Connect with us


TransferWise: the UK fintech grows up



With a pair of outspoken founders, provocative advertising campaigns and a sauna in its trendy London headquarters, TransferWise helped define the popular image of a fintech start-up. 

But while much of the sector has spent the past year desperately trying to stem losses during the coronavirus pandemic, TransferWise’s customer numbers, profits and valuation have continued to grow. A secondary share sale in July valued the privately owned money transfer group at $5bn, up from $3.5bn a year earlier.

“The longer you wait to make the switch [to profitability], the harder it becomes and the more customers should question whether you’re going to be able to make it,” said Matt Briers, chief financial officer.

“This is why if I was a shareholder or customer of TransferWise I’d be very happy.”

Mr Briers’ comments reflect more than simple executive braggadocio. TransferWise’s early success benefited consumers — and investors — by driving down prices. Its pre-tax profit doubled to £20.4m in the year to March 31.

However its rapid growth has also caught the attention of larger competitors, and it now faces rising competition from money transfer specialists, global banks and technology giants. Santander developed its PagoFX service after chairman Ana Botín was embarrassed to see her son using TransferWise instead of the bank’s own product.

Transferwise's rapid growth

As TransferWise approaches the 10th anniversary of its launch next month, it is seeking to convince customers outside its core user base that it is strong and mature enough to be trusted long-term.

“We need this company to be here for quite some time to achieve our mission,” said Kristo Käärmann, chief executive. “The way it can be here is that we be financially independent, and to be independent we need to be profitable.”

TransferWise launched in 2011 offering low-cost international money transfers for retail customers but has recently focused on attracting business clients while encouraging consumers to use it for more sophisticated services. 

The shift helped revenue growth accelerate in the past financial year even though the rate at which the company acquired customers slowed.

During the coronavirus pandemic, global remittance volumes have fallen, but the closure of traditional stores has pushed more people and small businesses towards digital providers. TransferWise’s customer base is skewed towards wealthier European and American immigrants who are likely to have been less severely affected than the poorer consumers who send the majority of remittances.

Still, rivals argue that it will become harder for TransferWise to maintain its pace as it expands beyond the young people and tech-savvy early adopters who drove its initial expansion.

“It’s a good company, but it’s still small by our standards,” said one person close to Western Union, the world’s largest money transfer group. “Some companies have really attacked us on pricing and customer acquisition, but nobody has the scale we have — complexity is a barrier, regulation is also a barrier.”

TransferWise’s early years coincided with a tumultuous period at its 169-year-old rival, which had to overhaul its business model after losing market share and falling foul of anti-money laundering regulations. But Western Union is now looking to grow in many of the same areas as the start-up, targeting business customers and providing white label services to banks.

Business payments have also caught the attention of technology companies such as China’s Ant Group, which bought rival British start-up World First last year after an earlier attempt to buy US group MoneyGram.

Meanwhile HSBC is launching a consumer “global money account” to rival TransferWise’s own “borderless account”.

“We really welcome competition in our space,” Mr Käärmann insisted. “We’re operating in an industry that was in a terrible place before.”

The big banks and established specialists are hoping to use their larger budgets and reputation for safety to hold on to existing customers and attract new partners who may be sceptical about working with a start-up known for advertising stunts such as spelling out expletives with currency symbols or having staff run down Wall Street in their underwear.

“One limitation for a traditional bank to work with TransferWise or other fintech is the element of compliance and [risk of] financial crime,” said one person who has worked on Santander’s PagoFX project. 

“When people see a bank there is still a notion of security around it, and there is also a strong reality behind that. Each time we issue a new product it is going through all the controls of the bank.” 

TransferWise has responded by stressing its sustainability and trustworthiness wherever possible.

Its chairman and co-founder, Taavet Hinrikus, has suggested that going public would further help build trust in the business. The company has spoken to bankers about the possibility of listing, and Mr Käärmann said he was encouraged by the recent boom in blank cheque companies, which raise money with a promise to acquire a business looking for a public listing.

