Wise has morphed into my 2nd largest holding after an initial buy at £10, followed by top-ups all the way down to £3.20, so I hope it's okay to add a few comments.
1 - I wasn't aware that Meta had moved into FX payments. In fact, I'm really surprised by this - I would have thought that the regulatory risks would put them off entering this space.
I hope you don't mind me asking, but do you have any further information on this?
2 - Visa risk.
One interesting comment from the recent Wise CMD was the company saying that there was nothing to stop other players doing what they do, but that they:
a) had first mover advantage;
b) could keep lowering their prices to force competitors to do the same (and therefore slow them down), and;
c) offer more services under one umbrella than every other player out there (e.g. B2C, B2B, etc...)
It was an interesting response.
3 - Digital Currency risk - thanks, I never thought about this.
I assume the risk is more on the value proposition of Wise rather than their due diligence proficiency (KYC and AML.) Presumably even with a Digital Currency you need to make sure you need to know who is sending/receiving the funds.
4 - Wise card usage made up 27% of underlying income last year, up from 19% just 2 years ago.
FX is down to 62% from 76% 2 years ago.
I personally believe that the expansion into other products, on top of the ever-cheaper FX proposition, will drive LT growth.
5 - On a similar note to the above, the #1 metric that I have been following for a few years is the Wise Account + Asset cash balance.
In theory if these go up, then all the other revenues should go up too.
FYI this balance was £21.5b vs £11.2b 2 years ago, and up 29% YOY.
6 - The reason there wasn't any interest income before 2023 is because there wasn't any.
In fact, Wise was losing money on cash balances pre-2023 due to negative interest rates.
7 - Kristo, the CEO, only has a controlling stake until March 2026. After this his B shares are effectively cancelled and he will lose voting control of the company.
8 - If the company isn't able to return interest to their customers like they want to, then the "underlying" metric doesn't really make sense in the long term.
So I personally prefer to use their statutory figures for now.
Statutory PBT should be £550m for FY25 vs a current market cap of £11b (plus >£1b of corporate cash)
That doesn't seem overly expensive with the current growth rates and I can only assume that I'm missing something obvious here.
Thanks for your comments. In particular, I wasn’t aware that the B shares are effectively cancelled after March 2026 (point 7). For some reason, Google’s Gemini deemed it not necessary to reveal this to me when I quizzed it on NotebookLM having loaded in Wise’s Annual Reports and Prospectus. In my view, this is further evidence that llms are incapable of fully replacing human expertise which is music to my ears, but I should have directly referred to the source documents.
Even though the cancellation of B shares will eventually diminish Kristo’s control, while he remains CEO he is able to pursue “Mission Zero”. But intentions and outcomes are two different things and so just because he wants to reduce Wise’s margins, does not necessarily mean he will be successful.
Your other points:
1) I said “the cross-border money transfer market is attracting” Meta, rather than it “had moved into FX payments”. I should have been clearer in my piece because you are right that they have not yet entered, but the following article is what prompted me to include the comment (and was linked in my original note):
2) I agree that Wise has a formidable and strengthening position which is why I said the competitive threat does not put me off. I said: “While these threats need monitoring, they remain in the distant future and in the meantime Wise’s position is growing increasingly defensible.”
3) Agree, I don’t see how using digital currencies would dispense with the need for AML/KYC requirements. However, given CBDCs would in theory forge a direct relationship between the user and the central bank, I guess KYC would be already effectively complete for anyone providing a service sending or receiving these types of digital currencies.
4) You might be right, the trends certainly support your view. I did mention, “perhaps other products such as the Wise Account would compensate for lost earnings” in the original article.
5) You said: “In theory if these go up, then all the other revenues should go up too.” I agree, but the rate of growth in total underlying income is pretty steady over the past few years as per my chart. Why shouldn’t this trend continue given the company is reducing prices to ensure profit margins remain between 13% and 16% (unless it fails to reduce margins of course)?
