Building A High-Growth Startup Sustainably | Nilan Peiris, TransferWise | BoS Europe 2018

Nilan Peiris, VP Growth, TransferWise

No marketing channel scales infinitely. That’s the message Nilan opens his talk from BoS Europe 2018 with. So how do you build sustainable marketing to keep your business growing sustainably? Drawing on past experience working with early-stage startups and as VP Growth at TransferWise, Nilan gave a three-pronged talk on the subject:

  • Learnings from running Marketing at early-stage startups
  • Optimizing for Word-of-Mouth at TransferWise
  • The Economics of a Mission-Driven Business

This talk is full of stories and marketing tips from the first 6 years of TransferWise – highly recommended!

Video, Slides, & Transcript below





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Nilan Peiris: Thanks very much for that Mark. By the way that was my P.A. so when Mark emailed saying we need walk-on music my P.A. intercepted the message and said I’m going to surprise you. So there you go dancing queen. It’s all out there. Okay. So onwards. I’m going to be chatting about how to build a high growth startup sustainably. Which is about spending money on marketing sometimes and sometimes not. And there’s three things I’ll be walking through. 1 – What I’ve learnt about marketing in early stage startups. 2 – a bit about what a mouth growth which has been pretty important to us at TransferWise. And 3 – something that I’ve been thinking a bit about which is the economics of a mission driven business. I’ll try and explain what those words mean, they’ll make sense by the end of this. Says about one hundred and twenty slides here. So I’m going to go pretty fast and I’ll share these all via Twitter later so you can read them properly then.

So, marketing in early stage startups. Before we kick off I thought I should introduce myself. I’m Nilan, I’m responsible for the product and marketing teams at TransferWise. TransferWise has been going for six years and I started as an advisor actually six years ago. I never forget my friend introduced me to Taavet and Kristo and said these guys have a great product but they have no customers. They should talk to you. And I didn’t really help that much for the first couple of years. But after two years I finished up my last startup and I joined the guys full time by which point we were about 40 people. And since then built our products and marketing organizations.

So growth. Prior to TransferWise for the last six seven years I’ve been working with early stage startups and with founders, VCs, private equity companies. And when I meet founders and talking to them they’re all about trying to create graphs that look like this. Yeah. And we’ve got some founders in the audience here. Quite a few. How many of you have graphs that look like this? Cool. So the rest of you should be out there actually working on it. And it’s quite fun. So when I meet them the graphs look like this and they’re usually at that point. And the fun bit is not really that point. It’s really that point because you really don’t know if you’re ever going to get to this magical point of traction where the business starts growing and it starts doubling in size every few months. The question is how do we grow? The kind of orthodox answer especially when founders talk to VCs is they need to find more customers and the easiest way to do that is to go shop on Google or Facebook and spend spare money or marketing. And that’s quite dangerous at this point in time because you have a call this point in time when you’re not growing you have a limited runway (the deathzone), and you have to get to traction by the time you get out of it. And so I’m gonna talk you through the challenges I’ve seen with working with startups that start off with the marketing led growth approach because it could quite easily end up like that.

So just to talk through the logic of how it works is (and I certainly I’ve done this myself in previous businesses I’ve run and scaled) so you start off by spending some money and putting an ad up. And as a result of an ad a customer finds you it’s pretty cool. And take the profit from that and invest it in another ad you get another customer and then you start to make the case that you can keep doing this and doing this. And then you go and see a VC and say look I gotta run these marketing experiments I’m getting a few customers if you invest we can we can have a graph that looks like that. Now the challenge actually with marketing channels is that the graph doesn’t look like that the graph looks like that. Okay. So any marketers any audience. Yeah. So as you spend more and more money in any channel be it TV or google the Facebook. So you double the amount of spend over time at the beginning it looks pretty good. You put their money in you get quite a lot of growth but over time you start hitting the law of diminishing returns. You’re expanding to reach an ever less relevant audience over time. And it gets more and more expensive. And having worked in high growth startups for the last 10 years something quite interesting happens at that point. So usually at that point you kind of see the business splitting into two. So there’s one group of people who say you know what: we need to spend more. We’re just not spending enough. And then early stage start ups and they’re going from series A to B or B to C is the point at which someone says the word TV initially and we just need to go on TV and it’s just going to keep going and there’s this bravado and ego I’ve seen in boardrooms at this point in time where it’s like who’s gonna be the first person to blink to turn off the money taps. And there’s usually a quiet voice in the corner saying I think it is kind of like or even if we do the TV thing eventually that will flatten out as well. There’s something else, we need to focus on something else, this isn’t actually creating value for our customers. This isn’t actually building a product here, all we’re getting good at doing is making the case for spending more and more money on marketing which is less and less effective. And yeah it took a while for me to realize this but just doesn’t exist, this channel you can just keep putting money into and growth comes out the other end.

