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Fintech Friends: Monzo Associates with TransferWise for International Payments

"So what's going on then?" I ask. "Two good friends are even better [friends]," laughs Kristo Käärmann, co-founder of TransferWise, while Monzo's co-founder Tom Blomfield, also on video, smiles approvingly. "Sorry to have spoiled your news," I say to the pair, who I interviewed before the announcement today that the two companies are working together.

The partnership, launched by TechCrunch almost three weeks ago, will allow TransferWise to make international payments for the 750,000 customers of the U.K challenger bank. This is the second new banking partnership that fintech unicorn unveiled this month, after announcing that it has begun working with the second largest French bank Groupe BPCE.

TransferWise also provides international money transfer for the German N26 and the Estonian LHV. However, a previously announced partnership with US bank Starling Bank has never materialized and has since been dissolved.

When asked why Monzo chose to work with TransferWise, Blomfield reiterated the goal of the challenger bank to become a "hub or control center" for your money. It will not necessarily be done by Monzo, he says, "but with partner organizations that connect to this hub". TransferWise is the first of them.

International payments have also been one of the most requested features by Monzo users since the challenger bank issued a roadmap of things that it intends to " repair "over the next three months now the passage of a prepaid current account card has been completed.

"I've personally been a TransferWise customer for five or six years and the service is amazing," says Blomfield. "Compared to my old bank, it's really, really transparent, the fees are really fair, and they're continually working to reduce fees and make transfers more instant. So, I can not think of a better partner to make foreign transfers with TransferWise. "

I ask Käärmann how much the conversation is different with a challenger bank like Monzo – who has nothing to lose by associating with TransferWise and will generate affiliate revenue on every transfer – through compared to large historical banks that have historically generated large margins on exchange fees. He says it's similar, and usually focuses on the fact that customers are already using TransferWise and that if a bank wants to put those customers first, it makes sense to offer TransferWise functionality in its own application. .

"When we announced the big French bank, which is clearly a licensee – a big company in place – she was thinking about her client," he says. "It may seem a little bit rare for banks to think this way, but they thought" if we're going to do that, then why not do it right. "They were actually driven entirely by their users and thought about way to get the best user experience. "

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The TransferWise feature will begin to be launched to Monzo users today and will allow them to send money from their current accounts to 18 of the most popular currencies, with "other additions in the near future". The user experience will be almost identical to that of TransferWise, and the transfers will be at mid-market rates claimed, in addition to the low and transparent fees of TransferWise. This means that you are told in advance exactly how much you will pay for fees and the amount you will receive in the currency exchanged.

The integration is pretty deep too. Monzo customers who do not have an existing TransferWise account will have an account automatically created for them on their first international transfer. If they already have a TransferWise account, they can use their existing contact information to authenticate with Monzo and link their account to Monzo. This means that all international money transfers made from Monzo will also appear in your TransferWise account and in the TransferWise application.

"One of the most interesting things for us, besides working with nice people, is that there is another bank in the UK that is transparent with its international tariffs, "says Käärmann. "We come to the place where, once there are enough banks that are as transparent in their fees abroad as Monzo, then it becomes untenable for all the others to continue to hide their fees and it's very interesting. Not just for us as a business, but more generally in terms of the functioning of the bank. "

Another notable Dynamics of TransferWise by adding another banking partner is that the fintech giant recently launched its own banking product. Positioned as a companion to your existing bank account, the TransferWise "Borderless" account and debit card allow you to deposit, send and spend money in multiple currencies. Acting as a local bank account, it is primarily designed to solve the specific problem of earning, receiving and spending money abroad and TransferWise says that it is not intended to to be a full-fledged bank replacement – at least not yet.

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"We're pretty cool," says Blomfield when I ask him if the temporary entry of TransferWise into the bank account space was kind of a concern. "Honestly, we're not competing with TransferWise, we're both looking at big banks as partners or competitors, and our customers are from Barclays, Lloyds, HSBC, and RBS. Increases brand awareness is a very positive thing.We have 750,000 customers, which represents about 2% of the adult population, we target the remaining 98% who still use big banks.I just think that it there is so much room in this space that it would be crazy to think that we are competing with each other. "

"If we take a step back, what is the problem we are solving?", Käärmann complains rhetorically. "The problem we are solving is that the transfer of money across borders is expensive. He then reiterated a point that TransferWise co-founder and president Taavet Hinrikus often made, that the company is totally independent of how customers access the service. The more money circulates in its infrastructure, the better it is, with economies of scale, which means that it has been able to reduce fees on a growing number of roads.

"For us, it does not matter if the money is in a bank account directly connected to TransferWise or it's in the Borderless account," he explains. "There is really no difference, and I know that the user experience is better today if you are doing banking in the UK with Monzo, so that's what users have to do ".

At this point, I can not help but mention Revolut, the startup of the digital bank and the newly crowned unicorn who, on paper at least, is competing with TransferWise and Monzo. Revolut's original "attack vector" (to borrow Blomfield's phrase) was a cheap currency exchange coupled with a debit card for traveling. And although she is not yet a licensed bank, she has deployed bank account features at an incredibly fast pace, which has allowed Monzo to benefit from the parity of features in a number of cases.

Rightly or wrongly, I say to Käärmann that the market thinks that Revolut is often the cheapest option to spend or send money abroad, even if questions remain about how it determines prices, especially on weekends. actually makes money on foreign currencies.

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"When you talk about other people coming into this space, we should be happy if someone finds out how to make certain parts, some roads, better than us or faster than us or cheaper than we, "he says, somewhat diplomatically.

"I'd like these things to be sustainable too.We are very anti-subsidizing, simply because we think that in the long run, it's not logical to require some users to pay for transfers from other users or for some roads to pay for other trips.The progress is going to be faster if it 's clean.But, in the end, s & # 39; there is a better solution, we are actually trying to recommend this better solution.It would be nice if this better solution was also transparent and we can say with confidence that they are not only better in the next 5 minutes, but that they're going to be better for the next 5 hours when you'll be able to put your transfer in. It's just that for the consumers – they're not stupid – that they should go where that is. Is the cheapest, if they need it, or somewhere that is more s practice. "

Cue Monzo's Blomfield to warn me not to let myself get caught up in London's fintech echo chamber. "Most people in the UK have never heard of Monzo or Revolut or TransferWise, and our mission over the next five years is to take market share at all the big banks that I believe, abuse their customers. things like foreign currencies. There is so much open space in front of us because the big banks are just not able to keep up. "