Man’s $300m revenge on banks
A MAN who was once ripped off by "thousands" in bank fees has turned his frustrating experience into a billion-dollar company.
In the early 2000s, Estonian-born Taavet Hinrikus was working for Skype as the tech company's first-ever employee - a role which required a lot of travel across Europe.
The 37-year-old was being paid his monthly salary into his Estonian bank account, but frequently needed to transfer that money into local currencies when he was working in other countries for longer stints.
After transferring euros into pounds during a long stay in London, Mr Hinrikus was shocked to discover he was losing a fortune in bank fees and poor exchange rates, despite the transfer being a quick and easy task for bank staff.
While he was in London, Mr Hinrikus met fellow Estonian Kristo Käärmann who had the same problem but in reverse, as he was being charged excessive fees transferring pounds to Estonia.
The pair soon set up a simple plan to avoid the bank fee rip off.
"Banks have a 3, 4, 5 per cent mark-up with no transparency - they'll never tell you they do it, and it's pretty frustrating," Mr Hinrikus said.
"I met another Estonian guy living in London who was sending money to Estonia every month and we started talking about how wrong it was, and we thought maybe we could help each other.
"The next month I sent money from my account in Estonia to his in Estonia and vice versa with our London accounts at the best exchange rate and boom - it worked."
Mr Hinrikus and Mr Käärmann ended up saving "thousands of pounds" using that trick, and soon let a few friends in on the secret.
"Local transfers are free and fast, and we saved thousands of pounds in bank fees," he said.
"We felt like we had outsmarted our bank."
But it wasn't until several years later they realised they could make their banking hack into a global business.
"A couple of friends joined us and we started doing it as a group, but later we were thinking about what we wanted to do and we realised hundreds of millions of people live, study and work overseas and we could help them move their own money," he said.
"At first it was really about helping friends but a few years later we realised we wanted to help many more people."
Their money transfer service TransferWise launched in January 2011 with just Mr Hinrikus and Mr Käärmann on the payroll.
Today, the billion-dollar company has grown to include a team of 1300 with four million customers around the world.
It transfers $AU5.5 billion every month and Mr Hinrikus and Mr Käärmann have an estimated net worth of more than $300 million each.
"I am really proud of how much money we take from the bankers and put back in people's pockets," Mr Hinrikus said.
Mr Hinrikus was in Australia this week for the launch of TransferWise's local business offering, which he claims will be 14 times cheaper than rival PayPal.
Australian businesses can now send and receive cash in 45 currencies.
Earlier this week, he took a swipe at Aussie banks in an AFR interview, claiming the big four were "screwing over" everyday customers by over charging in exchange for poor service.
He said Australian banks had been able to get away with bad behaviour for so long thanks to the monopoly enjoyed by big players and a lack of competition.