So as I go through the presentation you’ll see that quite a lot of aphorisms things that sounds really obvious that you hear people from Silicon Valley say all the time. I’ll try and explain. The funny thing about them is that they’re all true. I’ll try and explain what I’ve learned they mean in our context. So one of them is about this focusing on creating value for customers. You hear people say that all the time. I’ll try and explain how that comes to life at TransferWise and how that’s driven our growth to date.

So onto word of mouth growth and before we do that I’ll just take you through a little bit about TransferWise. So all startups started to solve a problem. And it’s usually the founders’ problem. The AirBnB guys needs to find a place to stay, the Uber guys needs to get a taxi, and Taavet and Kristo were both sending money internationally. Taavet at the time was working at Skype in Estonia and sending money to the UK for savings. And Kristo was working in the UK and sending money to Estonia, I think he was paying a mortgage out there. Each of them was sending a thousand pounds a month each way. Each time they sent a thousand pounds the bank took fifty pounds as a fee. So imagine this fifty pounds in the first month. Hundred pounds after two, 200 pounds after four months. It adds up pretty fast. And we’ve got an apocryphal founding story. Like all good startups. So these guys actually did meet our party and they were talking about this and they came up with this genius idea which was, Kristo why don’t I pay your mortgage, and you put money into my savings account. So that way no money ever gets exchanged. We both pocket 50 pounds each so that was the first version of TransferWise. No code written, 100 percent customer value, very fast to market. It was so cool and worked so well they created the second version which was a Skype chat. And they just invited all their friends who were Estonians living in the UK who wanted to send money to Estonia and Estonians in Estonia who are looking to send money to the UK and they started matching people up. So that was the second version of TransferWise and that worked again so well that one day Kristo went and built the website and the website was just a form. We just asked people. Who wants to send money to the UK and who wants to send money to Europe. And every night we match those people up get them to deposit money into our bank accounts in the UK & Europe and then do the payouts. Fast forward to today. And we’re moving over 2 billion pounds a month. We’re live with our borderless bank account which enables you to send, spend and receive money internationally in over 42 currencies. We’re doubling in size every year at the moment. And most importantly saving our customers 60 million in bank fees every month. Along the journey we’re now at a thousand people in 10 offices around the world. And we’ve been profitable for a couple of years.

But back to the marketing and the growth thing. The most interesting thing for me is this green line. So it’s illustrative. But the blue line is really what our growth has looked like over the last few years. The green line is a indication of how many of those people came in to join TransferWise after hearing about TransferWise from a friend. Last month that was 80 percent of our customers. If we go back four years to when I joined, we were 80 percent paid marketing. So we tried really hard to get this word of mouth thing to work for all of the reasons I talked through earlier. I’m going to share a little around what we’ve learnt along the journey and how we’ve done that. So the easiest way to find out about how why how to get word of mouth growth to work is to talk to your customers. And ask them, listen carefully to whether they recommend your product to their friends and listen carefully to the words they used to recommend the product. One systemic way of doing this is using something called net promoter score. How many people in the audience have heard of Net Promoter Score. Awesome. So I’ll whisk through these slides. So this is this question that you’ll see usually as part of a product or as an email you get from a from a company after using their product where it asks you Would you recommend us to your friends. And there’s a scale from 1 to 10. And the way the theory works is that if someone gives you a 9 or 10 they go around telling everybody you’ve got to use TransferWise. If they go around giving you a one to six they go around telling everybody don’t use TransferWise. And if there were seven or eight there like it didn’t really make that much of a difference to their life and the way you calculate it as you well know is by taking detractors away from the promoters and you calculate this percentage thing. So I’ll talk you through why I’ve learned this is probably our most important product metric over time and it’s something I call the the NPS Richter scale. So the Richter Scale is this thing for measuring earthquakes. And as you as you progress one point up the Richter scale the earthquake doubles in intensity. And something similar actually happens with NPS. So what we noticed is that you know when a customer is giving us between 1 and 5 they’re not recommending us at all. But as they move to a five to six they start to tell people about us, a seven to eight they literally double the number of people they tell about TransferWise and an eight to nine they do it again. There aren’t that many product metrics that when you move them you get that kind of impact on your growth. And to show you what that means that if you think about it you could run your product teams focusing on improving conversion rate or increasing sales. And they make a change and you get more sales but that’s a one off hit on sales or a one off hit on conversion rate. Whereas if you manage to move NPS – here’s the picture of your business. You’ve got a few customers churning every month. And a few new customers joining every month. But say I move the NPS of that customer from 40 percent to 70 percent. Then what happens is that customer now tells somebody else. And that person may now tell somebody else. And that compounding effect on growth you get, there’s nothing quite that light that has that kind of impact and that’s been one of the mechanics we’ve used to drive and double down on our on our word of mouth growth. So the simple fact is as long as you have more people going around telling everybody to use TransferWise rather than don’t use TransferWise you get this amazing organic growth. But this isn’t easy right. Otherwise everyone be doing it. So I’m going to just talk through a little around now what I’ve learnt about moving NPS.

