Why I'm Buying Shares in Wise
Wise has quickly grown into a top 5 holding for me. Clear cost advantages vs. incumbents, massive TAM, double-digit revenue growth, 20%+ margins, founder-led, and only trades at 23x LTM earnings.
Introduction
Wise (OTCPK:WIZEY) (OTCPK:WPLCF) is a global financial technology business focused on cross-border payments. Founded in 2010, Wise enables individuals and businesses to transfer money internationally at a fraction of the cost of incumbents like Western Union (WU) and PayPal Holdings (PYPL).
Wise has developed both the back-end infrastructure to facilitate low cost cross-border money transfers, as well as an easy-to-use consumer and business facing mobile app.
Despite industry-leading technology and strong financial performance, Wise trades at a modest LTM P/E of 23x, failing to reflect its market dominance and multi-decade growth potential. At the current valuation, Wise presents a highly asymmetric risk-reward opportunity, and I have been aggressively buying shares since late-2024.
Wise investment thesis
1) Strong counter-positioning from a unique and market-leading product
Wise is a product-led company that has pioneered a unique model for customers to send money internationally. Instead of leveraging traditional payments infrastructure where cross-border transfers pass through a host of intermediary banks and parties, Wise uses a peer-to-peer (P2P) model where incoming and outgoing transfers are matched within Wise's pooled deposit base of currencies.
Wise's unique P2P model is best explained with an example. The traditional way to exchange $1,000 AUD into USD is to leverage intermediary banks, who each add a small fee and process the transaction internally (requiring the bank to be open and sometimes manual approval) before passing onto the next party. The end result for customers is high fees (generally in the 3-7% range of the total transfer amount) and slow settlement times (often days).
The process with Wise is much simpler - Wise has a large pool of deposits across currencies and transfers money in or out of those deposit pools to customers. For example, in the above example, Wise would transfer from their pool of USD funds to the customer and the customer's $1,000 AUD deposit would go into Wise's pool of AUD funds. If the customer wanted to then transfer back from USD to AUD, the process would occur in reverse - AUD funds would be transferred to the customer from Wise's pool of AUD funds and the USD transfer would be deposited into Wise's USD account.
The end result of Wise's P2P model is that they incur substantially less fees from intermediary banks, where these savings can be passed onto the customer. The reduction in intermediaries also reduces settlement times, meaning that 65% of cross-border transfers on Wise are completed instantly (as of Q3 FY25) and almost 95% are completed within 24 hours.
Overall, Wise is effectively counter-positioned vs. incumbents with this P2P model, leading to:
Lower fees
More transparent pricing
Faster settlement times
There are a number of barriers for incumbents to replicate Wise's model:
Reducing fees to compete with Wise hurts an incumbent's profit margin in the short-term and incumbents (many of whom are publicly listed like PayPal and Western Union) have not conditioned their shareholder base to expect lower short-term profits
Competitors cannot transparently document fees like Wise because it only serves to highlight how high their fees are (particularly compared to Wise)
Changing to a P2P model like Wise would take substantial investment in back-end infrastructure and likely lead to a multi-year disruption in customer experience as the transition takes place
2) Lowest cost provider (an advantage which is only getting stronger)
When we compare Wise's average fees vs. other incumbent remittance providers and financial service competitors, the difference is stark, both in terms of cost and also transparency. Wise's fee model is substantially cheaper for customers vs. incumbents:
Wise - 0.56% average take rate in Q3 FY25 (fee shown upfront)
PayPal - charges 5% of the transaction amount (up to a maximum dollar amount) plus an additional currency conversion fee (3-4%)
Western Union - fixed transaction fee depends on amount and country plus an additional currency conversion fee, with online estimates suggesting a total fee range of 3-7%
Remitly (RELY) - similar fee profile to Western Union
I've used Wise on multiple international trips and have had very positive experiences to date. This anecdotal feedback is also validated by 3P data sources. Wise has established a strong and reputable brand as a low-cost provider for international transfers, supported by a customer NPS of 66 (FY24) and very strong online review ratings:
Trustpilot - 4.3/5 (over 250,000 reviews)
App Store - 4.8/5 (over 60,000 reviews)
Play Store - 4.8/5 (over 1.2m reviews)
Wise's management appears laser focused on further cementing this price leadership vs. incumbents. Management are following the Amazon (AMZN) playbook of passing on extra savings back to customers wherever possible, creating a self-reinforcing flywheel of cost advantages. Any chart of Wise's cross-border take rate over time is a powerful visual illustration of scale economies shared and Wise's price leadership.
