Wise: payments group continues to take share in developed world

Wise is a surprisingly straightforward proposition for a UK-listed fintech. It is not trying to be a bank. Nor is it offering a product no one knew they needed. Instead, the start-up specialises in digital international money transfers. Decent half-year results show there is enough demand for this service to justify the title “disrupter” for Wise.

Correspondent banks charge an arm and a leg to move funds round the world. Wise and its peers undercut them. Developed economies are the target markets. Poor migrant workers transacting in cash in hot countries still rely heavily on unsatisfactory money agents.

Rich-world customers delivered powerful growth. Three-quarters of revenues of £397mn in the six months to the end of September came from Europe, North America and the UK. Asia-Pacific provided £73mn and the rest of the world, £29mn.

Add in interest revenue on customer balances of £19mn and total income was £416mn, a year-on-year increase of 63 per cent.

Wise expects total income growth for the full year of 55-60 per cent, with a compound annual growth rate of 20 per cent in the medium term. Higher-value services, such as a new debit card, will support revenue growth. The average transfer fee was 64 basis points of value, up from 62bp a year earlier.

Wise hardly offers a cheap service. But it compares well with high-street banks charging 4 per cent or more. They still dominate the business, leaving room for growth.

Wise had 5.5mn customers in the second quarter, 40 per cent more than a year earlier. It will be harder to keep that pace of growth going amid downturns. More than two-thirds of Wise’s customers followed word-of-mouth recommendations. That will help. So will diversification.

The shares trade at 65 times forward earnings. That underpins a market capitalisation of just over £6bn, pegged as fair value by Lex when the company listed just over a year ago. Wise is hardly a value stock. But if you seek momentum, Wise has it.