Wise plc

Good morning, everybody. Those in the room and those joining virtually by Zoom. I'm pleased today that we'll be joined by our CEO and co-founder, Christo, who's going to talk through our mission update, progress on our mission for the first six months. And Matt, our CFO, is going to talk through financials for the first six months. We'll then move on to Q&A. So I'll start by taking Q&A in the room. And then for those that are joining us virtually, I will take questions by Zoom. Just as a reminder, if you do have a question and you're joining by Zoom, if you could just raise your hand through the Zoom function and I'll introduce you. And with that, I'd like to hand over to Krista.

Thanks, Martin. Josh, you have to wait. We still have probably about 10 minutes of me talking and then Matt as well. Welcome everyone in the room and everyone on Zoom. So before we go into a bit more detail and a bit more numbers, I just wanted to remind us why I'm here. So I'm here with my team because we were solving a really big problem for international people and businesses. It's a real thing that we're working on. We're doing it by building something completely new, restating the infrastructure and how these payments work. They power products that people and businesses love. So, it's a great thing to be working on those and doing it in a way that it's sustainable, meaning we're independent, we're funding our own growth. So, this is for me an amazing thing to be working on. Now, from the shareholders perspective, when you can read these things, you'll see that we're working on a really large opportunity. which builds on this infrastructure, massive competitive advantage, and it has an inbuilt growth engine through word of mouth. Then in the end, it's a profitable company. Just to put this into context of why we're here and why I think you're here. So how did we do in the last quarter? We had five and a half million customers use us for cross-border transfers. Our average price stayed at 0.64 and more than half of our payments are now instant. If you look at us in the context of growth, our volumes are growing 49 percent year-on-year and Our total income, which Matt will break down a bit more, has gone up 63 percent. We're staying at our 20 percent or above EBITDA margin. Now, I'm going to take you through how did we actually do in this quarter in terms of the product and how our customer experience has evolved. So a reminder again, the reason, the things that our customers care about and the things that we're solving here is that money internationally is very slow. We're making it fast. It's quite expensive to use. It's inconvenient and has lots of hidden markups and fees in there. So these are the things that we're solving on our own infrastructure. And in the context of where we are today, we're making visible progress on individuals. So up to 4% of the global volume is moving on transfer-wise. On businesses, we're still a rounding error. So we're less than a percent, we think, in small businesses. So there's a lot of work for us to do here. Going through each of these pillars one by one, we see that over the years, we've actually made really steady progress on instant. Now, half of these transfers arrive in less than 20 seconds and almost all the transfers in less than 24 hours. Last quarter, we had a drop down. You'll see some of these ups and downs. We anticipate this will be moving upwards and we can increasingly make more and more transfers instant. On fees, it's the same journey. We've managed to bring the fees down to 0.61 for the last few quarters. And then last quarter, we're up to 0.64. And then again, in the long term, we expect that our goal is to bring the fees down rather than up. But then put this into context, the banks are still somewhere at 3%. the small ups and downs on our journey have to be seen in the context as well. Now, I've always talked you through a little bit on the progress on those four things that go around building our infrastructure. So first is expansions. We're expanding globally. We're already quite a lot in. There's plenty to do. This half year, some of the bigger achievements was getting a settlement account in Reserve Bank of Australia, which leads a way for us to become a direct member of the Australian Instant Payment Scheme, which then again helps with our goal both on faster, more efficient transfers. On Japan, we actually were already pretty fast, sadly, just during the working hours. So we changed the connectivity this time around, and now we brought fast transfers to Japanese 24-7. On the regulatory front, it's quite a bit of movement on Wise Assets. So we got licenses in Singapore, started serving our customers there, and also in the EU in Estonia. So this is going to take a little while as we passport out to the rest of the On operations, we're onboarding a lot of new customers. We're going to be talking about the demand that we see for Wise and Wise account. We've been scaling up our operations teams. We added about 1,000 people there. On technology, the start for the half year is 99.7 percent uptime. Actually, for the last quarter, this was three nines. So the reliability of our platform, especially for our platform partners, is relevant and important. So now, moving on into how do our customers experience this, they use us through three products. It's either the Wise account, Wise business, or Wise platform. Just as a reminder of who are these people who use this? I hope a lot of our shareholders are also customers. But just as a reminder, so who do we see using the Wise account? There's definitely digital nomads who spend their time working in countries where they're different than employers. We have expats who move into new countries and then use the Wise Account as their first account for a little while. We see travelers and we see students who are often expats as well. So these are the few groups that we see among the Wise Account users. On Wise Business users, that's actually even more diverse because these days there are so many businesses who do international payroll and pay suppliers internationally. It's very hard to be really, really just a domestic business. And then increasingly, businesses are using Wise to invoice their customers who are probably also not in the country where they operate. So for businesses to be able to operate internationally, the Wise account really does come to life. So next, I'm going to talk a little bit through the features that we've added on the Wise account for the last six months, just to bring out the trend of development. There's a few in the US, actually. So our USD account, or the Wise account in the US, got much better connectivity into the local brokerage platforms, the financial