Cross-border payments startup TransferWise just inked its first US partnerships with lenders, including digital bank Novo. We chatted with its CEO about the launch, and why an IPO is still far off.

TransferWise

TransferWise founders Kristo Käärmann, left, and Taavet Hinrikus.

• UK-based fintech TransferWise has launched TransferWise for Banks in the US, which allows bank partners to add its cross-border payments into their own apps and websites.
• US banking partners can now integrate TransferWise's API into their infrastructure.
• "The company has all the components to have a successful listing," said CEO Kristo Käärmann. Though TransferWise does not seem to be in a rush to IPO.
• TransferWise announced a third straight year of profitability last week.
• Click here for more BI Prime stories.

UK fintech startup TransferWise has just inked deals with a US digital bank and a credit union that will offer its international money-transfer services through those companies' own apps.

This means the US banking partners can now integrate TransferWise's API into their infrastructure, giving their customers the ability to use TransferWise via the lenders' client-facing platforms to transfer money internationally.

That marks the first US agreements where TransferWise is layering its technology into existing banks. The cross-border payments company founded in 2011 is already live with TransferWise for Banks in Europe, where neobanks like the UK's Monzo and larger institutions like France's Groupe BPCE have signed on.

Small-business digital lender Novo and the Stanford Federal Credit Union, which serves Stanford University along with other tech companies in the San Francisco Bay area, are among the first US partners for TransferWise's banking product. In June, Novo announced a partnership with cloud accounting provider Xero.

"The exciting thing that the banks are telling me is that just by integrating TransferWise, they suddenly become hyper-competitive for international payments," TransferWise CEO and cofounder Kristo Käärmann told Business Insider.

The bank partnerships build on TransferWise's peer-to-peer approach, which pairs up people across borders who want to make money transfers in different currencies. The company says that P2P model is what allows it to charge lower fees than more traditional methods.

TransferWise says it charges fees around 1% for cross-border transfers, whereas the global average cross-border transaction fee is closer to 7%. It says that more than 20% of its transfers are delivered in less than 20 seconds.

In the US, TransferWise launched a borderless account and debit card last year - that card works around the world and lets people pay regardless of the currency they are spending in.

Earlier this month, global money-transfer firm MoneyGram, long seen as a cash-to-cash business, announced that it will now offer real-time, digital peer-to-peer direct deposit to Visa debit cards. That means that using the MoneyGram app or website, users will be able to send money to any Visa debit card. There is a fixed $1.99 fee per transfer, and the service will only be available in the US for now.

Read more: MoneyGram launches direct Visa debit card payments

The TransferWise launch with US banks comes a week after the company reported strong revenue growth and a third straight year of profitability.

The company says it serves some 6 million people around the world, and processes some $4.9 billion in domestic and cross-border customer payments every month. It has more than 1,700 employees in 12 global offices, and said when it released its latest financials that it is planning to hire 750 more in the next year.

Käärmann said that TransferWise is looking for partnerships with both larger institutional banks and newer challenger banks. But smaller firms may offer the most logical opportunity.

"We certainly see that the smaller banks are faster, more nimble adopters. It's easier to integrate into their tech stack," said Käärmann.

Read more: TransferWise, a fast-growing money transfer startup valued at $3.5 billion, just turned in a third straight year of profit

TransferWise

TransferWise offers borderless accounts and multi-currency debit cards.

The journey of listing

TransferWise doesn't seem to be in any rush to join the ranks of startups that went public this year and are now trading below their IPO price.

TransferWise's last fundraising was a secondary share sale, which brought their valuation to $3.5 billion. This kind of fundraising, which gives early investors and employee shareholders an opportunity to realize returns, can relieve pressure on a startup to rush toward an IPO.

"The market has given us the flexibility where we can raise funding in private markets and we can bring on investors by offering liquidity to our employees or early investors," said Käärmann. "We can do all those things without embarking on the journey of listing."

Read more: Tech IPO injury report: Some of the biggest names in tech have taken a beating after going public this year

"The company has all the components to have a successful listing," he said. "If we're going to go on the journey of listing, we have to rationalize it from our customer's perspective."

Käärmann said that the company still has plenty of work to do in the international payments space.

"We are very early in fixing the international payments, or international money in general," he said. Käärmann is confident that TransferWise will be able to achieve its goal of changing the international payments industry by offering cheaper and faster services than legacy banks.

"It was really just a hypothesis back then, until a couple of years ago when we reached profitability. That's when the hypothesis actually became true," Käärmann said.

TransferWise investors include Lead Edge Capital (which backed Uber and Spotify), Andreessen Horowitz (early backer of Facebook and Lyft), Valar Ventures (backer of Stash and N26), and entrepreneur Richard Branson.

TransferWise

TransferWise markets itself as a revolution.

Balancing product development with marketing

We asked what TransferWise may have done differently to achieve profitability six years after its launch in 2011. "Where tech companies and other startups trip up more often is in marketing," Käärmann said.

"The more expensive the marketing package, the more you'll have to charge your customers," he said, emphasizing that the math is pretty simple. "So many startups that get tripped up on this, and let their marketing costs balloon without really bringing in the customers that are willing to pay for that."

TransferWise markets itself as a revolution in international payments, appealing to a global customer base that is drawn to transparency and efficiency. To be sure, it's engaged in its own high-profile campaign - Tan France, of Netflix's Queer Eye, is the face of TransferWise's borderless account and debit card.

"His personal story resonates well with why we launched the borderless account, and why we started issuing the debit card," said Käärmann. France is from the UK, lives in Salt Lake City, UT, and films Queer Eye in LA.