Background of TransferWise
Question:
Discuss about the Business Model Canvas in Entrepreneurship Training.
Transfer Wise is an Estonian Company that is currently based in the UK. The company offers peer to peer money transfer services within the countries it operates. The company was launched in the year 2011. Its operations are global but the business mainly depends on Europe, US and Latin America. As at the year 2018, Transfer Wise had approximately 1000 employees. The products offered by the company include transferring different currencies globally without having to convert the currency. TransferWise operates in the financial services industry. The financial services industry is very huge in size and its segmented into various markets such as insurance,consumer finance,investment banking and money transfer(Türko, 2016).TransferWise operates in the money transfer market. The money transfer market has grown tremendously in the last one decade. Money transfer industry has evolved from being a preserve of the banks and it has become digital and more efficient.
The business model canvas of TransferWise is made based on Osterwalder and Pegneur nine pillars. TransferWisehassome partners who are instrumental in the success of the company. The company has partnered with several investors to help invest in technology and grow the company further. Some of these firms include; IA Ventures,IndexVentures,IJNR ventures and Velar Ventures. To offer efficient services,the company has also partnered with other service providers such as commercial banks. One of these institutions is Starling Bank. Starling bank offers digital banking services only and its partnership with TransferWise will make international money transfer easier and cheaper(Keane, Cormican&Sheahan, 2018).
Key activities of TransferWise are providing money transfer services to customers at cheaper rates compared to established financial institutions(Jain, 2013). The key activities involved to facilitate the money transfer include;recruiting new customers,maintaining and upgrading the online platform to make it more user-friendly and improving the infrastructure of the company to offer more efficient services.
The key resources that TransferWise depends on include;financial capital,reliable high-tech computer network as well as highly qualified personnel(Wei, Zhu & Lin, n.d.). Maintaining the online networks and continuous research and innovation are some of the key activities of TransferWise.
TransferWise customers get better value for their money when they send money using the network because the currency does not need conversion(Daly, 2010). It means that the customer does not lose value for their money by converting the currency. The transfer charges are flat and therefore making it cheaper and more convenient compared to established money transfer companies(Vial, 2016). TransferWise has a perfect relationship with customers. The company has been able to satisfy the needs of its customers,and that’s the reason why more than $1billion is transferred through the system each month. TransferWise also improves customer relations through the affiliate program which rewards customers who invite new customers tojoin the service.
The weakness with the customer relations aspect is that the company does not send the receiver messages on the amounts they have received(Keane, Cormican&Sheahan, 2018). It may inconvenience the customer at some point.
The customer segment targeted by TransferWise is the working class people working in foreign countries and wants to send money back home. The company also targets freelancers and business people with transactions that cross borders.
Business Model Canvas of TransferWise
The channels used in peer to peer money transfer involves money moving from the account of the sender to the TransferWise system and then to a person receiving the same amount but who is in the same country with the sender(Bolton, Freixas & Shapiro, 2007). There are only three channels involved. The company sometimes depends on banks as an additional channel.
The cost structure of the company composes of licensing fees,labor cost,cost of maintaining the online infrastructure(Miles, 2011). Other costs include overhead costs, marketing and advertisement expenses and miscellaneous costs of the company.
TransferWise gets its revenue through the commission it charges customers are transferring money.The company also gets revenue from other investments as well as sale of company assets.
The nine building blocks of the business canvas are closely related to one another. They function concurrently to help the business operate smoothly and achieve its objectives(Joyce &Paquin, 2016). The key partners of TransferWiseprovide the key resources that are necessary to carry out the daily functions of the business. Without the various partners,the company cannot get resources such as finance, human resource and technological resources needed to make money transfer efficient and affordable.The key activities of the organization help to create value to customers who use the money transfer platform(Hussain & Chong, 2008). For the key activities of the company to be undertaken,the company incurs various expenses. Costs are incurred in acquiring the key resources for the company. The key activities also contribute to the good customer relationship that TransferWise enjoys. The customer segments are the source of revenue for the company. They create the various revenue streams which generate revenue that gets transferred to the organization through the channels.
The key success factors of a business are the factors that are key for the business organization to achieve its objectives. There are five key success factors for TransferWise. They include;strategic focus,people,operations,marketing, and finance(Erlyana& Hartono, 2017). The strategic focus of TransferWise includes leadership, management and planning. TransferWise has very focused and experienced board of management. The co-owners of the company KristoKaarmann and TaavetHinrikus have great experience in IT and management. The company has a concrete strategic plan that has helped to raise the value of the company from scratch until to the point of being valued above$1 billion. People are also key success factors in TransferWise. People bring in innovation, knowledge and skills that are needed to perform key activities for the business (Britt, 2016). The company recruits highly qualified staff with the ambition and desire to achieve the objectives of the company. The company also invests in development. New products such as Borderless account as a result of the focus on research and development(Skees & Tucker, 2017).Process and work play a very great role in making a business successful(Mulyana, Daryanto&Purwito, 2018). Operations are the activities that take in the process of offering a product to the consumre. The processes of in the case of TransferWise are the activities that take place in moving money from the sender to the receiver. The processdetermines the efficiency of money transfer services of TransferWise.Well,the coordinated process leads to consumer satisfaction (Kendall, Machoka, Veniard & Maurer, 2011). Marketing involves informing customers of products offered by the company and making the products available at the right time and place(Mullins &Komisar, 2009).TransferWise markets its products through advertisements and other-other promotional methods. Finances are crucial in operations of TransferWise. The company has received funding more than $200 million from various investors. The finances help the company to invest in infrastructure and human resource. A company with a large number of assets is an indication that the company is successful.
Key Activities and Resources
The downside risk is the risk of the actual returns being below the expected returns. In other words,it’s the financial loss that a company suffers in the course of its operations(Chung, Ha & Kim, 2015). The downside risk of an organization increases when the probability of the organization making losses is higher than the probability of making profits. When the costs increase, the downside risk of a company increases.It also applies when the revenues of the company decline. The revenues of TransferWise depend on the number of transaction carried out through the platform,and hence they determine the risk of actual returns being below the expected returns. The downside increases when the costs incurred by the company increase or when the revenues decrease.
The business model used by a business organization is very important in determining the success of the business organization. One of the changes I would recommend to the business is the increase in technological investment(Pollock & Price, 2008). The company should focus more on technological innovation to be able to compete effectively in the ever-evolving financial industry (Mohapatra, S& Ratha, 2011).I would also recommend that the company improves its relationship with customers. TransferWise should improve communication with its customers to improve customer satisfaction.TransferWise company should use target a wide range of customer segment to gain more customers. The business model of TransferWise needs to be changed by improving the value proposition to the customers (Ye, 2015). The company should reduce the time it takes to transfer money from one account to the other. This can be done by researching in technology in order to make the services more efficient. The revenue streams of the company should be increased by the company offering mobile money transfer services.
Conclusion
This report analyzes the business model that TransferWise applies in its operations. The company was formed in the year 2005 and it has over 1,000 employees. The company operates in the financial industry which is very competitive and has evolved greatly over the past one decade. The report discusses the nine building blocks of the business canvas model. The report also discusses the relationship between the nine building blocks and how they affect the operations of the company. The critical success factors of the business are also discussed in this report as well as the recommendations for to improve the performance of the company.
References
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