Ed (00:04):  

I’m Ed Cowan, and this is Scaling Up.

Kristo (00:14):

We were growing very fast from, you know, hundreds of people to kind of now thousands of people, of course, along the way, you know, we had advice for some early investors of “hey, you should really have some, like, senior bankers on your board or in your management team kind of who know done this before”  but then the alternative or the kind of the counter argument here is that in the product and the experiences is the function of people so if we hire a large number of bankers, we’re going to get a bank. That’s not what we started to do. Another bank is not a solution. We’re building something new and we’ll see what it’s going to look like, but we’ll do it from the first principles.

Auto (00:33):

This podcast aims to educate and inspire by telling the stories of great growth companies as told by their CEOs and founders. TDM is an Australian-based investment firm that invests globally in fast growing public and private companies. For more insights, visit our website, tdmgrowthpartners.com.

Ed (00:56):

My guest today is Kristo Kaarmann, the co-Founder and CEO of Wise, the fintech powerhouse that’s fixing one of the most broken systems in the global economy: how money moves across borders. Wise simply started as a personal workaround, with Kristo trying to move money between Estonia and the UK, where he soon realised that international payments weren’t just slow and expensive by accident. They were structurally opaque, riddled with hidden fees, and built on systems that hadn’t meaningfully changed in decades.

(01:27):

From that experience emerged a very simple idea – and one that became Wise’s mission: Money should not have borders. Unlike most mission statements, though, this one actually constrains how Wise operates. It shapes pricing, product design, technology investment, culture, and even how the company thinks about its bottom line, with Wise consistently using its scale not to expand margins, but to collapse prices for customers. Underneath the product, though, sits something much deeper: a global payments infrastructure built directly into domestic payment systems, sophisticated treasury and ledger technology, and long-term relationships with regulators that have become a significant competitive advantage rather than a constraint.

(02:12):

Today, of course, Wise moves tens of billions of pounds around the world each quarter, operates critical financial infrastructure across dozens of countries, and is increasingly becoming the underlying platform that other banks and fintechs themselves rely on. Wise is one of my favourite companies, both as a consumer in love with their product, but also as an admirer of the incredible scaling journey both Kristo and Wise have been on. I hope you enjoyed this episode with Kristo Kaarmann, the co-Founder and CEO of Wise.

(02:48):

Kristo, welcome to Scaling Up. I’m incredibly excited to bring the Wise story to life simply because I love the business as a customer and that has set me up to get to appreciate the quality of the business that you run. I think it’s probably worth setting some context up front and I’m sure the founding story will come out in more detail, but Wise really started as a personal workaround for you and your co-Founder, Taavet: he lived in London and got paid in Euros, you worked in London but got paid in pounds and had a mortgage in Estonia, and so you needed to pay that in Euros and you figured out a way to exchange money between yourselves fee-free; to have Taavet put Euros in your Estonian account and you topped up his UK account at a real exchange rate. And I guess from this, very simply, TransferWise at the time, now Wise, was born as an idea and a mission was sparked inside of you that money should have no borders. It should be instant, convenient, transparent, and ultimately, it should be free.

(03:49):

And so more than any company I’ve probably come across in my time, this maniacal focus on the mission has shaped how you think about the product and the culture and the operating principles. And so maybe we start with this mission, and I’m sure a lot of the conversation will flow from there, but where does this mission and purpose come from? And I’m sure you’d love to give more context on the business as well.

Kristo (04:12):

Awesome. Fantastic to be on your show. So let me maybe even track back a little bit from the story as you told it. I have to say I wasn’t smart from the outset. So before we get smart, I was pretty silly. So my first attempt, really, to get money back from UK to Estonia, I was going to a bank. And back in the day, there was also some form filling and all of that, which hopefully now in most places is not an issue. But I did a transfer from my HSBC account in the UK to my account in Estonia. And the money was kind of gone somewhere for a few days, but then something arrived in Estonia but to my surprise, the amount was much smaller. So, 500 euros went missing somewhere. And I was very surprised, so I called up HSBC in the UK, “hey guys, did you make a mistake?” and I called up the Estonians, “did you make a mistake?” No one made a mistake, like everything is by the book. And then I started to kind of realise that although HSBC charged me like an international transfer fee of 15, 20 pounds or something like this, what they didn’t tell me is that they made up an exchange rate.

