Wise, the fast-growing British fin-tech and money transfer firm, recently navigated regulatory scrutiny from European authorities regarding anti-money laundering (AML) controls. The review, conducted by Belgium’s National Bank (NBB), highlighted gaps in proof of address documentation for a segment of its customer base. In response, Wise proactively developed a remediation plan, showcasing its dedication to compliance and its customers. This incident underscores the balance between innovation in financial technology and adherence to banking regulations.

Background: Wise and Regulatory Scrutiny

Wise under review by the Belgian National Bank
In 2021, the National Bank of Belgium (NBB) undertook a routine review of Wise Europe following Brexit. The regulator identified deficiencies in AML controls, notably the absence of proof of address for hundreds of thousands of customers.

Company founded on principles of fairness
Wise, established in 2011 and listed on the London Stock Exchange in 2021, has consistently championed cheaper, fairer, and simpler international money transfers. While the firm’s rapid growth has disrupted traditional banking, this case highlights the need for a robust compliance framework.

Wise's Constructive Approach to Address Issues

Immediate cooperation with regulators
Wise responded to the findings by collaborating closely with the NBB to devise a comprehensive remediation plan. The firm’s swift actions demonstrate its commitment to resolving issues effectively while maintaining customer trust.

Customer engagement as part of the solution
Under the approved plan, Wise contacted affected customers within weeks to request proof of address. This outreach emphasized transparency and the importance of compliance in safeguarding financial systems.

Key Elements of the Remediation Plan

Freezing non-compliant accounts
To ensure full compliance, the plan mandated Wise to freeze accounts of customers who failed to provide the necessary documentation within the stipulated timeframe. This decisive action underlines Wise's seriousness about adhering to AML standards.

Focus on transparency and communication
Wise prioritized clear communication with its customers, explaining the regulatory requirements and the rationale behind the documentation requests. This helped to minimize disruptions and enhance user confidence.

Balancing Innovation and Regulatory Responsibility

Acknowledging the importance of compliance
While Wise’s innovative approach to money transfers has disrupted traditional financial systems, regulatory adherence remains critical. The company’s response underscores its understanding of the importance of robust AML controls to maintain trust and ensure long-term growth.

Regulations as an enabler, not an obstacle
Rather than viewing regulations as barriers, Wise has embraced them as an opportunity to reinforce its systems and processes, ultimately ensuring safer and more secure operations for its customers.

What This Means for Wise's Future

Enhancing customer trust
Wise’s proactive steps in addressing regulatory concerns highlight its commitment to customers and compliance, potentially strengthening its position in the fintech sector.

Setting a precedent for fintech compliance
This case sets an example for other fintech firms, demonstrating that innovation and regulatory compliance can coexist effectively.

Bottomline for Wise Customers and Wise PLC Investors

Wise’s response to the Belgian National Bank's findings showcases its dedication to regulatory adherence and customer-centric operations. By addressing compliance gaps swiftly and transparently, the firm reinforces its commitment to delivering innovative financial services responsibly. This proactive approach not only strengthens Wise’s market reputation but also sets a benchmark for the broader fintech industry.

Wise Records 55% Profit Surge in First Half of Fiscal Year 2025

Wise, the British digital payments pioneer, reported an impressive 55% increase in profit for the first half of fiscal year 2025, attributing this growth to a rise in customer base and expanded market share. The company’s profit soared to £217.3 million, up from £140.6 million during the same period last year. With a significant 25% jump in active customers and revenues climbing by 19% year-on-year, Wise is cementing its leadership in the digital payments industry. Despite regulatory challenges, analysts remain optimistic about its future performance and strategic investments.

Key Financial Highlights for H1 FY 2025

Stellar profit growth
Wise’s profit for the first half of FY 2025 reached £217.3 million, marking a robust 55% increase compared to £140.6 million in H1 FY 2024. This underscores the company’s operational efficiency and market expansion.

Revenue climbs by 19%
The company reported a revenue of £591.9 million for the period, up 19% year-on-year, driven by the growing adoption of its platform for international money transfers.

Customer base expands significantly
Wise achieved a 25% increase in active customers, bringing the total to 11.4 million consumer and business clients. This growth highlights the firm’s ability to attract and retain users in a competitive market.

Operational Strategy: Cost Management and Market Expansion

Cost efficiency as a growth driver
Gautam Pillai, head of fintech research at Peel Hunt, lauded Wise’s ability to manage costs effectively. The company’s direct connections to global payment systems and reduced foreign exchange costs have significantly lowered its cost of goods sold, improving profit margins.

Targeted profit margins
Wise reiterated its medium-term guidance for an underlying profit before tax (PBT) margin of 13% to 16%. While pricing reductions in the second half of FY 2025 may bring margins closer to the lower end of this range, these investments are part of Wise’s strategic approach to capturing greater market share.

Analyst Optimism and Long-Term Outlook

Positive analyst sentiment
Gautam Pillai expressed confidence in Wise’s financial health and strategic foresight. He noted that the management’s cautious approach to provisioning has historically set the stage for strong financial recovery and margin improvement.

Market positioning
Wise’s focus on operational efficiency and customer acquisition positions it well for long-term growth. Its ability to undercut competitors on pricing while maintaining profitability is a testament to its robust business model.

Regulatory Setback: CEO Fined by FCA

CEO Kristo Käärmann penalized
Last week, Wise’s billionaire CEO and co-founder Kristo Käärmann was fined £350,000 by the U.K.’s Financial Conduct Authority (FCA) for failing to address a tax filing issue. While this incident raised governance concerns, it has not impacted Wise’s operational performance.

Commitment to compliance
Wise has reaffirmed its dedication to transparency and regulatory compliance, emphasizing that such challenges will not deter its focus on growth and innovation.

Future Outlook: Balancing Growth and Profitability

Strategic pricing investments
Wise’s recent pricing reductions aim to boost customer acquisition and market share. Management has assured stakeholders that no further material investments in pricing reductions are planned in the near term.

Expansion opportunities
With a rapidly expanding customer base and increasing revenues, Wise is poised to strengthen its position in the global payments market. Its strategic investments in technology and infrastructure will likely yield sustained growth in the coming years.