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Wise: remittance disrupter hits targets, bolstering bull belief

Payments fintech Wise promises lower fees for customers and a compelling proposition for investors. It had been falling short on the latter while succeeding with the former. Shares were trading below the 800p starting price recorded at their UK direct listing in July.

Second-quarter results on Tuesday sparked a rebound for this would-be disrupter of the staid money transfers industry. Wise delivered on several chosen metrics and its stock rose as much as 11 per cent.

Gross margins of 68 per cent in the first half put its profitability target for the full year comfortably within reach. Revenues rose a third to £256.3m with full-year growth guidance pushed up to the mid-to-high 20s.

Best known for low-cost, cross-currency transfers for individuals, Wise is gaining more traction with business users. In the first half, business customers accounted for 22 per cent of revenues, up from 18 per cent in the same period last year. Business volumes are growing at 60 per cent.

Customers use Wise to hold funds and shop, not just for remitting funds. Customer balances rose by a third in eight months to almost £5bn. About 13 per cent of revenue comes from products beyond the core foreign exchange offering. About 30 partner banks use Wire’s platform for their own customers.

Things look less upbeat beyond its preferred measures. The bottom line was dragged down by the costs of the direct listing. The adjusted ebitda margin contracted 270 basis points to 23.6 per cent. Still, this decade-old fintech cares more about pumping up volumes and keeping up its investments in growth. It sees no signs of running out of opportunities to do so.

Measured against a broader universe of online payments companies, the shares are ahead of Mastercard, PayPal and Square on a steep market value-to-forward sales multiple of 18 times, according to S&P Global data.

Remittances was previously a business sewn up by correspondent banks and money agents such as Western Union. Wise is one of several start-ups that challenges those incumbents. These numbers should bolster the belief of the bulls.

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