6) I know that low interest rates meant there was no interest income pre 2013. I wanted to provide a normalised view of the business because I assume that most of the time rates will be high enough for Wise to take at least 1%. More importantly, I wanted to model the trend in underlying income for the purposes of my projection.
7) See the beginning of my response.
8) You might be right that the company will fail to return interest to customers - this seems to be what the market is saying. My guess is that they will make at least some progress over time.
I did include next year’s forecast to provide an alternative valuation perspective in my piece which lines up approximately with your own figures, except I didn’t consider corp cash:
“I note that Stockopedia has £378 million profit after tax pencilled for FY 2026, which is based on 16 broker forecasts and is significantly ahead of my FY 2030 PBT figure.”
The question is: what will ongoing growth be after next year? If you take the message coming out of the company at face value regarding declining margins and “Mission Zero” then it seems to me that today’s valuation looks expensive. That was all I was trying to portray in the note, but I concede that you have a strong case for thinking that this won’t happen.
Thanks once again for taking the time to respond. As I said in the original note, I would like to own Wise again and your points (and another comment from someone else regarding the potential of the Platform business) are causing me to shift my stance on the fair value of the company.
To be fair to the LLM that you used, the Prospectus wasn't very clear about what happens to those B Shares and how Kristo's control would change, at least for me.
But the general consensus from speaking with a couple of funds managers (of which I am not one) is that these will be cancelled next year.
Thanks again for your initial post and your reply.
Yes, it looks exciting - particularly the recent deals with Morgan Stanley and Standard Chartered. Depending on underlying usage by these larger partners, this division could cause growth to really accelerate and blow my projection out of the window. As I said, I would very much like to own Wise, but would want to see evidence of a step change in growth in total underlying income to want to pay the current share price.
I too held and sold, too early. Its hold a niche position in cross border transactions and is used by many banks, it a large market where remittances are increasing exponentially worldwide Optimisly look a dip to reinvest
Hi Matt
Thanks for another insightful write-up.
Wise has morphed into my 2nd largest holding after an initial buy at £10, followed by top-ups all the way down to £3.20, so I hope it's okay to add a few comments.
1 - I wasn't aware that Meta had moved into FX payments. In fact, I'm really surprised by this - I would have thought that the regulatory risks would put them off entering this space.
I hope you don't mind me asking, but do you have any further information on this?
2 - Visa risk.
One interesting comment from the recent Wise CMD was the company saying that there was nothing to stop other players doing what they do, but that they:
a) had first mover advantage;
b) could keep lowering their prices to force competitors to do the same (and therefore slow them down), and;
c) offer more services under one umbrella than every other player out there (e.g. B2C, B2B, etc...)
It was an interesting response.
3 - Digital Currency risk - thanks, I never thought about this.
I assume the risk is more on the value proposition of Wise rather than their due diligence proficiency (KYC and AML.) Presumably even with a Digital Currency you need to make sure you need to know who is sending/receiving the funds.
4 - Wise card usage made up 27% of underlying income last year, up from 19% just 2 years ago.
FX is down to 62% from 76% 2 years ago.
I personally believe that the expansion into other products, on top of the ever-cheaper FX proposition, will drive LT growth.
5 - On a similar note to the above, the #1 metric that I have been following for a few years is the Wise Account + Asset cash balance.
In theory if these go up, then all the other revenues should go up too.
FYI this balance was £21.5b vs £11.2b 2 years ago, and up 29% YOY.
6 - The reason there wasn't any interest income before 2023 is because there wasn't any.
In fact, Wise was losing money on cash balances pre-2023 due to negative interest rates.
7 - Kristo, the CEO, only has a controlling stake until March 2026. After this his B shares are effectively cancelled and he will lose voting control of the company.
8 - If the company isn't able to return interest to their customers like they want to, then the "underlying" metric doesn't really make sense in the long term.
So I personally prefer to use their statutory figures for now.
Statutory PBT should be £550m for FY25 vs a current market cap of £11b (plus >£1b of corporate cash)
That doesn't seem overly expensive with the current growth rates and I can only assume that I'm missing something obvious here.