“There are so many more [ways to list] today than there were even three years ago,” he said.

But he insisted TransferWise was in no rush to go public, adding that a series of recent secondary share sales had “really worked well” by allowing early investors and staff to cash in some of their gains.

“From a customer perspective there’s very little they would really get extra, if anything, from us being a public company,” he said.

Customers can expect further product launches, as the company is introducing traditional banking features to encourage users to store money on its platform. Last month it debuted multicurrency savings “jars”, and next year will start offering investment products, although it says it has no plans to apply for a full banking licence.

Jan Hammer, a partner at Index Ventures, who was one of TransferWise’s earliest investors, said it was one of the only European companies to successfully “graduate” from fintech to “mainstream financial services”.

“What’s next is a broader, more diversified financial services firm,” he said.

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


A carbon registry leaves polluters with nowhere left to hide




The writer is the founder and executive chair of the Carbon Tracker Initiative, a think-tank

No one yet knows which countries will extract the last barrel of oil, therm of gas or seam of coal. But the jostling has started. Every nation has reasons to believe it has the “right” to continue fossil fuel extraction, leaving others to deal with the climate crisis.

In the Middle East, oil producers can argue that the cost of extraction is low. In Canada, they market their human rights record. Norwegians trumpet the low-carbon intensity of their operations. And in the US under Donald Trump, they touted the virtues of “freedom gas” and called exports of liquefied natural gas “molecules of freedom”.

The dilemma for governments is that if one country stops producing fossil fuels domestically, others will step in to take market share. And so the obligation to contain emissions set out in the Paris Agreement risks being undermined by special pleading.

In the UK, the furore over plans for a new coal mine in Cumbria the year that the country is hosting the UN’s climate summit is indicative of the contrary positions many countries hold. Facing one way the government says it is addressing climate change. But looking the other, it consents not just to continued extraction, but to support and subsidise the expansion of production.

Climate Capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here 

To keep warming under the Paris Agreement limit of 1.5C, countries need to decrease production of oil, gas and coal by 6 per cent a year for the next decade. Worryingly, they are instead planning increases of 2 per cent annually, the UN says. On this course, by 2030 production will be too high to keep temperature rises below 1.5C. The climate maths just doesn’t work.

One of the problems in attempting to track fossil-fuel production is the lack of transparency by both governments and corporations over how much CO2 is embedded in reserves likely to be developed. This makes it difficult to determine how to use the last of the world’s “carbon budget” before temperature thresholds such as 1.5C are exceeded.

Governments need a tool that establishes the extent to which business as usual overshoots their “allowance” of carbon. There needs to be a corrective because the cost competitiveness of renewable energy, and the risk of stranded energy assets, has not stopped governments heavily subsidising fossil fuels. During the pandemic, stimulus dollars have been dumped into the fossil-fuel sector regardless of its steady financial decline, staggering mounds of debt and falling job count. 

This is why my initiative and Global Energy Monitor, a non-profit group, are developing a global registry of fossil fuels, a publicly available database of all reserves in the ground and in production. This will allow governments, investors, researchers and civil society organisations, including the public, to assess the amount of embedded CO2 in coal, oil and gas projects globally. It will be a standalone tool and can provide a model for a potential UN-hosted registry.

With it, producer nations will have nowhere left to hide. It will help counter the absence of mechanisms in the UN’s climate change convention to restrain national beggar-thy-neighbour expansion of fossil-fuel production.

No country, community or company can go it alone. But governments can draw from the lessons of nuclear non-proliferation. First, they must stop adding to the problem; exploration and expansion into new reserves must end. This must be accompanied by “global disarmament” — using up stockpiles and ceasing production. Finally, access to renewable energy and low-carbon solutions must be developed in comprehensive and equitable transition plans.

The choice is between phasing out fossil fuels and fast-tracking low-carbon solutions, or locking-in economic, health and climate catastrophe. A fossil-fuel registry will help governments and international organisations plan for the low-carbon world ahead.