So when you launch your products, the first time we launch TransferWise, all you’re focused on is getting it to work and making sure you don’t lose anyone’s money. And then after time as it’s working great and you start to iron out all the issues you’re pretty happy with it. And most people stop here. A few people go a little further. They try to optimize the experience. They try to improve things like conversion rate retention repeat rate and try to understand what are the drivers of that. But there’s a step further you could go and that’s step when you’re looking at trying to really drive recommendation. And what I’ve learnt about that is that you are creating an experience that that customer has never seen before. And you’ve literally redefined their expectations of what the product is. And that’s what you need to aspire to do in order to move NPS. So let’s take that down into practically what does that actually mean. So what does that mean in the context of TransferWise in a money transfer product. While listening to customers we hear they recommend us for two broad sets of reasons. There are some very rational reasons they talk about when they’re telling people to use TransferWise. And emotional ones too. On the rational side. They tend to describe the product. And the emotional side. They talk about our mission or what we stand for. I stopped using the word brand on that side because marketing people get very confused with that. So on the product side the words they use to use TransferWise because it’s fast because it’s cheap because it’s easy to use so price, speed, ease of use. We can measure all those things. And we have teams orientated around trying to make it faster, make it cheaper, making it easier to use. What we find when we measure it is that in order to get advocacy we need to be 10 times better than the alternative in the market. So banks typically charge 5 percent. We charged 4.8%. You might use this but you wouldn’t tell your mum about us right. So banks are at five and we’re at 0.5%. Actually 0.35% now. And if you’re sending a thousand pounds you save 45 pounds. So if you do that four times are getting close to saving 200 pounds which is worth telling your friends about with speed. Thirty percent of our transfers are actually instant now. So they clear instantly and again that’s 10 times better experience than you get with almost any bank out there today. The fun thing here, coming back to the mission side, is that there’s nobody yielding price internally. We’re not dropping 1 percent on price and seeing if we get 1 percent more revenue because if we did that we’d be a bank. And so we came up with this idea a couple of years ago that we’re a mission driven startup. And the mission is to make the world’s money move at the touch of a button instantly for almost nothing. So you take price speed ease of use all the way to the theoretical maximum. And the organization is a catalyst for making that happen. Now we thought our customers didn’t care about that mission. We thought they just wanted cheap money transfers. And then about three years ago we sent this e-mail out to our customer base. And if you look at this e-mail it’s got no imagery in it. It’s got no discounts in it. But this is the best piece of marketing we had ever done up to that point. And all it did was talk about our mission. And our customers forward this e-mail on and we acquired more customers from this e-mail than anything we’ve ever done previously and that’s the first time we realized that this mission that was an internal motivator for us and the team actually resonated with our customer base as well. And in some places they want to help us achieve that to. So we talked a bit about word of mouth growth there and I kind of explained the recipe we found is having a 10 times better product and being clear on your mission and explaining that as clearly as you can to your customers. You put those two things together you end up with word of mouth growth. Simple right.