In summary, Wise is positioned as the lowest cost provider in the highly commoditised global money transfer market. I believe this low-cost strategy is a winning one and this cost leadership vs. incumbents should only continue to widen over the coming years, further reinforcing Wise's strong customer proposition.
3) Scalable, technology-driven business model
Wise's core revenue model for consumers involves a flat transaction fee on international transfers. In contrast, competitors often apply a much higher transaction fee (as discussed earlier) plus an additional mark-up on exchange rates, which is a core reason for the opaqueness of pricing.
While Wise is a financial technology business, the business model skews much closer to a technology business than a core financial services business. Wise generates transaction revenue as more individuals and businesses use the platform at a 76% underlying gross margin (as of Q3 FY25). If a customer remains loyal to Wise, this transaction revenue largely becomes reoccurring as that customer goes on additional overseas trips, transfers money to relatives, or uses Wise for business purposes.
Wise's revenue model is much more capital light than a bank or traditional financial services business that relies on the spread between their cost of capital for borrowing and the interest rates charged to customers for credit products. Wise does not provide loans and also does not take material credit risk, in contrast to a bank. As such, fluctuations in economic conditions and central bank interest rate policy impact Wise much less than traditional financial service institutions, helping to smooth out revenue and creating a more predictable long-term path to value creation.
4) Consistent strong top-line growth
Wise is a growth company that has posted strong double-digit growth in top-line metrics since their public listing in July 2021. For the most part, this growth has been relatively broad-based across geographies and both the consumer and B2B segments. Of note is that the number of active customers and total cross-border volume has almost tripled in the past 4 years.
Despite this growth in core metrics, Wise's share price is down slightly from where it was at the time of their listing in July 2021.
In their latest quarter (Q3 FY25), Wise reported continued strong growth across core metrics:
Active customers - up 20% YoY
Cross-border volumes - up 24% YoY (27% on a constant currency basis)
Customer account balances - up 26% YoY
Underlying income (core transaction revenue from cross-border payments plus a small margin from net interest income on customer deposits below a 1% gross yield) - up 13% YoY
The reason for the delta between growth in cross-border volumes and underlying income comes down to: 1) mild FX headwinds and 2) Wise reduced their take-rate YoY from 0.67% in Q3 FY24 to 0.56% in Q3 FY25. While this reduction in take-rate hits revenue in the short-term, it sustains their competitive advantage for the long term.
Wise expects to continue to grow underlying income at a 15-20% CAGR over the medium term, well above global GDP and industry growth rates. This guidance seems reasonable for a number of reasons:
Wise has grown at higher rates historically
Despite their scale, Wise still occupies a small share of the global cross-border transfer market (<5% market share in B2C, <1% market share in SMBs)
Wise has almost no presence amongst large enterprises, so this is a relatively untapped market
Frontier markets like China, India, and Brazil are showing strong trends towards digitisation and a growing middle class - which should drive adoption in Wise over the coming decades
Overall, I see a long multi-decade growth runway ahead of Wise and do not expect any material deceleration from their 15-20% underlying income CAGR guidance, independent of global macroeconomic slowdowns which will, of course, affect volumes in the short term.
5) High organic customer acquisition
Every business needs to acquire customers, and the business with the strongest brand and highest organic customer acquisition has a clear competitive advantage. Think of large-cap consumer businesses like Apple (AAPL) and Tesla (TSLA) - do customers buy because of a paid ad or because they know and trust the brand and because of word of mouth referrals? Most would say the latter.
In FY24, Wise mentioned that 2/3 of customers joined from a recommendation (i.e., word of mouth), which is a powerful testament to the quality of their customer experience.
Such high organic acquisition enables Wise to spend less than competitors on sales and marketing to attract customers. Indeed, in FY24, Wise only spent £36.5m on marketing, which is very low to generate over £1b in revenue (direct marketing spend = <4% of revenue). In contrast, in FY24, PayPal spent over 6% of revenue on sales and marketing and Remitly spent over 24% (and is unprofitable).