services apps. On global front, we're rolling out a new homepage experience. So what we're seeing is that there's a lot of, so we're hearing a lot of demand for the features that the wise account now offers, but they haven't been as easy to find. So we expect that there's even more people finding the features that are useful to them. We've started rolling out debit cards in the US. So again, we've been talking about rolling out cards in different places. around the world there's one place where we didn't serve businesses with cards yet, that was the US. We fixed that now and US businesses are getting cards. Again, on the business side where we're starting to enable our business customers to invoice their customers and get paid by cards. Our business customers use our account numbers quite a lot, so they get local account numbers in 10 different countries. So they use that to invoice their customers but sometimes they need to pay by card so we're enabling that as we go forward. All of these things that we're building for the Wise account really seem to resonate because we're seeing more and more of our customers and you'll hear about how much more customers are generally signing up to Wise, but more of them using the Wise account than merely transfer. So on the individuals, it's up to 20 percent and 30 percent and businesses up to about 50. The interesting bit here is that those who use the Wise account, they have either more use case or larger use cases, so then they end up using Wise for more volume moving through us and more transactions coming through us. So we feel that with the Wise account, we definitely created a better product or an added products for our customers that means they can get more of their things done with us. So one thing is you saw the share of the Wise Account users is growing up, but also the general amount of users is going up quite fast as well. So there's no surprise that we see the balances that customers hold with us go almost doubling year and year. or 88 percent year-on-year growth. They're split between personal and business and almost growing at the same pace. So this again is so far has looked like a really steady mix. So we talked a little bit about the Wyze business and the Wyze account. Now our customers reach us sometimes through our partners. So we have talked to you and shared a few platforms where Wyze is built into other products. And you see a lot of banks here, some challengers, some more traditional ones, and different types of platforms where these platforms get give their users the benefit of wise. This last half year, we have a few logos up of, again, you're seeing a few banks, both the challenger types and more traditionals, and also quite a lot of non-banks as payroll providers, company registration agencies, and others who make use of WISE for their customers. With that, we're kind of Talked about all the new features we're bringing out, all the new customers that we're servicing, and the capability that we're building for that is something that we measure through the user experience. The few things that are really important for us, how quick and easy it is for a new person or a business to start using Wwise. If you've tried to open an international bank account for a business, you might be spending weeks and months on it. We endeavor to get all of this done and open for you 24-7 and in 24 hours. There's still quite a bit for us to do, and also to kind of give you a view of how we're, like the standards that we keep ourselves up against. And when we say that 84% of payments arrived on time, meaning some didn't, but those that didn't, That means that they didn't arrive in 20 seconds, they arrived in 25. So there's a bit of a scene setting here. But of course, when we say customers are paying around 20 seconds, we expect it to. So it's still something to grow towards the 100 percent. Then moving on, just to put this into the context, we've added about 1,000 people to our team in the last six months and we keep hiring and adding more language support, more specialisms. So there's a lot more there to build. Now, the last thing for me is going to be just the international context. I think we showed this maybe a year ago. We've made this effort of plotting two axes. One is where we see how deep we are integrated in the local regulatory and technical infrastructure. So going from partnerships through our own licensing process to having direct connectivity to the central banks, and then what that means to the customer. So obviously, we expect this to be somewhere, the journey to be somewhere in the middle, the more better we integrate, the better features are available to our customers. We see that some of those countries at the top four, the UK, Singapore, We're already quite far ahead and then there's a lot of those countries where somewhere in the middle where the service is already pretty good, a lot of free features available, but there's a lot there to build and there's a few countries you definitely don't even see on that map yet. So just to give you the kind of way that we think about the travel here. And then just to narrate a little bit on what's happened in the last six months. We mentioned we acquired a licensed entity in India, for example, so that means we've moved the We moved a little bit on the x-axis. We haven't really moved on the y-axis yet because the customers haven't seen the benefit of that, so there's a bit more to do there. We see that Australia is a good example. We have the settlement account open, so we definitely moved on that axis. There's still work to be done to actually get into the payment system and start switching on instant transfers in both ways out of Australia. And with Singapore, maybe there's a good example in a different way. They already have a QR system that we're kind of connected to, so enabling our customers to pay with QR codes, and something that we were able to improve on the user experience side without too much effort on the integrations. So just to give you a kind of a view in our internal world of how we see our geographic expansions and deepening going on. Now to summarize what I've been talking about here. So there's these four things that we work on that try the user experience that we measure in the NPS and that does play through in the word of mouth that is 70% probably highest we've ever seen as a share. Then moving on to driving growth. So people recommend us that drives more growth, both in-person business customers, and that yields the numbers that we're seeing, both in the volumes that we transfer, the impact that we have on the movement of money, but also our year-on-year growth and financials, which Matt is going to talk us through next. Thank you so much.