So there’s one question like “How do you build a 10 times better product?”. So I’m going to share a little bit now to go into a bit of detail around that because that is definitely probably the hardest part of the puzzle. So I’m going to talk about two two little stories. The first one is about what happened to us in Singapore. We have an office now which in Singapore with 80 people in. And three years ago prior to setting up the office we went to the government of Singapore saying hi we’d love to offer the people of Singapore fast cheap money transfers. And they said sure thing but you’re gonna have to meet every single person prior to transferring that money out to Singapore. We’re like meet what do you mean meet them face to face? Okay we’re familiar with global anti money laundering laws and FATF and you don’t need to do that like in Australia or in the US in the UK in Europe in Singapore you’re going to meet everyone otherwise you’re not getting a licence. And what happens here is that most at this point most money transfer companies go cyanara Singapore and they move on to another country because it’s too hard to get to work. What happened with us was Jack from a verification team flew out to Singapore and he started verifying people. So to be clear the experience was shit from a customer perspective! So you went through you downloaded this app it said cheap money transfers. You went through the app and you got to the end and it said book an appointment to see Jack. Jack’s a really nice guy but still you had to get all your papers go to the office meet him get verified. I think over the course of a year something like 800 people went through this process in order to get access to the product. But the muscle we built was that as customers complained we told them not to complain to us but to complain to the regulator. Because at the end of the day payment systems around the world are owned by governments who appoint regulators there and governments are usually beholden to the will of the people. So we created a big campaign in Singapore to update their anti-money laundering laws for the 21st century. We got our customers to lobby for it. We put a bunch of soft pressure on them as well. And now nine months ago we got the world’s only licence to do online verification in Singapore. So, 10 times better product than what’s available previously and quite interestingly our customers helped us achieve that. One more example just to bring it to life – Bank of England. So when we started in the UK we had a bank account at Barclays. And Barclays, every time we received a payment or did a payout was charging us about £1.50 a go. Now we’re on a mission to make price go to almost nothing and speed to instant. So I started digging around it and it turns out that the way money moves in the UK between banks is through a system called Faster Payment Scheme, FPS. Which basically means for big clearing banks have bank accounts at the Bank of England. And everyone else has bank accounts of the four banks and whenever anyone makes a payment it all goes through to their bank accounts at The Bank of England and they just literally swap with each other and then pay out again. So when you figure that out you kind of realise we need to get a bank account at the Bank of England. So this was four years ago, when we we’re moving like fifty thousand pounds a month. We had a few thousand customers and 40 people. And it took four years of lobbying working hard with the government talking to the UK government around how through opening up access to the underlying banking infrastructure you’re going to enable more disruptive innovation and kind of transform the financial services industry in the UK for the 21st century and through that we ended up creating what’s called a regulatory sandbox with the FCA, which enabled us to have trial accounts at the Bank of England and today every single payment going in and out of the UK doesn’t touch a bank and goes straight through the Bank of England. And that is a 10 times reduction on price since our early days and gets us closer to instant free payments. 10 times better products. Again.

So how does it scale? I won’t talk about this too much but just to try to bring to life a little bit around how the thousand people at TransferWise work. So. Everyone at TransferWise works in a team and each team is focused on one of the customer problems we need to solve in order to achieve the mission. And it turns out there’s about seven of these problems. So we need to be regulated in every market around the world. From the moment we need to have access the payment system as well to have a team doing that. From the moment someone tells you about TransferWise to the moment you use us you need to be onboarded, you have a bunch of questions that need to be answered, the payment needs to be fast, the pay in must be fast and cheap and the payout as well. So teams on that. We need to verify who you are whatever country you are in around the world. And we also have a couple of teams and emotions so a team on trying to understand the drivers of worry through the money transfer process and reducing that. And a team and trying to increase evangelism through the process as well. How many friends do you tell.