Twice weekly newsletter

Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.

Source link

Continue Reading


Hasty, imperfect ESG is not the path for business




The writer is a global economist. Her book ‘How Boards Work’ will be published in May

Good environmental, social and governance practices take a company from financial shareholder maximisation to multiple stakeholder optimisation: society, community, employees. But if done poorly, not only does ESG miss its sustainability goals, it can make things worse and let down the very stakeholders it should help.

To be sure, the ESG agenda should be pursued with determination. But there are a number of reasons why it threatens to create bad outcomes. The agenda is putting companies on the defensive. From boardrooms, I have seen organisations worry about meeting the demands of environmental and social justice activists, leading to risk aversion in allocating capital. Yet innovation is the most important tool to address many of the challenges of climate change, inequality and social discord.

Pursued by $45tn of investments, using the broadest classification, ESG is weighed down by inconsistent, blurry metrics. Investors and lobbyists use different evaluation standards and goals, which focus on varied issues such as CO2 emissions and diversity. Metrics also depend on business models.

Without a clear, unified compass, companies that measure themselves against today’s standards risk seeming off base once a more consistent regulator-led direction emerges (for example, from worker audits, the COP26 summit and the Paris Club lender nations).

ESG is not without cost and the best hope for long-term success lies with business leaders’ ability to stay attuned to its impact and unintended consequences. For example, while the case for diversity is incontrovertible, efforts at inclusion should account for the possible casualties of positive discrimination.

Furthermore, despite ESG advocates setting a strong and singular direction for governance, organisations have to maintain their operations and value while managing assets and people in a world where cultural and ethical values are far from universal. While laudable, a heightened focus on ethics (such as human rights, environmental concerns, gender and racial parity, data privacy and worker advocacy) places additional stress on global companies.

It is often asked if advocates appreciate that ESG is largely viewed from the west’s narrow and wealthy economic perspective. To be truly sustainable, ESG demands global solutions to global problems. Proposals need to be scalable, exportable and palatable to emerging countries like India and China, or no effort will truly move the needle.

Much of the agenda is too rigid, requires aggressive timelines and lacks the spirit of innovation to achieve long-term societal progress. Stakeholders’ interests differ, so ESG solutions must be nuanced, balanced and trade off speed of implementation against the breadth and depth of change.

Business leaders are aware of the need for greater focus and prioritisation of ESG. We also understand that deadlines can provide important levers for senior managers to spur their organisations into action. After all, in the face of pressure for a solution to the global pandemic, vaccines were produced in months instead of the usual 10 years.

I live at the crossroads of these tensions every day. Raised in Africa, I have lived in energy poverty, and seen how it continues to impede living standards globally. As a board member of a global energy company, I have seen much investment in the energy transition. Yet from my role with a university endowment, I have also been under pressure to divest from energy corporations. 

Business leaders must solve ESG concerns in ways that do not set corporations on a path to failure in the long term. They must have the boldness to adopt a flexible, measured and experimental agenda for lasting change. In this sense, they must push back against the politically led narrative that wants imperfect ESG changes at any cost.

Source link

Continue Reading


UAE’s Taqa seeks to shine with solar energy push




From a distance, the 3.4m panels making up the United Arab Emirates’ largest solar power plant look like a massive lake.

But Noor Abu Dhabi, nestled between camel farms and rolling sand dunes, is no mirage. The 1.2 gigawatt facility — the world’s largest single-site plant — produces enough electricity for around 90,000 homes. Owned by Taqa, an Abu Dhabi state-backed utility, with Japan’s Marubeni and China’s JinkoSolar, it will celebrate its second anniversary of operations this month.

Staff constantly scan for repairs so production can be maximised during daylight hours, while every evening more than 1,400 robotic cleaners wipe the dust from the banks of solar panels to boost efficiency.

Noor and another Taqa project — an even larger 2GW solar plant under construction in Al Dhafra, nearer the capital — are emblematic of the company’s ambitions to recast itself as a force in clean energy.