(05:22):

So rather than taking the real exchange rate that I was looking at on Bloomberg or even Googling, they took that and had added another 5% on top of that. So the money that I’d been earning, 5% of that was just gone in the instant of sending it across to Estonia, and that was an interesting feeling because 5% is not the end of the world – it’s quite a lot of money for a young 26-year-old – but it was quite embarrassing. It’s quite embarrassing that I fell for this. And then I kind of talked to other smart people and kind of looked around and realised that that’s actually how everything works. Like whenever you move money across borders, it’s not just an HSBC, it’s every single bank in the world, every single broker or institution who was set up to do that, that is their business. And looking back, I think the crazy thing is that they didn’t tell me they were going to charge me 500 euros for it. So anyways, that was the kind of the preamble to what we describe as the founding story where I then started thinking about, “I don’t want to do this again, so what can I do?” And I had indeed friends in London who were doing the kind of the opposite trade, so we started a little, what was eventually a Skype chat, if you remember that, so we had a Skype chat of some Estonians in London and we were kind of figuring out how could we move money between Estonia and London without going through the banks.

Ed (06:55):

Fascinating. And in terms of the mission itself, there must be something deeply rooted inside you. Did you feel that it was unfair or unjust or it was just a problem to be solved?

Kristo (07:08):

I think it’s just a problem to be- so, there’s a couple of components to that. I think generally the fact that the money cross-border works terribly – or at least at that time, worked really terribly – compared to money domestically. So if you think about it, from an engineer’s perspective, it’s nuts that money going from London to Paris is infinitely more expensive and slower than money going from London to Aberdeen, which is much further away in a harsher climate. So, this didn’t really, from an engineering perspective, make any sense. I think the component that is unfair or unjust is that we let banks get away without telling people what they charge. So I think generally in financial services, this is what needs to be regulated, that banks should be allowed to charge whatever they like, but they should be transparent to their customers.

Ed (08:03):

And was there anything in your upbringing growing up in Estonia that, you know, in my mind, maybe this is fanciful, but, you know, Eastern European block, maybe there’s this lingering thought that transparency and freedom was interwoven into your value set, perhaps, as a man growing up.

Kristo (08:24):

Yeah, indeed. I think you’re looking for a kind of an historical connection. So both my co-Founder and I grew up just through the time as the Berlin Wall fell and we got our own country back, which had nothing. So I think the interesting thing that is kind of hard to fathom is in early 90s, Estonia didn’t have any business – it had zero banks to begin with, there wasn’t even such concept. And all of the businesses had to be invented. So there’s a generation ahead of us, so not us but between us and our parents, anyone who had working arms and legs will become entrepreneurs.

(09:03):

And for sure, there’s an element of inspiration for us, if we do have a better solution to this than all these huge banks do, why shouldn’t we try? And the whole story of then TransferWise started with really the hypothesis of: what if this is not just an Estonians in London problem? What if it’s also the Australians in London problem and maybe even, you know, French and Americans and Canadians? And then we kind of found out that it’s also the Brits everywhere in the world problem. So the first years of TransferWise were pretty fast expansion just because we kind of realised that it’s not just us. There’s a lot of other people who’ve kind of come up with their own little solutions here and there. And this is something that if we’re managed to institutionalise, it might solve a pretty big problem in the world.

Ed (09:58):

I was certainly one of those Australians who worked in London, for a period of time, that solved the issue very much how you and Taavet did it: with a friend who was moving to London and I was moving back to Australia. I guess the purpose of that last question was something caught my eye in your culture handbook. And that is the purpose or framing of the values is that this isn’t a job, it’s a revolution. And it made me think that the business is just a means of doing what you’ve just described in line with the mission, and all the standard business principles are applied, but they’re really re-prioritised. You know, customers are first, it has to be at the heart of that mission, and shareholders benefit along the way. And Wise has saved, I think, almost 2 billion pounds in foreign exchange fees last year alone. I mean, it’s an astronomical number. So I guess when a leader uses the word, “we’re a revolution”, people can hear different things. I’m just curious as to what your intention was or what did you want people to hear?

Kristo (11:00):

So the origin of those statements that we could have formulated as some of the principles, we did this about three or four years in, building the team we were – I think at that time, maybe 50, 100 people – and it got quite useful to set a kind of a clear understanding of why we’re doing this. But you shouldn’t take that, in this particular one, you shouldn’t take it as a kind of political statement or political narrative. This is more about reimagining how money should work cross-border from the first principles. So it’s not like, oh, you come in to do something that you’re told to do, your job is to figure out how that should work. So that’s when you kind of think of revolutions as well, it’s like, okay, the revolution or uprising is one thing, but then you kind of also need to figure out how that thing works afterwards.