So what do we see? So we're moving an awful lot of money now. We've done 50 billion pounds and that's growing, as Chris has said, around 50% year over year. That's generating actually 63% year on year growth in income, over 400 million pounds. And that's actually pretty profitable, at a 22% EBITDA margin, highly profitable, 92 million pounds of EBITDA, and that EBITDA is growing fast. And all of that's flowing through, it's a real bottom line profitable tax. And as you know, the way we run our businesses, it's high quality earnings, it's highly cash generated too. But just to step back and put that in context before we go into the details on this, you know, the environment we're in, we're still growing fast, we've still got huge demand from our customer base, whether they're people, businesses to move money around the world. Actually, we're translating that into transparent fees, which we translate into income for us. And we're still highly profitable despite actually investing significant amounts in our growth. And I'll go into more detail as to how much of that gross profit we generate is actually translating through into investment, which we're making for future growth into our business. And that's in the context of a really challenging economic environment. We're a profitable cash-generative business that's resilient through the good times and the challenging times. And that's intentional as to how we've built our company. So we're really proud of these results, but let's click in as to what they actually mean. So our active customer base has grown. Our personal customer base has actually accelerated to growing over 40% year-on-year. We're seeing still strong growth in our business customer base. Those customers are moving more money through us. People moving 6%, 7% more versus last year. But actually, business is moving quite a bit more. Now, some of this is moving. as Christo mentioned, more customers using the Wise account and those customers will use this more. Some of this is root mix, but also some of this is undoubtedly inflation throwing through, particularly in the businesses we think where, for example, you can imagine some of those examples Christo showed where businesses are paying their suppliers and those costs are going up. That's translated into volume growth of almost 50%. On a currency adjusted, worth calling out around 44%, but both business and personal volume growth growing really strongly. But just step back and think about that 50 billion or 100 billion annual run rate. That puts us well ahead of, I think, nearly any other money mover around the world. So it's probably the largest standalone money mover growing really fast as well, which is quite, just to frame this in context. Describe here our take rate. We've always talked around our cross currency take rate than our other take rate, but we now also have this interest income that gives our total income take rate. You can see that's gone up. We see Christo mentioned what's happened on cross currency prices. We see more and more customers use our wise accounts. And then we're also seeing some of this interest flow through into our total income take rate. So overall, what that means is our revenue is growing around 55% year over year. And that's growing all across all regions. In fact, pretty amazing how even when you look at the UK, this has grown very healthily still, despite actually, as we called out before, having a really high share of the market, but really just shows that still huge demand, even in our most mature markets, or the markets have been operating the longest to continue growing. And people and businesses are actually holding 9 billion of balances with us. As Christo mentioned, that's really adoption of the wise account rather than the average balance is growing. People finding use for the product, storing their, and trusting us with their money. So I thought I'd provide a little bit clearer around where do these balances sit and how do we hold these. You can see we have a mix of currencies. That doesn't purely driven by the mix of customers, but actually, for example, if you're a customer in the UK, you might hold as many dollars with us as you hold pounds, just like if you're a customer in the US. But overall, it means you've got a fairly even mix across pounds, euros, and dollars. A lot of people try and help understand what is the rate that we're earning on these. Half of that is still held in cash in banks, so in high credit quality banks who we partner with to help us run our infrastructure. But then another half of it's held in government bonds or in money market funds, which are highly liquid. Our job is to keep this safe and secure and available for our customers. This means that actually we often ask around what the yield is we see on these balances. And just in September, because obviously rates changed and also shifted our balance mix over this period of time, we're seeing around just over 1% yield on these assets. So you compare that to what the average rates would be. You can see we don't earn interest on all the balances, but we're earning interest on a fair sum of this. So the question is, what are we going to do with that? I think we've been clear and there's no new surprises today, but just to reiterate that. The first thing is many of our customers will have the opportunity to earn interest and we want to be able to pay interest. We're not always able to, but we're looking at ways as to how we can do that. Second is actually our account and the account that people use and value, where they're holding this, can have costs of running that, which we can help cover with some of this interest income rather than necessarily conversion fees or other ways. So some of this interest we'll use to cover the costs of that. And then also where we can invest, we always will, So some of this can help us continue to grow. And then across all these costs, any costs that this would cover are clearly will continue to earn a margin, as we always will and always have done on these costs. The primary is our thesis, and there'll be different answers in different regions, but this is how we're thinking about moving into this. So let's step back. So overall income growing around 63% year over year, 416 million, supported by the early stages of that interest income that started to come through in this half year. So these numbers you're familiar with, let's just go through some of the margin stats then. So we generated a 63% gross profit margin across the half year, which means a $262 million of gross profit. And we've always said and been clear on what do we do? What is our business model or our investing model? You know that we invest for growth. So that's the gross profit generated from our product. And we reinvest a bunch of that into marketing, which helps us bring more customers, brings more volume. We invest in product and the features. We've given you examples of sustaining that development in our infrastructure and our products, which drives volume. And then also we will, where we can, lower price where that's possible, or also we'll maintain our price or increase our price in order to make sure we can sustain this flywheel. So today I just wanted to give you a bit more color as to what some of this balance might look like, because we've always talked around our expenses. If you look at that gross profit, that 262 million, where's it go? So I've kind of given a split here of three. A lot of that, you know, you can see, At least a third of that is going into flows to EBITDA, adjusted EBITDA. Actually, a third of that, the other two thirds, is split roughly between covering the cost of running the company. Think about our operational teams of everything from customer services, verifying customers, but also cost of running finance or our other corporate functions and the offices we're sitting in. Versus on the other side, actually, a third of that is investing in our growth in the future. And that's not really changed over time. So much so that actually, if you think about, it's kind of an interesting fact here, but if you look at the cumulative amounts of money that we've spent in product development since the very early days, the first engineer. They spent around 350 million pounds. That's all time spent on this. Then if you look at the 525 is twice the current, it's not a guidance to the years. It's twice the last six months gross profit. Actually, it's quite a nice return. You think about spending one period and what do you get back in the next period? And the reason I show you this is to highlight the discipline that we have. When you see a third of that gross profit going into investment and growth, those principles really haven't changed around, let's invest in things that our customers want and need that will help them move more volume. It's a pretty healthy return on investment that we see on this spending. It gives us huge confidence to keep investing in that third, which when you look at that pie chart, it's around where we're investing. That also includes marketing spend. So actually, if you look at that, just media spend alone, we've grown around 40%. And we've always said we have less than nine months payback on that. And that is literally the return on that media spend relative to the customers that it brings in. Actually, if you look at the blend across all of our customers, it's radically lower at three months. But actually, if you look at the returns across the period, I know there's a lot of pressure on returns on marketing pressures on our media, but actually our returns got better over the last six months. Actually, we've seen payback improve consistently over the last year. And let's just remember that actually 70% of our customers that join us do so without this media spot. They're coming through word of mouth. They're coming off the back of that cumulative investment of 350 million pounds in our product, which is only getting bigger and appropriately so given the opportunity that we've got ahead of us. If you look at total expenses, this is the full stack of expenses. This is growing just over 40% year over year. Clearly, we're investing heavily in our teams and employee benefit expenses, investing in marketing, and then some other things in there as well. And we did have some one-offs in this time last year relating to the listing. And transparently, if you look at the expenses that sit between gross profit and EBITDA, there's growing around 57%. This shows that the slightly slower growth in some of the costs that sit below that, whether it's the amortization or the or the stock-based comp charges. So 40% expense growth relative to the 60% income growth. So at EBITDA, we said that we're investing. We're generating a very healthy gross profit. We're investing heavily in our future growth and maintaining an EBITDA at or above 20%, and that's 22% for the half year up on the 20% we saw in the last period. So this is very, very, very intentional and reflects the balance of growth and profitability that we're managing of a highly profitable business growing really fast. It's also cash generated. So if you look at the strict definition we've got of cash flow, we generated 78 million pounds of free cash flow. But if you adjust for some of the working capital adjustments, we always have working capital movements in and out of collateral, for example, for these periods. Actually, this underlying free cash flow is really growing in line with the income and the profits that we're generating. So it's a very, very healthy cash dynamics in the business today. The bottom line profitable, like a lot of companies will use EBITDA, we do, it's a good comparison and we think it's helpful for our business. But just to give you the confidence, we see really fast growth in the bottom line profit before tax that we're seeing, all the 50 million pounds for the period. So to summarize, we're moving a lot of money now, moving more than 50 billion pounds in six months. And that's still growing really fast, like the incremental billions of we're adding year over year is significant. That's translating to very healthy income growth, but also from a profitability perspective. Both the gross margin, we're investing an awful lot of money in our future growth and still managing a very healthy 22% EBITDA margin. And that's generating bottom line profits and cash generation. So pretty excited now to think about the context for this. We've got very healthy business and very resilient and continuing to invest in the future. Thanks very much. So I'm going to hand back to – so one more thing. No change in guidance. We upgraded our guidance, if you remember, in the last set of results. Still continuing 55% to 60% income growth for the year and no change to our guide on revenue or adjusted EBITDA. Comments?