So in summary building a high growth sustainable business is slow hard work to focus on solving these really hard product problems. Solving these takes time but in solving them you create huge amount of value for customers which translates back to growth. So I’m just going to now talk a bit about something new I’ve been thinking about which is increasingly having to do which is having to explain this to investors. And so I’m going to try talking through the economics of a mission driven business. So the way it works is, so say a consumer goes along to the bank and says I want to transfer two thousand pounds to Europe. And the bank says well that’s going to cost you 5 percent. Well they actually hide the 5 percent in the fee in the exchange rate but broadly it’s going to cost 5 percent. Now the fun thing here is that we’ve been watching banks and how much they charge people. And sometimes they charge 7 percent. And sometimes they charge 3 percent. What’s really going on is they’re tweaking their price to try to extract as much value as they can from their customer base. Now this isn’t an evil thing to do. This is 101 management school. This is how you create shareholder value. And this is what any investor will ask any company to do for him. If you’ve got a customer base you’re trying to grow your EBITDA, your profitability, strategy evaluation. And obviously if you can maximize the amount of profit you can extract from your customers then you’re going to create a very valuable company and if you’re not gonna do that then you’re gonna have to explain why you aren’t doing that as well. And I think this myopic focus on short term profitability and short term value creation is why banks and the financial services industry has got stuck. So let’s just contrast that a little with what we do. So remember if I’m sending two thousand pounds to Europe I am going to be spending one hundred pounds with my bank and getting this slow inconventient service for it in return. So with us up to recently we charge you 0.5%, not 5% and two months ago we dropped that to 0.35%. And I hope one day to 0.2% although this is very different to what’s going on with the bank. So we’re dropping our prices. So the logic behind the price drop is we earn a margin. I said we were profitable. But we drop our price as fast as we can drop our costs and we drop our costs by investing in product and solving those problems I put up earlier. So we’re dropping price and in doing that we’re charging only £7. And an unnamed investor said to me you know what Nilan, I’ll be really sad if one day we wake up and realize we built this huge business moving 10% of the world’s money and we could charge everyone double and I could have made double the amount of money. Right. And I was thinking like how. OK good. Good point. How do I respond to that. So I’m trying to talk through how a little bit around how I responded to that. So turns out in economics there’s a word for the £93 savings of value that we’ve moved from banks to consumers. And it’s called a consumer surplus. So consumers now are getting £93 more value because the banks are trying to extract as much as they can. And this consumer surplus is effectively what the investor is asking us why don’t we attack and try to take some of it. Well the fun thing I’ve noticed with consumer surpluses is that they turn into that is that customers know they exist and they turn into this magical thing I call goodwill. And so those customers know that we’ve done that. And they actually turn that goodwill into telling people about TransferWise, into trusting us into helping us achieve our mission and in doing that you create this dry and defensive moat around the organization which a bank has never had. And remembering back that again from business school that your valuation is a function of your growth rate and your profitability. If your customers are driving your growth and you’re maintaining your profitability then this will also turn into economic value as well. And so you end up with a trite aphorisms like create more value for your customers than you capture and the consumer surplus turns into consumer goodwill and profitable growth.

Cool. So that was it. I went through marketing and early stage startups, what I’ve learnt about that, word of mouth growth at TransferWise, and a little bit about the economics. But before I wrap up I just want to talk a little bit about the 70 people that we have at TransferWise working in marketing and they do a really good job. So I’m just gonna just talk a little bit about what they do and what they’ve taught me about marketing. So when I joined four years ago I was the marketing person at TransferWise and the way I used to run the teams was pretty simple, like every three months I say we need to find double the number of customers that we can for the same or lower CPA. And that’s why I was running the marketing myself. And then after a while it stopped working. And then my team sat me down and told me I was doing it wrong and that the right way to do it was to ask yourself the question “What is the problem marketing is solving”. So what is the problem marketing solving and I said Well the problem marketing is solving is making people aware that there is a fee hidden in the exchange rate, and our role whether in the affiliate marketing team the SEO marketing team the Facebook marketing team is to make people aware of that problem. So we’re going to switch from putting giant click me banners on high volume websites to finding blogs which customers trust and talking to the editors about the fact there are fees in the exchange rate. And as a consequence they will naturally write about that. And customers will find us. And that’s been tremendously successful for us. One of the other things we did was probably the biggest marketing campaign we’ve ever run. The team realized the best way we could market TransferWise was if we changed the law and made it illegal for banks to hide the fee in the exchange rate. So they ran a petition we had forty five thousand people sign it. We went to the Houses of Parliament and we have a piece of legislation that made its way through Parliament in order to force transparency around the exchange rate. A couple of other just quick examples, just to bring to life how the team actually do this in practice. So we have a viral growth team which is like a refer a friend thing that looks something like this. You refer three people, you’ll earn 50 quid. And that was a team I actually started myself. And what happens after four years of running that team is you’ve tested everything you possibly can. So you tested giving away cash, tested giving away chocolate, we tested whether who gets the cash. We tested everything. And the team actually ran out of things to test. And they came up with this quite genius idea building on some of the stuff I was talking earlier. So this is the email that we send a customer when they complete a transfer. You can see at the very bottom that tells you how much money you saved versus your bank. What this refer a friend team noticed is that people believe they save money with TransferWise but they didn’t believe that number. So they spent about a month iterating what this email looked like and ways of talking about the savings and doing things like this until people got there was a fee in the exchange rate and believed they actually saved that amount. And when they started pushing these two things together they saw a 700% increase in the invite rate. This helped me understand part of the role of marketing is marketing the product. And helping people understand that value that you’ve created through mechanisms like this. One other team I’ll just touch on before I finish up is the SEO team. So you think SEO, there’s no way they can take some of these principles and use that in SEO. SEO as you remember is the marketing you use to game Google and to turn up first in the results. Well it turns out turns out it does this stuff does translate there as well. So our customers don’t actually look for TransferWise, they’ll look for things like what’s Barclays exchange rate. Now if you look for what Barclays or NatWest exchange rate is you’ll find a page that looks like this. And this ranks pretty high like it’s on page one now. And what we’ve done is we’ve built comparison feeds to about 60 different banks. And we go through and do get quotes from those banks hourly on what their exchange rate is how much their markup is versus us. And sometimes the bank can be cheaper than us because they could be running an offer. And when that’s the case we direct our customers to go try out the alternative at that point in time as well. But that’s a really good example of what I call mission driven marketing where our team even our marketing team are passionate about the mission trying to drive transparency to the world of banking through helping customers become aware there are fees hidden in the exchange rate even if that means someone not choosing TransferWise in the short term.

