Wise (LSE:WISE), formerly known as TransferWise, is one of Britain’s biggest and most popular fintech unicorns, currently disrupting the financial services sector. Founded in 2011, it has experienced a meteoric rise, culminating in their recent IPO in July. Wise started trading at £8 per share and has now already reached the ~£10 mark, with a market value of ~£10 billion (~$14B), representing up to a 25% return for the public investors that jumped in early.
Wise is in the business of providing cross-currency money transfers across the world, taking a small fee of each conversion whilst still providing significant cost savings compared to the much more expensive transfers offered by the big, traditional banks. The company has a strong brand reputation, portraying the image of fighting for the everyday consumer, bringing transparency to international payments, and slashing away at excessive and outdated commission models. Even the way that the company joined the stock market was done in a way that broke the mould! Traditionally, firms will employ investment banks to manage their IPO, to help gather client interest and buy orders to set a price range for the stock trading, all for a handsome fee. Wise, true to their disruptive roots, opted to list on the London Stock Exchange via a direct listing, a very rare and relatively new method of offering their shares straight onto the exchange and holding an auction, and bypassing the commissions to the bankers.
High growth and profitability
Despite the company’s short history, Wise has become one of the largest money-transfer providers on the market, boasting nearly 10 million users. In recent years, start-ups and tech stocks have generally pursued a ‘growth at any cost’ strategy, which has often resulted in negative profits/losses, IPO disappointment, and investor pain. On the other hand, Wise has hit the sweet spot, as the firm is profitable and has been since 2017. In FY21, the company doubled profits to ~£31 million. At the same time, the extreme growth rate shows no sign of slowing down, as revenues grew 39%.
Product expansion into digital banking
I believe Wise shares have an extremely positive outlook, as all of the firm’s success up to this point has been solely from cross-currency transfers. In addition to further geographic expansion, the firm is now generating new revenue streams from additional financial services linked to digital banking, such as consumer and business accounts and digital wallets in up to 50 different currencies. This is a high growth and competitive sector with the likes of Revolut, Monzo, and Starling Bank. If Wise is able to grab market share in this space and up-sell their new services to its growing user base, the shares should continue their strong start and upwards trajectory in the markets.