(11:40):

So that’s been kind of one of the guiding principles and give you some anecdotes around that: when we were growing very fast from, you know, hundreds of people to kind of now thousands of people, of course, along the way, you know, we had advice for some early investors of “hey, you should really have some, like, senior bankers on your board or in your management team kind of who know, have done this before” but then the alternative or the kind of the counter-argument here is that in the product and the experiences is the function of people so if we hire a large number of bankers, we’re going to get a bank. That’s not what we started to do. Another bank is not a solution. We’re building something new and we’ll see what it’s going to look like, but we’ll do it from the first principles.

Ed (12:42):

You’ve certainly enacted all your operating principles from first principles. Let’s touch on the product itself, because it is integral to how this mission is being enacted. And I know internally sometimes you talk about mission zero, which is ultimately cross-currency transfers should be free. And so the product itself, it’s one of the great consumer technology experiences you could ever imagine. Money moves in seconds, not days, as you previously described. Fees are fully transparent, they’re itemised, you always get the mid-market rate, and it’s got this amazing user experience that any great consumer technology should have. This shows up in many ways. I think 70% of your new customers come from word-of-mouth, which is just incredible. So I’m curious what product decisions, I guess, have served the mission in hindsight, examples of some trade-offs that you’ve had to make given the practical constraints of the regulatory environment you operate. I’d just love to hear how that product in your mind comes to life to enact the mission.

Kristo (13:49):

Sure. So maybe I’ll try and answer almost two different threads here. One is you can refer back to mission. I want to get clear that what we’re doing here, we really want to be very transparent with everyone in the company and around us. Why are we here? Why are we doing this? So I think everyone joining us as well, so through the interviews, it’s very useful to know what’s their objective, what do they want to do, what do they want to achieve. So from the very beginning, if we want to solve cross-border payments, it kind of sets up all the important metrics.

(14:25):

So the most important thing is how much of the cross-border payments do we serve, how much we’re able to save for consumers, how fast these are- so we started maybe now six, seven years ago tracking what we call the share of instant payments across the hundreds of thousands a day that we put through, and it’s now, I think last we reported, it was about 74% of all the transactions arrive in less than 20 seconds on the other side of the world. So it’s an amazing journey. But the awesome thing is that these metrics are also aligned to customers. So these are the things that the customers care for, and then these are the things that we internally care for, and everyone’s aligned, everyone’s very clear on what we’re here to do, and that helps us really with the efficiency of scaling. So how do we get as many people working towards this common goal, that’s very obvious to everyone, so that we don’t get in each other’s way.

(15:24):

I think a lot of companies have missions. Some people are clear why these companies exist, but it’s maybe not as clearly communicated as we try to do. So the why we’re doing this is really quite important for us. And then when it leads to these metrics, so what is it that is important for people when it comes to money, they wanted to be there immediately. I had long conversations in the early days with bankers and regulators, but if it’s there in the day, like who wants to be faster? So now I’m thinking back, it would be crazy to go to our customers and say, “hey guys, actually let’s make it slower. Let’s make it like 4 hours, not 20 seconds.” So this is one thing, the cost is the other thing. So in financial services it’s effectively a commodity. It should be, like money is fungible. This money is not better than that money so it is a commodity and that should get more and more efficient. Money should get more and more efficient to use. I think that’s happened over time as well.

(16:35):

And lastly, people care about convenience. So they really don’t want to- they don’t want to think about it. They don’t want to deal with their mind. They want this to work. So when we look at how the product has been set up, that’s all been driven by the things that we know people and small businesses value. The other realisation is also why weren’t banks able to do that? Or why did they struggle? And our learning from that has been: it’s not really that the banks didn’t want to have a good product, but they just never had the infrastructure to do so. And when I say infrastructure, the clever thing that we’ve done with Wise is, and as you did, so the money that you had in the UK was already there when your friend arrived, and his money was already in Australia. So you kind of don’t need to move the money. The money’s already there. And the other realisation that it’s very fast to move money around in Australia, it’s very fast to move money around in the UK, it’s just this connection point is the issue. So we ended up building now over the years an infrastructure in Wise that connects all the domestic instant payment systems together in a global mesh, if you like, so that it doesn’t really matter where you are in the world, if those two countries between which you want to move money have an instant payment system you’re very likely that with Wise you can use the money almost as domestically between those countries.