Okay so that’s more or less it. We’ve gone through marketing in early stage startups word of mouth growth a little bit about economics and some final thoughts on marketing as well at TransferWise. So building a high growth startup sustainably turns out to be the same thing as creating value for your customers sustainably. Hope that kind of makes a bit more sense now and that’s more or less it! Got a bit of time for questions now.

Mark Littlewood: Questions. So the way I like to do questions by the way is kind of queue them up so that we get through them in quick succession so stick your hands up and I’ll direct mics accordingly. Okay.

Audience Member: I can see how your 10 times better than the banks which are appalling. What about the real competition of other cash transfer operations?

Nilan Peiris: So there’s two things about competition. One is they’re all very small. So one is remember 90/95% of the market is still with banks even in the UK. And so it’s great there’s competition because our competitors focus on slightly different problems slightly different routes slightly different products. And that’s great because it’s great for consumers. In terms of how I think about this that’s obviously what I would say from a commercial perspective the way I think about businesses is as long as we invest our cash flow into dropping price and making the product faster and better faster than anyone else does then no competitor can catch up with us. And as long as we execute well against that then we’re fine and the only the only risk we’ve got versus competition it’s just not going fast enough.

Audience Member: So the mission driven thing, 10X products and all of that seems really cool. But would you agree that it can be afforded only by, well, bigger companies with much bigger funding, so you have to raise a lot of money to afford that. And with that would you agree that you can afford that only at some stage so it started with two people just transferring money. So what would you advise for smaller indie hacker software teams that didn’t raise millions and didn’t have such growth.

Nilan Peiris: Yeah so a couple of things. One is that if you could go back in time and not raise as much money we would totally not raise money. So that was the slide I glossed over. There came a point when we couldn’t raise money anymore about two years ago and we had to get to profitability fast. And we ended up dropping half our spend, 10% on our users and only 1% on revenue. We could have done that two years previously if we hadn’t raised the cash. What ended up happening was we ended up getting distracted by the money we raised in thinking about how to spend it. So you end up with this slow organic way to grow through trying very hard to understand am I building a product that’s much much better than this customer has seen previously and are they telling people about it. Building the product takes a while but the growth takes a while because each customer comes in and uses the products and then they tell someone and then that person comes in. So it’s a much slower organic growth process but that’s the underlying growth rate in businesses and you can definitely go and do marketing tests and run marketing in the short term that gives you a short term spike. But underneath it all you will revert always back to that. And basically what I’ve learned with early stage startups is try to focus your efforts on that because that’s all that matters in the long term.

Audience Member: So do you think that this is also going to work for a B2B focused business?