Thanks Matt. And the last thing for me is just to check whether the numbers match back to the reasons why we're here. So as a reminder, we're here to solve a big problem for people and businesses. We see more and more of that.

and starting to use-wise. We're rebuilding the infrastructure. I can show you the progress, how that's going. And again, we're seeing even the markets where we are working, we've been working on those markets for 10, 12 years, they're still growing as the UK, for example. And creating experience that people love, being sustainable on the way. The numbers do mash up with what we do.

Do we have some time for a Q&A?

Yeah, so we'll manage this in the room and then Martin will help us broker this. I'll be told to keep it on the screen. Okay, so let me start. So James, just for everyone, what's your name? Where'd you come from? And then what's your, what's the question?

We don't need to wait for a mic.

We should be up there. I'll be shouted out if it doesn't work.

So James Goodman from Barclays, thank you for taking the questions. Maybe just to come to the account balances, which clearly have grown extremely strongly actually ahead of volume when there is an argument that maybe customers should start to think about where they can get the best return on those balances. So you're clearly adding new functionality into that. Can you talk a little bit about your comfort in those balances continuing to grow and maybe just to help us think about that interest income percentage. When you show the amount of funds which can generate interest income for you, where can that get to on a structural basis? So that's the broad question around the account balances. Second question is a bit more specific. Just I noticed that with the business account, you're starting to offer cash back to some of those businesses. It's an interesting way to start to give some of this back to customers. Wondered whether you could talk to that and whether there might be the opportunity to do something similar at some point in consumer.