Ed (18:02):  

Yeah, it’s worth probably picking this up just for clarity. So you’re operating direct access to domestic payment rails essentially and integrating your own ledger and treasury instead of routing payments via corresponding banks, which would be the experience if I was using my normal banking service, hopefully not in the future, and will come to the platform opportunity for you. But the decision that you made around this infrastructure has built incredible long-term competitive advantage, and scale and technology has built infrastructure depth and, importantly, regulatory trust with it, so… very few people on a scaling journey build infrastructure and technology that gets stronger, not more fragile over time. I think you hear a lot of technology companies at some point in time either having to re-platform or there’s lots of technology risk, but in actual fact, as you’ve got bigger, your technology and infrastructure has got stronger.

Kristo (19:01):

That’s true. So I think the banking generally is a very local business. So credit is a local business. And tech, so if you think of the tech companies, that’s a very global business. So the world doesn’t need 2 Googles or two Amazons or two Ubers. Well, we do have some, like China has their own Google and the rest of the world has their Google, so tech is very global. So then we end up in this interesting place where the banks are very local, that tech companies are very global, and what we’re building is, by nature, hugely international. So we’re in this kind of interesting place where, from the platform side, we’re now giving banks this infrastructure that they will never be able to create themselves because they’re local businesses, they’re domestic businesses mostly, but we’ve created this international infrastructure that kind of links into Zengin in Japan and Pix in Brazil and NPP in Australia and so on and so on. And that didn’t exist before because no bank was really set up or motivated to do that.

Ed (20:11):

And I guess in my mind, the local infrastructure on the global technology has given you a chance to actually predict currency flows better. And in regards to your own liquidity, and you’ve been able to use machine learning around managing your ledger. And in actual fact, what this does is lower the cost and increase the speed of settlement. And so your advantage compounds over time, I would have thought.

Kristo (20:36):

For sure. We’re very much in a scale business. So some of these effects that you describe, they are effectively coming from scale so seeing so many different corner cases – for example, now we know that Reserve Bank of India shares their volume of rupees coming into India, which is, I think last year it was about 100 billion US dollars worth of rupees. And then when we kind of look at our own volumes, we realise we’re about 10 billion. So you kind of start realising we move about 10% of the world’s money into India now. And then obviously with that scale, we get the scale effects that none of the banks can really enjoy in that space, and then the scale effects help us, as you say, be a lot smarter in the way that we operate, the way that we build a product. But it also brings the economies of scale so the same tech can service larger and larger and larger volumes.

Auto (21:38):

You’re listening to Scaling Up with Ed Cowan, a podcast brought to you by TDM Growth Partners. Visit the website tdmgrowthpartners.com.

Ed (21:49):  

That’s probably a good segue to a topic I definitely want to talk about, and that is how you’ve used scale to what is known as scale economy shared. And you’ve really used this as a competitive advantage. And so this is an idea simply where the company systematically passes through the benefits of its increasing economies to the customers, typically in lower prices, not always, but certainly in Wise’s case, to fuel long-term growth and customer loyalty rather than short-term profit. And this obviously becomes self-enforcing. So you’ve chosen to use your scale economies to systematically lower price. And there are other examples of this over the years, be it Costco or Amazon. So I’d love your view on why this, sometimes this theory is maybe misunderstood, but I’m sure there’s been a whole heap of trade-offs that you’ve had to make, you know, pragmatically, in around trading off the short term with the long-term view that this is actually the best way to grow a business.

Kristo (22:55):  

So you’re right. We definitely have the approach where we recognise that as we increase the scale, the product gets better for consumers. But also don’t forget that every year, every quarter, we’re now also able to invest more, so the scale economies are shared. Some of the benefits, economic benefits, indeed, go to the consumers who bring us that scale. So this is a very powerful thing if you’re a consumer, knowing that if you bring your friends onto the platform, this is going to get better for everyone. And it does actually get better for everyone. But then on the other hand, we are also able to invest more, so we can bring out new features and make it convenient in new ways. We’re now holding quite large chunks of customer funds, paying interest, kind of way beyond what banks would pay on your current account. So these are kind of new things that we’re now also able to do for the consumers, but it also makes it enormously more valuable for the owners of the company.

