Kristo Käärmann, the 40-year-old chief executive of $5bn (£3.9bn) currency transfer service TransferWise, pulls up his hoodie as he sits outside a log cabin in Tallinn.
“Sorry, it’s very windy here,” he says, peering into his computer screen on a Zoom call. “Luckily the sun is out, which is quite rare.”
After a decade spent in London building up what has become one of Europe’s most successful fintechs, Käärmann has used lockdown as an opportunity to move back home to his native Estonia. With a net worth of £229m, he can afford to take a short break with his wife, lingerie designer Kriss Soonik.
It’s just 10 years ago that Käärmann and his co-founder Taavet Hinrikus were trying to juggle their own expenses while Käärmann worked as a management consultant and Hinrikus was an executive at Skype, another successful start-up with origins in the small Baltic nation.
Eventually, they hit upon the idea of paying each other’s expenses, reducing the amount of money flowing around the world and thus avoiding stiff currency transfer costs. Not long after, Transferwise was born.
Käärmannspent the first 26 years of his life in Estonia, experiencing Perestroika and the country’s transition to independence in the 1990s. It helped to instill a sense of inventiveness in Käärmann who had watched as new industries including banking emerged from the wreckage of the USSR.
"It was an inspiration to me," he recalls. "The idea that a couple of simple dudes from the fringes of Europe can provide a fix to this was a little bit inspired from our upbringing."
In the company’s early days, the pair made a splash in the City by stripping down to their underwear outside the offices of big financial firms to boast that they had “nothing to hide” about the cost of currency transfers.
More recently, their approach seems to have mellowed somewhat. “I’m sure the way we talk about banks has become more nuanced as we have grown and evolved,” Käärmann says. “The attitude hasn’t really changed.”
Käärmann, the quietest of TransferWise’s co-founders who is happiest when speaking at length about his company, still talks passionately about the high cost of sending money around the world through traditional banks. “The fact that they’re not telling you what you’re charged, that’s not acceptable,” he says.
The London fintech scene
TransferWise announced on Wednesday that its annual profits had doubled to £21.3m and its revenues rose 70pc to £302m. It now has 8m customers globally processing around £4bn in payments each month.
The company was expected to have been hit hard by the pandemic because it offers a travel card which can convert funds to a local currency. But while some rivals have struggled, the business appears to have largely shrugged off the impact and its latest results show continued healthy profits.
“We just haven’t seen the demand move away,” says Käärmann, a keen triathlon and marathon runners. He adds that customers including expats and families split among several countries are still using the service to transfer money around the world.
Part of TransferWise’s resilience is down to a shift in strategy that the business has taken over the last five years.
“Back in the day you might remember everything was about growth and how many customers you have,” Käärmann says.
But after five years burning money chasing rapid growth, the founders switched their focus to profitability. “Almost every action that you do on TransferWise is sustainable and maybe even slightly profitable,” Käärmann says.
It’s a far cry from challenger banks, where executives privately complain of losing money from offering current accounts.
“We’ve now seen that this was a really smart move,” Käärmann says. “Now many other products are looking for their business model. It’s much harder if it’s not built into the fabric of who we are.”
Käärmann speaks proudly of the company’s partnerships with central banks including the Bank of England and the Hungarian National Bank which allow his business to send customer cash directly around the world.
These deals helped to boost TransferWise’s valuation to hit $5bn in July following a $319m secondary offering, placing it just behind Revolut, Checkout.com and Sweden’s Klarna in a league table of European fintech.
Does this make the company a contender to meet Dominic Cummings’ dream of building $1 trillion start-ups in the UK after Brexit?
Käärmann laughs when asked about Cummings’ plan. “I didn’t spend any time on this to be honest,” he says.
Boris Johnson's chief advisor Dominic Cummings
Credit: Getty Images Europe
When asked what’s on his shopping list of factors needed to grow TransferWise in the UK, Käärmann pauses to think.
“It would be great if we had an arrangement to access the European market on the same terms as we had it two years ago,” he says.
The company last raised venture capital funding in 2017, and Käärmann says “this is it for a while” when it comes to raising outside money.
TransferWise’s founders have stayed silent on any plans to go public, but when asked whether a future float would take place in London or New York, Käärmann makes it clear that both cities are seemingly still in play.
“I do think London is an interesting, real thing and I wish that there would be more companies listing in London,” he says. “But then again, we also have companies in London who list in New York and that also makes sense in many ways.”
“We haven’t thought about this that much,” Käärmann says as the wind picks up outside the cabin, rattling the wind chimes once again. “You’re right, one day we will have to think about it. But we’re not there yet.”
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