Wirex may be as close as the fintech sector has yet come to providing a regular mobile bank built in considerable part on the bitcoin blockchain.
Bitcoin, as Euromoney readers know, is very good for certain things that individual banking customers value: for micro-payments or transferring small sums quickly across border without paying hefty fees. But it still feels like an amazing application in theory that isn’t much use in the real world. It’s not going to change the landscape of retail payments if you can’t buy a flat white with it at Café Nero.
Wirex may change that. Its founders – who focused initially on building E-coin, a business around bitcoin debit cards, before becoming dis-heartened by the slow pace of adoption – describe Wirex as a hybrid personal banking platform. Its target is to serve frequent travellers, international students, nomadic workers, for example in the knowledge industries, users of the big remittance corridors and even the unbanked.
Arguably what makes it most threatening to the established banking order is not that the bitcoin blockchain is central to everything Wirex does as that it is almost incidental.
Wirex offers a single mobile account that can hold fiat currencies including dollars, euros and sterling, as well as bitcoin. By bridging the fiat currency and cryptocurrency worlds, it opens up possibilities for fast and cheap cross-border transfers where the currency swap may go through a bitcoin leg, unseen by sender and recipient.
“If you want to send £100 to a friend in Europe and convert it into euros, we can do that from sterling to bitcoin and then bitcoin to euro, at a better rate and cheaper friction cost than in the conventional currency market,” Pavel Matveev, founder of Wirex, tells Euromoney. “This fiat-to-fiat conversion on blockchain is the new big thing.”
Wirex also links bitcoin wallets to Visa and MasterCard debit cards. It allows instant transfers to friends and family. It also allows payment through near-field communication off a mobile phone and the capacity to withdraw fiat cash from ATMs with a virtual e-card on a mobile, even for customers that haven’t paid the delivery fee for a very traditional-looking plastic Wirex card.
“We are trying to break down the border between crypto- and fiat currencies and bring to customers the best of both worlds,” Dmitry Lazarichev, another company founder, tells Euromoney. “Essentially, this is about bringing the benefits of blockchain technology to the conventional banking world. We already have more than 20,000 customers in 130 countries that we have shipped cards to. We are now growing very fast.”
The company has addressed markets where families need to send money to young students abroad, such as to Chinese students in Europe who sometimes find it hard to open bank accounts. Often families try to manage high money-transfer costs by sending large sums once a quarter, raising obvious worries about cash security. Instantly up-loading money onto a virtual card removes that worry and reduces costs.
Wirex charges commissions on fiat-to-fiat transfers that it says are lower than MasterCard and Visa; it says that for remittances the service is far cheaper than incumbents like Western Union, which doesn’t move physical cash across borders and so needs to maintain cash reserves in every country it serves.
Wirex has identified big remittance corridors under-served by the new start-ups in that segment, for example between Canada and the Philippines, as well as high-cost corridors such as to and from Japan. With virtual cards delivered via apps to mobile phones, the service is very popular among populations underserved by traditional banks. And it sees big opportunities in Latin America, notably Colombia, Brazil and Argentina.
“Anyone with internet access can open an account instantly and use a virtual card,” points out Lazarichev. “There is great opportunity among the 2 billion unbanked people in the world.”
Wirex raised money via crowdfunding last September and is now negotiating a series-A funding round with venture capitalists to raise another £1 million.
Next to some of the giant fund-raisings for fintech companies in the past 12 months, measured in many tens of millions of dollars, it doesn’t sound so impressive, until Lazarichev points out: “We only need £1 million because we are already profitable and we don’t have a high burn rate.”
The company is looking for distribution partners on the ground in local markets where it sees opportunity.
As Lazarichev speaks, Euromoney almost pictures the hackles rising on the back of regulators’ necks. They are seeking to clamp down on, for example, pre-loaded cards as used by terrorist attackers in Paris last year.
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Matveev tells Euromoney: “The blockchain world is new and we are trying to anticipate the regulations flooding into it. For example, we are talking to [blockchain intelligence firm] Elliptic about ways to do due diligence around addresses and gain a clear picture of where money is coming from and going to. And we are putting in place the same kind of know-your-customer and anti-money laundering infrastructure that already covers conventional bank accounts and debit cards.”
The blockchain world is not regulated in the UK yet, though Wirex says it will certainly apply for a licence once the regulation frame is defined. Its banking partner is WaveCrest, an e-money issuer licensed by the Financial Services Commission of Gibraltar, which has passported its licence across Europe. WaveCrest is a principal member of MasterCard in Gibraltar and the UK and a principal member of Visa in Gibraltar.
Euromoney reports elsewhere on the first tentative steps of the world’s biggest banks to integrate this new technology, such as Barclays, which is working with Circle, a US app, to facilitate payments between sterling and US dollars on the blockchain. The UK’s Financial Conduct Authority has granted the service a licence – the first of its kind to be handed out in the UK.
For now Wirex sees itself as a first mover in this personal banking hybrid service between the fiat and cryptocurrency worlds.
Matveev says: “For banks, blockchain adoption is at the very early stage. I’ve worked at a number of large banks, and while they and Visa and MasterCard are all working on their proofs of concept, they are still playing with the technology. I think it will take them a long time to test it and really deploy it.”