Okay, why don't I take the first question and cover the second one? So the question is, what's our expectation of growth really of these balances? And then also what might be the structure of that look like from what we hold those balances in? So we haven't given any guidance on that outlook and don't plan to, but you can see so far they've really been driven by the rate at which customers are adopting our account, our Wise account. So what that means is people are continuing to come and bring their balances to us. Now, customers will have options, no doubt. Maybe not from their bank, maybe from somebody else, maybe to earn some interest. This is inevitable. And actually, we'll offer that option to our customers as well, hopefully through our assets products in certain jurisdictions. So clearly, our objective when we launched the balanced product wasn't to attract balances. It was to help people make it more convenient to use Wise accounts. So we'll continue to invest in that. If we can pay interest, we will. But inevitably, we'll see. We'll learn in each market as to how we develop our proposition as to what happens to those balances. The most important thing for us is that customers keep using Wise and keep moving their money and using Wise to save money versus moving their money internationally. As to the mix, we probably can go higher on the mix, but we'll do that cautiously. We're not racing to chase yields. We are making sure that the customer's money is safe. that it's available and liquid. And then as we feel comfortable with this, and we're pretty cautious on this, as you'd hope, we'll work it out so that operationally it works really well and that there might be a yield. So it can increase and it will be different depending on the jurisdiction and the regulatory requirements.

And on the business spend cashback that you're referring to, this is something that we're launching in the UK for UK business, and we're rolling out where we can. So this is really speaking to our approach to not subsidize across customer groups. So we are getting that interchange from the schemes and the merchants, whether we want it or we don't want it, and this is what the business customers earn by using their card, it would be, I think, not really thoughtful to use that money to subsidize some of the other projects that we're doing, but rather give it back to the people who kind of earned it. And I think eventually we'll see other banks and card issuers do the same thing. Because otherwise, everyone's going to start using the wise business card. And they probably wouldn't want to see that happening.

Hi, good morning. Omar Keenan from Credit Suisse. So I've got a question for Christo and a question for Matt, please. So my first question for Christo, so you've been a, Wise has been a publicly listed company for more than 12 months now, and part of the feature of that, I guess, has been a debate around the way the cross-border market is going. I guess if we think about it over more than 12 months, we've had things like cryptocurrency, IXB, HSBC global money, you know, kind of debate as to whether somebody can come along and do it better than you're doing, or at least as good. And standing here today, it feels like those fears are a little bit overblown, and you're still doing it a lot better than other people are. So just wanted to get your thoughts around the industry landscape. When you think about the alternative ways that like other fintech disruptors could potentially do this that's out in the market. Do you see any sort of obvious ideas that you can bring in and do things differently at Wise? And do you see any movement on the incumbent banks to reduce that differential in terms of much more times expense more expensive they are i guess the most public one that we heard was from hsbc global money and that's kind of gone a little bit quieter so would like would like your thoughts there um and then my question for for matt um i i hope i was wondering if you could help us a little bit more with the the mechanics of the interest rate sensitivity around the wise deposits uh you know appreciate don't want to give guidance on growth in in the level of deposits But the 1% yield in September, obviously central bank rates are going up from then. Understand that you're holding, there are some balances in bonds that you're holding. If you could talk about the roll-off profile that can help us mechanically think about interest income and where you have balances sitting with banks. Understand that you guys have hustled a little bit more in terms of trying to You get the interest rate, you get up on that key. Help us think about what that password is going to be. And related to that, the use of that money in terms of reducing price towards the customers, I understand that's going to be weighted towards other fees, which is currently 50 basis points. Could you give us a bit of a steer as to what you've announced already, how that's going to change? So it's a 15 basis points because you're using less domestic. Yeah. Charging less for domestic fees, is that going to become 5 or 10 or something?

Got it. All right, Omar, you were asking for advice of how to do this better that we're doing, and I wish I knew because then we would do it differently. So the thing that I shared on this map that works is really linking into the local payment systems. clearing in the local networks. which is all doable and we can demonstrate it can be done. We've removed 50% of the payments already instant. So I think the technology exists. It's just a matter of how do you make it work and how do you interconnect the world, which is just a lot of work, unfortunately. So I don't think that, I wish there were silver bullets. I haven't seen any. And I think what we're building and where we've made years of headway is the way how this money is going to work without borders. That was, I think, the first part of your first question. The incumbent banks, what are you seeing from? Oh, the incumbent banks. I think for them, the trickiness really is because they've never told their customers what they charge. It's very hard for them to say, hey, we're going to cut our fees by 50 percent. But because we never told you that we charge 3%, us telling you now that we're going to start charging 1.5% is really hard. It's just I don't know how they're going to deliver that message. So I think we haven't seen much of that happen yet. But I think it's first they will have to move towards being more transparent with what they charge. And then quickly, I think we're going to start seeing the fees come down as well. But getting over the first hump is, I think, the harder journey.

So I'm basically taking from what you said. when you survey the landscape that this is the best way to do it. And there's no threat to the morality in this business model for the foreseeable future. Despite all the debates that people have had in the last 12 to 18 months, this is still the best way to do it.

It's the best way that I've found.

Cool. So the second question then is, what are we seeing with these balances? And then where might the rate go?

I think it was really where you were trying to get to.

