TransferWise: Disruptor or Disrupted HEC Montreal CSC Consulting Olivier Cohen, Brandon Jacobs, Jessica Drolet, Richard Wallace

The Problems facing TransferWise How can TransferWise: Maintain its competitive edge and meet the challenges posed by new disruptive technologies Become market leader in remittance industry Achieve zero-fees

The Key Issues 1. Overcome concerns regarding money laundering and illegal activity through the platform 2. Manage emergence of blockchain technology eroding competitive advantage 3. Redefine nature of long-term relationship with established banks 4. Grow sustainably towards zero-transaction fee

TransferWise Going Forward Strategy 1. Create joint innovation hub with AI and fintech firms to drive new technology development 2. Partner with select banks to take-over their remittance services 3. Licence tech breakthroughs to finance reduction of fees to near-zero 4. Partner with tap-to-pay providers

Internal / External Analysis Strengths Established reputation Novel business model Large client base Attractive pricing Fast transactions Weaknesses Reliance on banking relationships Dip in profits Security concerns Links with Bank under scrutiny Opportunities Expansion to new markets Partner with popular tech. and social media platforms Threats Regulatory concerns Potential for fraudulent use Blockchain Technology TransferWise has high-potential for growth and market leadership, despite hurdles

Remittance Market Analysis Threat of entrants – Med / Low Incumbents already established Banks and other institutions Supplier Power - Low Banks Financial institution Customer Power - High Axed on convenience Price sensitive Secure and safe Competition Branks, Western Union, TransferWise Threat of Substitutes – Med / High Blockchain Similar “halawa”-based technologies Market still ripe for disruptors like TransferWise but also exposed to further disruption from blockchain

Alternatives 1. Partner with AI innovation hub and Fintech start-ups to develop new technologies to meet current challenges Leverage partner expertise to develop new technology Improve productivity internally License tech. services to other companies as new revenue source to offer additional liquidity 2. Convert TransferWise to a new crypto currency leveraging latest blockchain Currency will traded on crypto markets TransferWise becomes digital wallet Revenue through low transaction fees

Alternatives 3. Expand offering of financial services to finance zero-fee target Apply for investment licensing in UK, EU, and USA Leverage technology to enable Exchange-Traded Funds (ETF) investments Use revenues to fund improvements in security and technology 4. Re-focus on large commercial clients Offers high-volume accounts Reduces risk of fraud Different segment from blockchain

Decision Matrix Alternatives Reduce the risk of fraudulent activity Mitigate threat from blockchain Establish a new relationship with banking partners Deliver progress towards zero-fees 1. Partnerships in AI and Fintech and leverage innovation Hub 3 4 2. Convert to blockchain technology 2 3. Offer new investment services 1 4. Re-focus on commercial clients

Decision Matrix Alternatives Reduce the risk of fraudulent activity Mitigate threat from blockchain Establish a new relationship with banking partners Deliver progress towards zero-fees 1. Partnerships in AI and Fintech and leverage innovation Hub 3 4 2. Convert to blockchain technology 2 3. Offer new investment services 1 4. Re-focus on commercial clients

Decision Matrix Alternatives Reduce the risk of fraudulent activity Mitigate threat from blockchain Establish a new relationship with banking partners Deliver progress towards zero-fees 1. Partnerships in AI and Fintech and leverage innovation Hub 3 4 2. Convert to blockchain technology 2 3. Offer new investment services 1 4. Re-focus on commercial clients

Decision Matrix Alternatives Reduce the risk of fraudulent activity Mitigate threat from blockchain Establish a new relationship with banking partners Deliver progress towards zero-fees 1. Partnerships in AI and Fintech and leverage innovation Hub 3 4 2. Convert to blockchain technology 2 3. Offer new investment services 1 4. Re-focus on commercial clients

Decision Matrix Alternatives Reduce the risk of fraudulent activity Mitigate threat from blockchain Establish a new relationship with banking partners Deliver progress towards zero-fees 1. Partnerships in AI and Fintech and leverage innovation Hub 3 4 2. Convert to blockchain technology 2 3. Offer new investment services 1 4. Re-focus on commercial clients 14 11 9 10

TransferWise Going Forward Strategy 1. Create joint innovation hub with AI and fintech firms to drive new technology development 2. Partner with select banks to take-over their remittance services 3. Licence tech breakthroughs to finance reduction of fees to near-zero 4. Partner with tap-to-pay providers

1. Developing the Innovation Hub Strategic partnerships with select A.I. and Fintech firms in a joint innovation hub Develop A.I. technologies to automate security checking of transactions Increases productivity, lowers costs Faster transactions Develop new fintech programs to drive TransferWise platform innovation, reduce operational costs Push towards zero-fees Become market innovation leader Push-back against blockchain

2. Reshape Bank Partnerships Target Select banks in operating countries for partnerships to handle all remittance services Mutually beneficial For TransferWise Increase volume of customers gain mainstream credibility guaranteeing market share For Banks Increase attractiveness of their banking products Long-term goal: monopolize remittance in banking sector

3. Licensing Tech. Breakthroughs Create additional revenue streams to finance zero-fees Licensing system or sale to non-competitors Open new division within TransferWise to license marketable technologies Target fin-tech and financial services sectors Large multi-nationals (airlines, oil & gas, mining, retail) Provide additional liquidity for TransferWise operations

4. Tap-to-Pay Partnerships Expand services to point-of-sale transactions Strategic partnerships with credit and digital wallet providers Apple Pay Interac/Cirrus Visa/Mastercard Back-end platform for their international transactions Enables instant, low-fee international transactions for customers The ultimate evolution of travellers cheques Differentiates from blockchain cryptos through convenience and certainty

Alignment of 5 pillars and actions Policy of 0% fee during emergencies 1.Price Partnerships with reliable banks only 2.Trustworthiness Increase by developing new technologies (innovation hub) and partnerships 3.Speed From 50 countries to 150 countries 4.Coverage Integrate into more channels (eg: Facetime, Skype, Whatsapp, Telegram, LinkedIn) and tap-to-pay 5.Convenience

Low-cost high impact marketing campaigns Expats and diaspora User-generated content “solving real customer problems” (contest + blogger outreach with cash transfer) 0% rate during emergency situations (natural disasters) + ~$2 donation to cause On-campus activities and transparent ads on windows in high-education schools Blog posts in top 20 languages Sponsorships on business websites Travelers International students Businesses, sole traders, freelancers

Risks Difficulty getting buy-in from banks Mitigations Difficulty getting buy-in from banks Offering exclusivity in certain banks, emphasize differentiation from their competitors Blockchain drives fees to zero before TransferWise can match Diversified revenue streams through tech. licensing Reticence from Tap-to-pay providers Long-term plan to launch tap-to-pay wallet

Take-away Strategy Results  Clear path to zero fees  Increase user base  Diversified revenue streams  Become market-leader in remittance Strategy 1. Create joint innovation hub with AI and fintech firms to drive new technology development 2. Partner with select banks to take-over their remittance services 3. Licence tech breakthroughs to finance reduction of fees to near-zero 4. Partner with tap-to-pay providers

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