This efficient customer acquisition enables Wise to either boast higher margins than competitors at scale or aggressively reinvest this surplus back into product development to further reinforce their technological advantage.
6) Consistent profitability and attractive margin profile
Wise is a scalable and capital-efficient business. As of H1 FY25, Wise had a strong underlying gross margin of 76% and underlying profit before tax margin of 22%. The business has been consistently profitable since entering the public markets in 2021. Given Wise's recent changes in P&L reporting, I have presented adjusted EBITDA margins below, which presents a like-for-like comparison over the past four years.
Over the medium-term, Wise is targeting an underlying profit before tax margin of 13-16%, which equates to an underlying adjusted EBITDA margin of 20-23%. Such guidance seems solidly achievable, given Wise is already exceeding these margins targets in a relatively benign macroeconomic environment.
This continued profitability is a strong sign of the quality and sustainability of Wise's business model - even with the lowest take rate in the industry (and continued trends towards even lower take rates), Wise is a structurally profitable business.
7) Clear benefits from scale economies
Wise is a business that benefits massively from scale. As Wise grows, their back-end technology infrastructure (supported by over 850 engineers) and operational costs (e.g., setting up and remaining compliant to banking requirements) are spread over a larger customer base, reducing the effective cost per customer. With each new customer, Wise's effective operational cost per customer decreases, reinforcing their cost advantage vs. potential upstarts (who do not have the same scale) and incumbents (who already offer higher fees than Wise).
The other strong benefit to Wise from scale is the associated increase in customer balances, which enables them to generate interest income from investing some of those balances in low-risk financial assets, which is a similar dynamic to an insurance company investing their 'float' in assets that generate a positive return. As Wise has grown in scale (and very importantly interest rates have risen), Wise's interest income on customer balances has increased materially from <£5m in FY22 to almost £500m in FY24, accounting for the rapid jump in margins in FY24.
8) Hidden transition to a financial super-app and infrastructure business
While most people still think of Wise as a digital consumer cross-border payments app (and with reason, 12.2m of their total 12.8m users are personal consumers), Wise is quietly broadening their scope into a financial super-app and technology infrastructure business, increasing their potential customer ARPU and total addressable market (TAM).
In addition to consumer international transfers, Wise has built the following adjacent services:
Business accounts - allows primarily SMBs to send money internationally and track expenses
Asset investments - allows customers to invest their deposit in low-risk assets and money market funds while keeping funds available for everyday transfers (has quickly grown to >20% of total customer balances)
Physical cards - for customers who want to use a physical debit card (4Y revenue CAGR of over 80% for 'cards and other revenue')
White label infrastructure - banks and fintechs can use Wise's infrastructure to embed international money transfers into their own services
While all of these adjacent services are potential growth areas, Wise as an infrastructure provider for banks and fintechs is arguably the most exciting. Wise currently works with over 85 platform partners, many of whom are excellent and multi-billion dollar fintech companies (e.g., Brex, Monzo, Ramp, Nubank, Interactive Brokers) but choose to partner with Wise rather than build their technology and banking infrastructure in-house. Such partnerships provide a glimpse into Wise's technological advantages - if the technology was simple to replicate, these well-funded companies would simply build in-house rather than partnering with Wise. Growth in these large fintech companies over time provides another powerful tailwind for Wise.
9) Founder-led business with high inside ownership
A clear theme in my own investing journey is that the best shareholder returns come from founder-led businesses where the founder has very high inside ownership and a mission that is measured in decades, not quarters. Examples of past successes using this framework include Daniel Ek at Spotify (SPOT), Rick Smith at Axon Enterprise (AXON), and Luis von Ahn at Duolingo (DUOL).
Wise also fits this profile. The business is led by Co-Founder and CEO, Kristo Käärmann, who owns almost 20% of the business. Glassdoor reviews are solid for Wise (3.9/5) and 80% of employees approve of Kristo as CEO.