So far, I mean, let's look over the last six months when we've really seen the interest rate environment start to change. As you can see, we haven't seen a radical shift in the in the vector and the rate at which these balances are growing. There's still people coming to us. Not to say that won't change. We'll find out. A lot of our customers have never seen an interest rate. Think about the age of customers. So I think we'll see how this works over time. The best we can do, as I said, is where we can or where we want to pay interest, we will. Then you asked around like, Actually, you asked around what might be the impact of the things that we're doing on the other fees around these things. Clearly, some of these things were announced either towards the end of the quarter or even in this half year already, so they're not necessarily in these numbers. But the way stepping back from this, the way I think about this is we look at the total income base that we have and actually would think, effectively, where do we want to cover costs or pay for the costs of operating these accounts? Where in the past it might have been from conversion fees, now some of that might be from interest. So I'd rather think that If you're trying to think, don't think about how much of this would necessarily drop through as extra. Try and think about the rates. We're really thinking about what margin do we want to continue to earn on our business? And what's the best way to fund those activities for our customers? So we'll test things like cashback. We'll look at things like domestic payments being free, which we shipped recently in some markets. But overall, I would think about still driving this volume growth and still seeing, we've given you a census to the overall income growth and we'll test our way as to how that's made up between interest and revenue, such that if interest really, let's say the central banks have to put their rates up to 10% I'm not sure this is in the curve, but if that goes slightly faster, it means we can maybe go slightly faster on our proposition, if that makes sense. Because that's how we think about investing for the long term. Yes, we may be able to get a higher yield balance because some of that cash we might see moving into interest-earning products. We might actually earn interest from banks on this. But I would rather think about this as the better job we do on that, the better our proposition gets rather than thinking about immediate drop through. Does that make sense?

Yeah, that makes complete sense. And I guess reason for asking the question is not to assume that there's a full drop through, but in a way, the more interest income you earn, then the better you can invest in the business and increase the virality of the business because it allows you to cut domestic payment fees. I guess that's why the question is interesting. If that 1% yield on interest income goes to 2% or 3%, that allows you to cut other fees. I guess my question is, mechanically, is that going to go to 2% or 3%?

Well, I mean, central bank rates have moved since we've given you that average rate, so it's definitely going to go up. But at some point, it might come down again. it's connected to the central bank rates which you've seen have increased and probably will increase. So the question is what are we going to do with this? It's clear that we're going to have an opportunity to reward back our customers for holding balances with us where we can or other mechanisms to make our product really competitive.

Is there any colour you can give us on currency splits or

I showed you a currency split in the chart, which is roughly split between dollars, pounds, euros. So you can see like sensitivity to one central bank rate or another. I'm going to go this way around the room. So Kim.

Thanks. So my questions are about growth. First of all, I guess in a bigger sort of way and more thinking between businesses and personnel, how should we be thinking about growth going forward? Those two. And with that, So we can see that lots of customers you're onboarding are clearly taking market share. Where is that market share coming from? And then finally, having existed and having seen you for this long, but we're going into sort of a different kind of macroeconomics at the moment. I guess everybody's trying to figure out what might that do? What's your sensitivity to that? So if you could, obviously nobody knows, nobody's got a crystal ball, but if you can help us sort of think about your business in slower economic growth?

All right, I'm going to, I think there was, there might have been three, but I definitely got two of them. So like business personal, like what are, Where is the growth going to come from, or where is that going? And then second is when the market's economic environment are sensitive to that.

Maybe you take the second and I'll take the first. So the question was around, how do we see going forward our business and personal growth? They're growing both very fast. So we've been asked a long time ago, so when is the business going to overtake the personal? It hasn't because the person has been growing so fast as well, although the business customer base is growing really fast. So both are growing really fast, but I think the dynamic to point out there is, and you've heard us talk actually over the years now, how we're building features for larger and larger businesses. So businesses who bring on their team to wise, They have dual approval accounts, employee cards, a lot of the things that businesses need to do that personal customers don't have interest in. So we've been building out these feature sets and rolling them out to business customers, which has, I think, perhaps gotten that, as you see the business, per customer volumes are increasing a little bit. I think some of that might be a mix that there is now that's more useful for larger types of businesses. So we see that we're going from very, very small businesses to a bit larger and larger ones that find Y is useful and usable in their business context. So I think we're definitely going to be seeing more business growth even coming from that. But then again, there's so many more people who are starting to use this, that it's hard to kind of think about the mix, top down. So therefore, it's easier to think about it bottom up. And you asked about where the customers coming from, they're really always, like nearly always coming from banks. And banks, there's like 6000 of them around the world. And that's very kind of a very fragmented business. There's, there's no one competitor, really, to point out here, but a very large base of normally have used banks, or maybe they have the first ever international payment to make. And now they've kind of started looking around at a macro.