Ed (24:09):

Without doubt, I think Wise is one of the rare companies where customers and owners, as you rightfully describe, not shareholders, long-term owners of the business can both enjoy the upside of that. I’ve actually heard you say, you know, the enterprise value of a company is merely a function of the value you create for your customers. And, you know, that equation becomes clear when you think about it through that lens.

Kristo (24:33):  

I think this is true not just for us, but for every meaningful company, they’re creating something valuable. That’s the reason why they’re valuable. And some of the value we create is just making this thing cheaper for people. And then in turn, it is also valuable for the company, for the owners. So it’s a fantastic way how clearly these things are aligned or how easily, let’s say, it’s aligned between the owners, shareholders, and the customers of the company.

Ed (25:06):  

Yeah, and it’s not a question of just cheap, as you said, it’s better. For instance, I’ve started using Wise as my primary bank account, given the interest benefit that you can get as opposed to all the bells and whistles that you think you’re getting with one of the domestic banks that actually never come through the system as you imagine. One quick topic I do want to talk about is I see a large and growing regulatory advantage, these licenses or connections into the domestic payment systems many times around the world are hard to get and increasingly so. And yet every time you open a new market, it actually gets easier for you. I don’t know, I think Japan might have taken four years to get your approvals, but as you gain the trust of regulators around the world, it gets easier to open new markets. And so there’s a compounding effect, I think, in terms of the regulatory and brand trust that you’ve built that also comes from the scale that you’ve now achieved.

Kristo (26:06):  

For sure. The amazing thing is that the regulators actually all want the right thing for consumers. So they were created to avoid the financial services entrepreneurs to take advantage of the unsuspecting public. We’re kind of fundamentally very aligned with regulators, but you’re right to point out that in order to operate globally in every country, we need to be able to work with a Japanese regulator as much as the Brazilian one, as much as the Canadian one, or the Australian.

(26:14):

So building up that muscle has been very helpful. But over time, you’re also right that as our customers start increasingly placing their trust in us, it’s quite a fascinating to think from when we made our first transaction 15 years ago to now where 13 million people and businesses are holding, what is it, about 20 billion pounds of their money in Wise, their trust is clearly increasing, but also the regulators seeing that, where our intents are and our actions are aligned with our intent. And as we get kind of better and better over time, of course, their confidence in us grows everywhere as well. So you’re right in that.

Ed (27:30):

In my mind, regulators would usually see that as systemic risk. And in actual fact, it’s gone the other way for Wise. They’ve been able to build this trust in your business to ensure that growth has not been constrained by geography in many respects.

Kristo (27:45):

And I think they see that we’re very well set to handle the risk or provide the utility that our customers expect from us reliably. So the reliability is what they really care about here.

Ed (28:00):  

And it’s not just the regulators that have seen this infrastructure and technology as reliable, it’s also the banks. And I’d love to just quickly touch on the platform opportunity and for listeners: essentially, the banks have worked out that your infrastructure is far better than the legacy systems that they’ve built on. And so they, in layman’s term, want to white label it and use that infrastructure for their own banking experience and their own customers. And so, you know, what started as a B2C company, much of this next horizon could well be a B2B opportunity where you’re selling your infrastructure to banks. So I’d love to hear about this evolution, maybe the lessons that have surprised you, the muscles that you’ve had to build as an organisation. It’s a different muscle, B2C to B2B. How are you thinking about this next opportunity for Wise?

Kristo (28:53):  

Let me maybe come back to where this started. So I’ll share a little story, how we got inspiration for what now we call Wise Platform. This story started around 8 years ago, I think, we launched in a small country called Hungary in Europe. And after a while, we saw there’s quite a lot of customers coming from Hungary, a little bit more than we expected. And of course, I asked them, so how did you hear about Wise, TransferWise back then, et cetera, et cetera. And then we found that some of them said, well, our bank recommended to use Wise. And we were really, really surprised as in why, how.

(29:35):

Then turned out that there was a small bank called – they’re owned by the AXA Insurance Group, and I can’t remember what their niche is, but they had one or two branches in Hungary, and their bread and butter definitely was not cross-border payments. However, their customers did need to make one or two occasionally. So they had this process where they had to come to the branch, fill in forms, and the teller would type into a blue screen. The money would often get missing somewhere, the customers were angry, the tellers didn’t know how to help, et cetera, et cetera, and they would have to charge a lot as well because obviously it’s a big cost to them.

