into that, and it looks like NPP (New Payments Platform) will be taking reigns of payment initiation,” he said.

“And there are some benefits of them doing that compared to the open standard being built and then banks having to adhere separately.”