Thanks again
A
Hi Abtan,
Thanks for your comments. In particular, I wasn’t aware that the B shares are effectively cancelled after March 2026 (point 7). For some reason, Google’s Gemini deemed it not necessary to reveal this to me when I quizzed it on NotebookLM having loaded in Wise’s Annual Reports and Prospectus. In my view, this is further evidence that llms are incapable of fully replacing human expertise which is music to my ears, but I should have directly referred to the source documents.
Even though the cancellation of B shares will eventually diminish Kristo’s control, while he remains CEO he is able to pursue “Mission Zero”. But intentions and outcomes are two different things and so just because he wants to reduce Wise’s margins, does not necessarily mean he will be successful.
Your other points:
1) I said “the cross-border money transfer market is attracting” Meta, rather than it “had moved into FX payments”. I should have been clearer in my piece because you are right that they have not yet entered, but the following article is what prompted me to include the comment (and was linked in my original note):
https://fortune.com/crypto/2025/05/08/meta-stablecoins-exploration-usdc-circle-diem-libra/
2) I agree that Wise has a formidable and strengthening position which is why I said the competitive threat does not put me off. I said: “While these threats need monitoring, they remain in the distant future and in the meantime Wise’s position is growing increasingly defensible.”
3) Agree, I don’t see how using digital currencies would dispense with the need for AML/KYC requirements. However, given CBDCs would in theory forge a direct relationship between the user and the central bank, I guess KYC would be already effectively complete for anyone providing a service sending or receiving these types of digital currencies.
4) You might be right, the trends certainly support your view. I did mention, “perhaps other products such as the Wise Account would compensate for lost earnings” in the original article.
5) You said: “In theory if these go up, then all the other revenues should go up too.” I agree, but the rate of growth in total underlying income is pretty steady over the past few years as per my chart. Why shouldn’t this trend continue given the company is reducing prices to ensure profit margins remain between 13% and 16% (unless it fails to reduce margins of course)?
6) I know that low interest rates meant there was no interest income pre 2013. I wanted to provide a normalised view of the business because I assume that most of the time rates will be high enough for Wise to take at least 1%. More importantly, I wanted to model the trend in underlying income for the purposes of my projection.
7) See the beginning of my response.
8) You might be right that the company will fail to return interest to customers - this seems to be what the market is saying. My guess is that they will make at least some progress over time.
I did include next year’s forecast to provide an alternative valuation perspective in my piece which lines up approximately with your own figures, except I didn’t consider corp cash:
“I note that Stockopedia has £378 million profit after tax pencilled for FY 2026, which is based on 16 broker forecasts and is significantly ahead of my FY 2030 PBT figure.”
The question is: what will ongoing growth be after next year? If you take the message coming out of the company at face value regarding declining margins and “Mission Zero” then it seems to me that today’s valuation looks expensive. That was all I was trying to portray in the note, but I concede that you have a strong case for thinking that this won’t happen.
Thanks once again for taking the time to respond. As I said in the original note, I would like to own Wise again and your points (and another comment from someone else regarding the potential of the Platform business) are causing me to shift my stance on the fair value of the company.
Matt
Hi Matt
To be fair to the LLM that you used, the Prospectus wasn't very clear about what happens to those B Shares and how Kristo's control would change, at least for me.
But the general consensus from speaking with a couple of funds managers (of which I am not one) is that these will be cancelled next year.
Thanks again for your initial post and your reply.
A
Please don't shatter my hopium regarding LLMs!
Interesting write up Matt. I'm in this one for the long term. Any thoughts on the Platform business ?
Yes, it looks exciting - particularly the recent deals with Morgan Stanley and Standard Chartered. Depending on underlying usage by these larger partners, this division could cause growth to really accelerate and blow my projection out of the window. As I said, I would very much like to own Wise, but would want to see evidence of a step change in growth in total underlying income to want to pay the current share price.
I too held and sold, too early. Its hold a niche position in cross border transactions and is used by many banks, it a large market where remittances are increasing exponentially worldwide Optimisly look a dip to reinvest