(30:10):  

So the bank managers had themselves started using Wise, like you, and then they just told the tellers the next time someone comes in, to show them how to get a Wise account, how to set up a transfer, how to fund the transfer from their access bank account, and probably before they leave the door, the money’s already there. So it’s from Solve. So yes, we don’t earn nothing on this, but actually our costs are so much less and we have a happy customer, hopefully on the other side of it. So that was a bit of an inspiration. We didn’t end up doing anything with AXA Bank at the time, but then we started seeing the challengers kind of crop up in Europe especially. We have Monzo that have been really successful, N26 in Germany. And they started kind of thinking about how do we compete with these incumbents for main accounts? Because the challenge has always got like a side account almost first.

(31:10):

 And then they needed to be able to do everything that the big bank does. And they realised that if we’re able to have Wise built into our apps, we get a better experience and cheaper pricing. So we get we get a lot better than our incumbents so that became a bit of a competitive edge for the challengers that we first onboarded. And then over time, of course, larger and larger banks took interest in this infrastructure as they see their customers using Wise, but also they see their customers using Monzo. And that’s maybe even kind of slightly more alerting that they don’t, they don’t really want to get competed away by all of these new challengers who’ve gotten onto this new infrastructure. So that has indeed kind of led us to the place where now we have banks almost in every country. In Australia, we have UpBank or Up and Bendigo. Bigger names like Morgan Stanley, Standard Chartered, UniCredit are now moving some of their flows onto Wise Platform.

Ed (32:18):

The opportunity here is enormous. I think $120 trillion of cross-currency flows every year. Have you had to think about how the business transforms itself? I’ve heard you say the consumer app is the best demo app of all time in regards to the opportunity ahead for the platform. And so there must be some rewiring internally as to attack this opportunity.

Kristo (32:46):  

Indeed, we’ve set up the org to be able to support these really large banks, ranging from doing that in Brazil and doing that in South Korea and everywhere in between. So this does take a different skill set that we’ve set up in the org. But what’s amazing is that both our direct-to-consumer apps and the Wise platform integrations – turns out the end customer still cares about the same thing, so they still care about how fast the transactions are, they care how cheap they are – so the infrastructure that’s beneath both of those threads benefits both of those client groups. And it just adds more leverage that we get out of every investment, every next payment system that we integrate, more scale that we’re bringing onto the volume, there’s more scale benefits to be shared.

Ed (33:42):  

I think the ease to which the company has transferred those skills internally probably talks to the culture that you’ve built and how these teams have been built from a first principles approach. Wise has this deep-rooted belief around democratisation or autonomy inside the business, and it’s not framed as empowerment or flexibility, it’s framed as what’s the fastest way to get closest to the customer to make the best decision. So I’d love you to maybe go into how you’ve thought about scaling the culture, how you’ve operationalised it, because I know these small, autonomous, cross-functional teams are really at the heart of all the developments that Wise has enabled, be it either on the consumer side or on the platform side.

Kristo (34:29):  

Indeed, our Chief Product Officer at Nilan Peiris has this talk that has a punchline that product equals people. What he’s trying to say is that the function of what you experience using the app is a function of people who are building this app. So therefore, it is very important who are the people, why are they building this app for you? And I’ll bring it back to the mission a little bit. In order to be able to do all of these things that we talked about today, being able to build an experience for Australians and at the same time for Brazilians and expanding into all of these different segments that we’re now serving, it becomes so much easier when everyone knows why we’re doing this. And then it just really becomes the execution matter of how many things we can do in parallel, the better we know where we’re going, the easier it is to add another team. As long as we have these scale effects that we can invest behind, the easier it becomes to do more and more and more, and basically grow faster and faster and faster as the company. So it kind of links back to this original question you had on mission of “why are we being so- why are we talking about this so much?” Because we really want everyone to be clear on what we’re doing and why.

Ed (35:56):

How have you operationalised this specifically? There are lots of operators and founders that listen to this podcast. These autonomous, cross-functional teams have been deliberately set up, and yet as you’ve scaled, sometimes cultural pillars break, and yet this one’s got stronger and has enabled you to move quickly still at the scale that you’re at.

