In a recent article over at Fortune, I explore what Transferwise, a fast-growing new startup has rediscovered: an enduring customer need that is currently featuring in the migrant crisis, Hawala. The practice of Hawala originated centuries ago when traders were concerned that they would be waylaid by bandits along their routes of travel. So they worked out a trust-based practice in which a party in one location would receive a payment, and a trusted counterparty in a second location would pay the money owed. The key thing here is that the money itself doesn’t change location – between payments in and out, the exchanges mostly balance themselves out.
That’s an idea that has now emerged in a most-modern startup, Transferwise. The startup, from the folks who founded Skype, is based on the insight that sending funds from one place in the world to another using a bank is really, really, expensive. So what they do instead is essentially what happens in Hawala. A payment is made in place A using that currency and is matched with a payment to be made in place B using that currency. The actual funds don’t have to go through a bank settlement system or an expensive currency exchange. By one recent report, since opening its doors in 2011, Transferwise now accounts for 2% of all funds transfers made in the United Kingdom, worth about $760 million.
Now that’s a disruptive startup!