Fintech start-up Atlantic Money, which claims to be up to 99% cheaper than its competitors, announced yesterday that it is expanding its fixed-fee international transfer service to businesses.
The company currently allows individuals to send up to €1m/£1m for £3/€3, making it far cheaper at the top end than competitors using dynamic fees that increase as more money is sent. Its business proposition is exactly the same, offering a free-to-set-up account with the same fees as the consumer offering.
Baid explains to GlobalData that it is Atlantic’s innovative backend that allows this competitive pricing: “We learned that you can exchange assets in ways that are really inefficient and also in ways that are really efficient. We started with efficiency from day one. That’s why you see us able to offer prices on average that are 10 times better than our closest competitor.”
Baid and his co-founder Patrick Kavanagh were both early employees at online brokerage platform Robinhood, and it shows. Robinhood’s original proposition was strikingly similar: zero-fee stock trading with no minimum account balance. In fact, Robinhood co-founder Vladimir Tenev’s words in an interview from 2014 are almost identical to Baid’s: “We realized institutions were paying fractions of a penny for trading and transactions”.
Despite its subsequent controversies, there is no denying that Robinhood transformed the stock trading landscape. Whether Atlantic can achieve the same for international payments remains to be seen, but the numbers look promising. It processed £160m ($203m) of transactions in its first year of operating, over ten times that of Wise, which it sees as its closest competitor. Atlantic did not disclose its transfer volume, though it has said this will change in the future.
Younger, but Wiser?
Despite the touted savings that Atlantic offers, Wise is often cheaper. Because of the flat-fee system, Atlantic is more expensive for transfers to Euro until around £700 (the exact number varies from currency to currency). At £5,000, Atlantic saves you €21.42; a notable amount for sure, but perhaps enough for a business to switch provider.
The real savings – the 99% – come at the high end. Atlantic is not shy about this, featuring a price comparison tool on its website and even featuring positive reviews of other payment platforms on its blog.
Wise is an older company, though also founded in London by disgruntled expats, perhaps unsurprisingly a common factor among many international payment companies. Its entry into the market in 2011 revolutionised international payments through its own low-cost transfers by utilising a peer-to-peer system, which circumvents exchange rates.
In simple terms, Wise operates two sets of parallel transactions simultaneously: A-B and C-D. A wants to send, for instance, GBP to B, who needs Euro. C, in the UK, is due to receive money from D, who lives in Germany. Wise collects A and D’s money, and then sends A’s to C and D’s to B, meaning there’s no need to transfer either Pounds or Euro into another currency.
This model, along with a lack of brick-and-mortar storefronts, allowed Wise to vastly undercut traditional banks in the sector and helped the company achieve an estimated $8bn market cap. Now Atlantic wants to do to Wise what it did to banks.
Baid explains: “You see us able to offer prices on average that are ten times better than our closest competitor. I’m not talking about banks. Comparing to banks is not interesting anymore. They were disrupted ten years ago at this point, so we compare ourselves to the best-priced competitor, which in most cases is Wise.”
“You won’t see us become a super app”
The company’s commitment to transparency shows confidence in its core product, as well as an unwavering focus. Baid has been vocal in the past about his feelings on so-called ‘super apps’ that try to integrate multiple services into one platform – and it remains so to this day.
“What you see a lot is that you have businesses that start out by offering one great service and then they want to offer 100 other services,” says Baid. “That’s solving problems for the company, not consumers. [They] don’t necessarily want all their money in one place.
“A lot of different financial services have different use cases and different usage patterns […] they don’t need to be under one roof. And when they are they get in the way of each other. They end up in a situation where I want to check my brokerage account but I’ve got these five other services that are taking up so much real estate and getting in the way. That’s what you want to avoid.”
To that end, Atlantic’s current growth plan is, much like its product, simple. More currencies to transfer to – it recently added the Indian Rupee, the largest target currency for international transfers – and more countries to transfer from.
“We’ve got this really strong foundational service, which is cross-border money movement, and we want to offer that to as many people and as many regions as possible, because it’s just broadly useful,” Baid says. “And we can do a better job than the people in those markets.”
Parallel to this is its move into the business-to-business sector, which accounts for 97% of the international money transfer market. By maintaining the £3/€3 fee, Baid hopes to convince finance departments to change their norms, something he admits is difficult: “They’re much stickier [than individuals] – once the business has picked up the service and it becomes part of standard procedures, they’re not going to move that easily. You need to really have a big step change to get businesses to move and we think we have that […] if you’re a business, you might be moving 50k or 100k, and that’s where we’re 50 or 100 times better than everybody else.”
If the company does decide to diversify its offering, it won’t be under the same app – or even necessarily the same brand.
“So you go build the [new] product, and on the front end, it looks slightly different, […] but on the back end we have a lot of the core systems, compliance and technology required to operate that financial service,” explains Baid. “We can leverage it to bring the product to market more cheaply and more quickly.”
Why not crypto?
PayPal, arguably the king of online payments, recently made headlines with its launch of PayPal USD, a cryptocurrency tied to the US dollar. It is one of many such ‘stablecoins’, with PayPal promising a 1:1 conversion between PYUSD and USD backed by fiat currency and cash equivalents. The coin has been touted as a “digitally native” stable instrument that will allow low-cost transfers both online and internationally.
Baid is unconvinced: “If you look at international money movement, what is the problem you’re trying to solve? You’re trying to get fiat from one place to another because fiat is what people want. Nobody wants to hold stablecoins, not in the mass market, and not among developed countries. They don’t want to have stablecoins because stablecoins aren’t useful. I can’t do anything with it that actually brings me value. So, then the question becomes, ‘what problem are they solving?’”
He suggests that, much as with super apps, the answer is problems for businesses themselves, not for customers.
“What PayPal is trying to do is solve a problem for themselves, which is how do we get relevant to Web3? If you’re like a large highly capitalised company like PayPal one of the things that you’re worried about – and PayPal’s not unique here – is getting disrupted. They’re staking a claim and saying look if Web3 gets big, we’ll benefit from it. If it doesn’t, we made an investment, investment goes to zero, whatever, we’ll move on.”
In a market riddled with high-tech solutions with limited use cases, service bloat and moonshot start-ups that go nowhere, Atlantic Money’s simplicity is like a breeze of ocean air. Despite the slick presentation and start-up bravado, the value proposition is in fact quite old-fashioned: we will move your money from A to B as cheaply as possible.
If Baid’s bets are right, the company could become a go-to service for businesses and consumers alike, leveraging a strong backend to become a player in broader financial services. If he’s wrong, the pinpoint focus may leave the company unable to adapt and vulnerable to disruption itself.