Yeah, on macro, like, I guess, this context of both the use cases for people using wires, and then what we've seen in the past, so we see in our customer base, and maybe you saw some of these on the screen, people, it's not a, it's not purely discretionary activity, you might be paying money. paying supplies in your business. So these things tend not to, it's not e-commerce discretionary spend, which we would imagine is on balance more resilient than a pure discretionary activity going into this. And then also if your cost of living is getting really tight, you need to save money. You think wise is a pretty good, pretty good option for you. If you can, if you're able to compare between us and your back. So that perspective, like we're, uh, on balance, there's a, there's a level of like, customers are really going to keep continuing to need us through this period. If you look at what happens to remittances through the global financial crisis. This is reported. Now, it's a sub-segment, definitely, of the market. But it's growing quite quickly, is the first thing. It did slow down, but it slowed. And maybe it dropped a bit, but it kept growing quickly. But there's no doubt about it. Our customers and small businesses, some of them are going to suffer through this period. But at the rate at which we're growing and the rate at which we're shipping products, we're confident at the rate at which we can. What's driving our growth is not the market. What's driving our growth is the rate at which, as you said, customers are joining us from an alternative. We've got inflation effectively forced in our cost base, but we also have this in our top line. So there's an element of protection or benefiting from this. But if you step back and think about it really macro, growth businesses that are investing a lot in growth in the future, we're doing that today, but we're doing it out of cash flow. We're doing it out of a level of profitability. And we've worked out how to charge it. We've got a business model where we're charging our customers what it costs us to generate the product. And if it gets really hard, we've seen with volatility, we've trained ourselves and our customers to prices may go up. On balance, we want them to go down in the long run. But all of this mechanic, both the relationship to the customers, the business model, and the way we've run it from a profitability perspective, sets us up pretty well to keep investing and growing, even when times which I believe right now are very challenging for most businesses out there, as I'm sure you're meeting and seeing. Pretty resilient.

Hannes Leitner from Jefferies. I have a couple of questions. So the first would be around your headcount growth. We go maybe into a more economic downturn the next couple of quarters. So how should we think about that? Is this now an inflection point for you to hire more talent and role and then the second thing is for example on your business ventures you mentioned business cashback and other features and functions and expense management for example do you see there moving more into that fintech space i think you know thinking now about the marketo and arden is this the other competing elements driven then also by the thought process of of your customers of your businesses and the last bit is just in terms of your partner network when we think about germany and 26 when you move into this kind of business accounts and personal in enriching the features and functions are those partners all on board do they use them then as well or are you competing directly with them okay so can you do the uh

I'll do the hiring question. Okay. Then you can cover the features, the second thing. Cool. So we're all hiring, but we're not hiring. I think a lot of companies have hired speculatively thinking, let's invest and see if we can generate some growth to pay back that cash flow in the future. We're quite more synchronous with this in that we're hiring. Yes, we're hiring operational folks to help service the demand that we've actually generated. So a lot of customer service verification agents, that's all funded by the product today. And then on the product area, which is the other third of the pie chart, which I showed you, actually we're hiring in this area pretty quickly as well today. We haven't accelerated, but we're just continuing to hire and lay down put down teams and grow those teams to be able to grow things for the future. So I don't think we'd say we're opportunistic now, we're just, nothing's really changed in how we're managing the business through the cycle. Like we've just got this discipline of, I talked about that 350 million, that's really just incrementally growing a really strong team that's able to continue to roll out features over time and that team's growing. Yes, if there's more talent on the market, great. We'd love to hire them. But we'll keep building the team at the rate at which we can sustainably grow this and keep that discipline on the return.

And then in terms of the features we're rolling out for businesses, the principle is roughly that, to an extent, we'll probably be able to do a good job for businesses, but at some point along the verticals that you mentioned, whether it's accounts payable or accounting or some treasury services, someone else can and will build a specialized service and then it's more the matter of how do we integrate with that service. So it's a bit of a both. A good example is maybe, we built a really good integration into Xero, the accounting tool. We can help our customers do like basic accounting or at least get on the way with any tool and then we build integrations with whether it's an accounts payable tool or or a card issuance tool, we have a few of those as well. So therefore, there's no yes or no answer to your question. We're definitely going to increase the breadth of things the businesses can do on Wwise or get their finance teams job done on Wwise, but then also help them use other more advanced services that are already out there. So both those ways. And in fact, with your second half, the questions of what are these things that we build, are these useful for our partners? I would say that our partners mostly bring the international infrastructure to distribute their customer payments. It's really the wise transfer feature that they mostly want and need for their customers. We usually expose everything that we build to our partners as well, but I don't see that being too much of an interesting angle going forward. Let's keep going.

Good morning, Andrew Gardner from Citi. Question, Christo, on the chart you showed about the sort of the relative maturation of your product by different country, clearly UK and Singapore in the upper right there. When you give us the sort of the account, wise account adoption, that's on an overall basis. Can you give us a sense as to where you stand in those more mature markets today, sort of the rate of adoption there? And I've been on a journey, you've clearly done well here in the UK, but for those markets that have more recently launched that kind of feature set, are you seeing a similar rate of adoptions happening faster, slower, just so that we can get an idea of where that might trend over the coming period?

It's a good question. I'll not give you the number now. There's a few things to think about, like where we launch a product. In some markets, we've been open a long time without those features. So there's a put and take here. If you imagine some markets, we've got a lot of customers who onboarded to TransferWise over time, and that's what they do. Whereas in some markets, we launch quite quickly with these features. So it might not be intuitive to look at it that way, but clearly, we try and look at markets here where we have those features as to what the penetration is. So I can't give you the answer.