It has outlined a new sustainable strategy with a goal for renewables to form 30 per cent of its energy mix, compared with 5 per cent now, and plans to boost domestic power capacity from 18GW to 30GW by 2030. It will set itself a carbon emissions target later this year.

“We want to transform Taqa into a power and water low-carbon champion in and outside the United Arab Emirates,” said Jasim Husain Thabet, chief executive of the power provider, which is majority owned by government holding company ADQ and listed on the emirate’s bourse.

Renewable sources account for a small part of the UAE’s energy supply

Taqa’s push into renewables is a key element of the UAE’s ambition to have clean energy form half of its energy mix by 2050, with 44 per cent from sources such as wind and solar and 6 per cent from nuclear power.

Last year, the oil-rich emirate had 2.3GW of renewable energy capacity, or seven per cent of the power production mix, mainly from solar power, according to Rystad Energy, a research firm. It forecasts that the UAE is on track to reach its 44 per cent target by 2050.

Although many Gulf governments have targets to boost solar and wind power, the UAE has been out in front.

The Al Dhafra plant is expected to boast the world’s most competitive solar tariff when complete. The facility, a joint venture with UAE renewable pioneer Masdar, EDF and JinkoPower, plans to power 150,000 homes when it comes online next year, reducing the country’s carbon emissions by the equivalent of taking 720,000 cars off the road.

“This is about being a good citizen,” said Thabet. “But it is also attractive for global investors keen on environmental sustainability, it fits in with our main shareholder’s priorities and brings down financing costs.”

Yet Taqa’s sustainability pitch could fall flat with investors scrutinising environmental concerns.

Taqa has committed to capping production at its overseas oil and gas assets, which span fields in Canada, the North Sea and Iraqi Kurdistan. But although it has not ruled out selling the hydrocarbons assets that it bought during a spending spree in the 2000s, divestment is not imminent.

“If the right opportunity comes we will consider it, but right now our focus is on enhancing operations and reducing emissions,” Thabet said.

The UAE, a leading oil exporter and member of Opec, is also committed to increasing its crude oil capacity in the coming years. The country is working towards reducing greenhouse gas emissions, but still has one of the highest per capita carbon footprints in the world.

But Mohammed Atif, area manager for the Middle East and Africa at DNV, a renewables advisory firm, said the UAE, like other major oil and gas producers such as Norway and the UK, are working for a more sustainable future. 

“Yes, the roots and history of the UAE are grounded in hydrocarbons, but they are aware of the challenge of climate change,” he said. “It is a transition, not a revolution, and that takes time.”

US special presidential envoy for climate John Kerry: ‘There’s no reason why oil-producing countries cannot also be a key part of tackling the climate crisis’ © WAM/Handout via Reuters

John Kerry, the US special presidential envoy for climate, visited the Noor plant while attending a regional climate change dialogue in Abu Dhabi earlier this month, saying such “incredible energy projects” would “set us on the right path” to achieving the Paris Agreement goals that aim to limit global warming.

“There’s no reason why oil-producing countries cannot also be a key part of tackling the climate crisis,” he said in a tweet. 

At the same time, Taqa is eyeing opportunities to expand in renewables beyond the UAE. Last year it merged with Abu Dhabi Power Corporation, creating an integrated utility company with ADQ owning 98.6 per cent.

The government is expected to increase the free float via a share offering, Thabet said, declining to provide further details.

With exclusive rights to participate in power projects in Abu Dhabi over the next decade, the company is now mulling how to leverage that guaranteed cash flow abroad.

Thabet said the company would focus on projects and investments that burnish its sustainable credentials. It wants to build 15GW of power capacity outside the UAE. The group currently produces 5GW internationally, including 2GW in Morocco.

“We believe in solar and [photovoltaic] projects, so we will focus on that — but if there is an opportunity outside the UAE, such as onshore or offshore wind, then we will explore that,” he said. Taqa would also consider investing in international renewables platforms to reach its targets, he added.

Source link

Continue Reading