Nilan Peiris: Yeah that’s a good one. I see. We are actually a B2B focused business now. So 20 percent of our growth is now from businesses and from banks using TransferWise and soon it will be half. And definitely we went on the same journey every B2B business went on which is you start off by hiring a sales team and the sales team go and bring in sales and then you realize the product doesn’t work for those sales ends. But the principles we had were exactly the same. So we have banks that are dying to use us to take our product at 0.35% and to charge 6% on top of it. And we had to say no to that and that’s the short term growth that’s there that we know is there, but we’ve had two banks now sign at showing the 0.35% rate and the TransferWise brand to their customers. So I think it does work for B2B, I think it’s a much slower growth cycle than you typically see if you get a sales team and instruct them to sell then you definitely will sell something. But yeah I think you take the same principles there as well.

Audience Member: The things you are seeing at the very beginning about the founder’s story sounded to me like a typical anti money laundering thing you transfer money here you transfer money there. How did you get away from that?

Nilan Peiris: So obviously we’re not illegal. So there is something called Havilah banking in the Islamic world which looks exactly like trans highways where you have somebody in Cairo and somebody in Istanbul and you just pay money to each person and they pay out either end. So we think of TransferWise as a legal version of that because that has no anti money laundering checks right. So for us to have a license in the UK we need to make sure that we’re not financing terrorists or criminals. And so when somebody pays into TransferWise we do a bunch of checks, obvious ones or whether they’re on terrorist blacklist and stuff as well as non obvious ones in terms of looking for potential fraudulent usage etc.. So yeah we do exactly the same things as banks do with that regard, just cheaper and faster than they do it.

Audience Member: Can you speak a bit to the sort of frequency and usage that you see from your customers and the lifetime value that you’re seeing. And if that’s an area of focus in terms of levers to increase.

Nilan Peiris: Yeah yeah. So it’s the frequency the average is about 10 times a year. And people on average transferring over a thousand pounds but averages mean nothing. It’s quite typical when a new product manager joins TransferWise that they want to move the repeat rate or move frequency. So it’s more interesting when you look at the reasons why people are using us. So I think it’s about two thousand people last month bought a house and used TransferWise in Europe say. They’re not going to buy a house next month! So frequency doesn’t work that well. So really it’s around understanding the use cases people have. Some people have highly frequent use cases, for example people salaried in euros living in the UK where they need to transfer every month through, and just making sure that we are attracting all those building the features to switch those customers to us

Audience Member: I’d love to hear more thoughts around pricing and dropping prices. So our customers definitely tell us that they would love us to be cheaper. We do have people you know saying they’re leaving because we’re too expensive but then we look at that math of how many more customers we would need to get for a cheaper price. Can you kind of share some thoughts on how to figure that out.

Nilan Peiris: So it depends a lot on industry right. So we have ultimate commodity like money you can’t say this is high value money so I’m gonna charge you more for it. People just aren’t going to buy that. So if every time you move money a little bit disappears people notice that bit disappearing and therefore we have to figure out how to make as little as possible disappear. There’s not many industries that where people are so conscious of how much it costs. The second point around understanding the tradeoff between dropping price and how much growth you get off the back of it. So we don’t do that because it would paralyze us. The moment you get into a) trying to set up a test to do that it’s fiendishly difficult and b) trying to understand the incremental value that you’re going to get through doing that, you’re going down this path of what I talked about earlier – extracting as much money as you can from your customers. So you need to make a strategic decision on whether you think price and value is something you’re going to compete on. You invest heavily in driving your unit cost down and then you’re going to drop price as that happens. And you will hear that if that’s important to you as your customers should be telling you that’s important to us. And therefore you invest the money in that way. Now as long as your volume is growing faster than you’re dropping your costs and even with us our volume is growing faster than we dropping our cost and it’s very hard to drop costs, then you will make more cash in the short term. So you’re not losing you know eroding your cash that you need to pay everyone’s salaries and doing that. Makes sense?

Audience Member: Okay great. But transferring is just one thing. Do you have other products, do you have joint accounts for families, do you have credit cards that are cheaper to use everywhere?

Nilan Peiris: That’s a good question. So the thing is with all those problems we don’t know how to solve them. So I don’t know how to make credit cards that costs nothing but give you lots of let you borrow money. That’s a pretty hard problem to solve. Or even a domestic bank account that’s so great my dad would switch to using it instead of Barclays. So our Northstar metric is cross-border volume. And it’s a huge market and we’re building products and features that enable customers to switch their cross-border volume to us and we think we can make all the world’s cross-border volume move for almost nothing. And that’s a big enough task for us.

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