Kristo (36:19):

So maybe I’ll go back to when we started. So when we went, let’s say, from 20 engineers to the 50 engineers or 100 engineers, that was maybe the point where we had to really start thinking about the structure more seriously. And I remember at that time, we had to create the first of those autonomous teams. And the wisdom then was that we should create them for what customers want. We know that customers want speed, so we should have a team for speed. And we did. So the team was called Speed, and the other team was called Convenience. And these two teams, they could do anything across our code base to make our transfers go faster. Of course, they figured out that if we do better integrations, then that’s one way of doing this, if we’re very clever about all the internal checks that we need to do, that’s the other thing.

(37:13):

So they were very aligned with the rest of the organisation. We just knew that we had this group of people working on Speed. If we get faster, they’re doing a great job, if we’re not getting faster, then we need to go and help them. And the same with Convenience, that if we see the net promoter scores going up, then they’re probably doing a fantastic job. And so if we look through the history of the organisation, we’ve tried to keep it pretty tight with what the customers want and what we’re working on, and this to be pretty closely aligned because then that’s kind of reduces the overhead of project managing, or like, who does what or who gets the resources, who gets the budget, et cetera.It gets very clear on what is it that we’re optimising for.

Ed (38:01):

And in this kind of organisational structure, and I guess operating rhythm, the question needs to be asked, what does great leadership look like? I think I’ve heard you say leaders just need to hire great people, give them context and get out of the way. And in many regards that helps, but I’d be curious to hear your views on how you think about your role and your leadership team and maybe the first couple of layers of leadership in an organisation that really values autonomy.

Kristo (38:33):

Coming back to this “product equals people”, so we have people who are building the product, so that concept. Then if you think of the leadership, they’re the ones who kind of build the machine that then builds the product. So it sounds a bit fluffy, but a lot of what the leaders need to do is build the most efficient, effective organisation that is then able to build the product without getting in each other’s way, having really high standards, high expectations, and being really clear where we’re going. So it sounds easy, let’s give context and let people get on with it. Might not be that easy always to give that context. I mean, getting out of the way is also not always obvious when you have 6,000 people who all need to get out of each other’s way.

Ed (39:25):  

But I also know that you love executives that have the domain expertise that they can, in fact, add value, it’s not just about creating capacity for the organisation. If they need to be in the weeds, they can be, but they can zoom in and out.

Kristo (39:38):  

Indeed. So I’m happy to say that our CTO really has a way around the code base and can touch any part of the code if he needs to. He hasn’t needed to for a long while, but if there are projects that need attention or want help, then all of the levels of management must be able to actually do the work.

Ed (40:02):

I think a good way to finish is maybe looking forward, the future of banking and finance more broadly is definitely becoming more topical. Taavet, your co-Founder, wrote a blog I found in 2016 that was talking about, you know, after the Financial Crisis of 2008, there’d been a loss of trust and the future will be about the rise of the millennials, mobile internet regulation that actually looks after the consumer and not the banks, and all these things have come true. And so I’m interested in your view on a 10 or 15 year kind of view.

Kristo (40:51):

So there’s a realisation that many bankers have come to that banking is a technology business. Banks are – the ideal bank is a tech business, or at least a very big part of a bank is a tech business. There is a relationship business element as well, but a huge part of that is a tech business. There are going to be banks who take advantage of technology evolution and others who are going to be slower than that, but everyone will so I think I’m quite hopeful from the consumer perspective that banking just becomes a better and better commodity. We have to think about it less. It’s going to be cheaper for consumers, cheaper for small businesses. It’s going to get more competitive. I think that’s an important one that banking gets better when it gets more competitive; that means it gets more efficient. So I think this, definitely we’re on the journey, but I’m pretty optimistic to where it’s heading.

Ed (41:52):  

Yeah, and there’s no doubt, you know, Wise is now at a scale that it’s going to be very hard to compete with. The more competitive it gets in the marketplace, probably the more advantageous it is for Wise, given how you’re placed now at a certain scale and infrastructure.

Kristo (42:10):

True, I would add to this, that we’ve done really well, but we’re still very much in the beginning. Even in the consumer space, we probably serve only 5% of the market today, so there’s still 95 going to banks, so our work’s cut out for us.

Ed (42:27):

You’ve been a long-term thinker from the start, I’m sure that won’t change. Good luck on your revolution to change how money is transferred around the world. Thank you so much for joining us on Scaling Up, Kristo.

Kristo (42:39):

Thank you so much. Thanks for having me.