Kristo and Wise's senior management team exhibits many of the traits I look for in category defining companies:
Long-term founder orientation - All Wise's public materials are focused on growth over years and decades, not individual quarters
Technical background - Kristo earned a master's degree in mathematics and computer science (technical training) and worked first-hand with European banks and insurance companies as a management consultant at Deloitte and PwC before starting Wise (first-hand experience of the problem)
Deep focus on customer satisfaction - Wise is the lowest cost provider in their industry, constantly passes savings back to customers at the expense of short-term revenue growth and profitability, and has very high NPS rates (66 in FY24)
History of product innovation - As mentioned in section 8, Wise is evolving from a simple consumer app into a financial super-app and infrastructure provider, with strong growth in all recently rolled out products
10) Trades at an attractive valuation
Wise has sold off in recent months (down 16% from 52-week high), largely due to slower than expected revenue growth in recent quarters (which is attributable to a combination of FX headwinds and Wise aggressively reducing take rate, which impacts short-term revenue growth). Such revenue headwinds are very short-term and do not impact Wise over the long term.
With this recent sell-off, Wise has traded down to a valuation multiple that presents a highly asymmetric risk-reward opportunity. Wise currently trades at an EV/LTM revenue multiple of 5.6x and LTM P/E multiple of 23.3x, near the lower end of their valuation range as a public company and broadly in line with market multiples.
For context, PayPal trades at 17.6x LTM P/E growing revenue in the mid-single digits and with similar margin profiles to Wise. A high-quality payments business like Adyen (OTCPK:ADYEY) (AMS:ADYEN) growing revenue in the low 20% range and with almost 50% EBITDA margins trades at a strong 50x LTM P/E multiple, more than double that of Wise.
Wise has guided for medium-term CAGR of 15-20% in underlying income (their equivalent of revenue), which is a realistic base case and ignores excess income generated from net interest income above a 1% gross yield. With a current LTM P/E multiple of 23x, if we assume that Wise holds an LTM P/E multiple in the mid-20s (in line with the current multiple and arguably cheap for a highly profitable business growing 15-20%), shareholder returns should approximate this 15-20% growth rate over the medium term, ignoring any potential dividends or stock buybacks.
Potential existential risk - technological disruption from stablecoins?
Wise is exposed to many risks, including a general macroeconomic slowdown, compliance risks, and potential reduction in global interest rates (which reduces Wise's net interest income). However, these risks apply to all competitors and arguably, if there is a macroeconomic downturn, Wise may benefit and gain market share as customers and businesses looking to transfer money internationally become more price sensitive.
To me, the main existential risk to Wise is creation and adoption of a new payments technology that makes Wise's existing P2P model less valuable (or obsolete in the worst case).
One such example could come from stablecoins, which are cryptocurrencies pegged to a 'stable asset' to reduce volatility. Most well-known stablecoins are pegged to a fiat currency (e.g., USDC or Tether), but others can be backed by commodities like gold or oil.
While stablecoins are not currently used by the masses, early evidence suggests that transaction fees could be near zero on some blockchains with almost instant transfers. These cryptocurrency blockchains operate outside of the traditional banking system, reducing banking intermediaries, regulatory checks, and compliance costs.
While exact pricing is still indeterminate for these stablecoins and their adoption is very early, there are signs that they are gaining steam. In February 2025, Stripe closed a $1.1b acquisition of a business that specialises in stablecoin infrastructure, while the total number of global stablecoin users reached 30m (up 53% YoY).
The rise of stablecoins or other payment technologies (e.g., central bank digital currencies) is unlikely to happen overnight, but remains a potential threat over the medium-to-long term.
I will remain on the lookout for any commentary from Wise management on the rise and threat of stablecoins and whether there is any potential for Wise to integrate stablecoin technology into their platform.
Conclusion
Wise is one of my highest conviction ideas in the current market and has quickly grown to become my 5th largest holding.
Wise offers investors a rare combination of structural cost leadership, high-margin scalable growth, and consistent profitability. With medium-term underlying income guidance of 15-20%, Wise's intrinsic should continue to compound at a healthy clip, with the potential for margin expansion as investors begin to recognise its durable competitive advantages. At 23x LTM earnings, the market is failing to price in Wise's multi-year compounding potential, presenting an asymmetric risk-reward opportunity for patient investors.