But I think it's fair to say intuitively without having looked at that data, I would expect these to be correlated. So the better the feature set, the more penetrative, more adoption we find for the Wise Account users. We usually wouldn't build these features if no one's using them basically.

Because it's resonating similarly as you

Would expect so I think we'll see like small differences around where there is like specific demand or or good competition that the banks do a good job with that as well and there's There's probably some local dynamics, but generally it would expect that to be correlated Yeah, we couldn't we couldn't get that kind of lumber across the base if it's not pretty well spread if you think about it Good good.

How well you understand the basis for this spread? Cool. Let's have these two questions, and then maybe we can go to the phones, as it were.

Please. Hi. Thanks for my question. My first question is on volume growth. Could you help us understand how inflation contributed to your volume growth? And my second question is on geographical expansion. You launched Wise Account in Brazil area this year. You saw healthy growth. You also had a slide on progress in different geographies where you had this matrix. I'm just wondering whether you're looking into M&A to accelerate your geographical expansion.

Okay, cool. I'll do that. So on inflation on volume growth, you look at the volume per customer. You can see definitely in the business customer base, some of that I feel is coming through from inflation. You have to do your judgment of your math as to how you think that is impacting it. There's also a currency impact in there, which we've tried to be really transparent on. There's definitely inflation in some of that growth in volume. So active customer users is not a bad proxy to keep it really, really clean.

In terms of M&A and things that we've acquired, we've recently announced we acquired a small company in India that carries licenses that we believe will be useful for our customers over there. Looking forward, we just remain pragmatic about what is the additive thing that an acquisition could bring to our infrastructure really. and follow from that.

Remember that chart with the flags, so any of these radically move us up or to the right on these versus doing it ourselves. Always, we have to be aware of these opportunities. Let's keep going from a time perspective.

Anderson from Libra. Just three questions. So first of all, net credit losses, both in absolute terms and relative terms, they've picked up. So is that a new normal or just some kind of aberration? Secondly, on other operating income, that's also kind of picked up. Again, is there something went off in there or is that a new normal level? And third and final question is on regulation and compliance. You sort of flagged the fine in Abu Dhabi. So the question is, with regulation and compliance, do you aim to meet the standards within the jurisdiction you're operating in, or would you have a highest common denominator approach globally?

Okay, let me do the finance questions, and then do you want to talk about the regulation more? Yeah, so it's actually the credit risk in the portfolio is very, from a consumer or business basis, we don't have credit risk on these. From time to time, we might make a loss on, actually, probably more so a while ago, we had a loss in Brazil where we had a dispute with a partner. But actually, this is relatively low and not something that we expect to be meaningful over time. Then on the other income, So in our total income, so I think you're referring to on a... No, sorry, it's kind of the 7 million just above the PBT line.

Okay, so these will be... This is much higher than usual.

Yeah, so this could be relating to... So we have a bunch of movements below this. This may be interest that we're seeing on, we could have interest that we're seeing on not some of our own cash, on our own balances. If you think about, so most of the cash we hold, which we, if you think about the interest that we're holding on, the interest that we're reporting in the top line is interest on customer balances. So effectively we can earn interest income on our own cash balances, which can help show that line, I think.

Sorry, just to be clear on the net credit losses, are you saying that it wasn't like a one-off in there like Brazil two years ago?

So that was a one-off. We saw that. But we also see – so we'll make some product losses in the product, but these are relatively small. We haven't seen anything material shift over the last 12 months or six months.

And in terms of your question about the regulatory footprint, the answer to that is really clear. Actually, this chart that we had with the two axes and all the countries where we operate, this is all about taking regulatory exposure. And the answer is very clear that every country has their own rules. And we operate in this country. We operate in those rules. So therefore, absolutely, we need to operate in the local regulators. rule set, whether we like it or not, whether we think it's effective or not. And we always intend to do that. So as you rightly pointed out, in Abu Dhabi, we had very tiny operations. We didn't adapt as well into the local regime as we should have. And therefore, we were refined there. And of course, if we look at it in the global scale, the intents of the regulators are often very, very similar, if not the same. Therefore, there is a large common denominator and when we build the systems that support that, of course, we try to take advantage of the way that we could simplify the experience. But the bottom line is we're responsible in the business that we operate to the local regulator and their laws.

I guess just maybe the question is as you grow more and become more global and therefore more complicated if you look at the kind of the banking industry people tend to use one of two models when they're smaller they tend to everyone always meets compliance at a local level that's kind of a given but sometimes they just decide you know it's getting so complicated we kind of go to kind of like a highest common denominator approach so that you kind of weigh the same the highest possible standards in every jurisdiction.

I mean, it's unlikely that we would end up there. I think we'd rather follow the local complexity and then in the background, if we can make it simpler, that's fine. But that's the bonus of efficiency.

Okay, should we take some from Zoom? Because I think those folks have been waiting for your question.

Sure. Thanks, Matt. So the first question comes from Justin Evans.

Hi, good morning. Just one question. Matt, you had said earlier this year that volatility in the FX markets had benefited wise as it likely pulled forward some demand. What are your latest thoughts on that? Is that FX volatility still a driver of demand? And if FX volatility were to subside, how do you think that might impact growth? Thank you.

Thanks, Josh, for the question. So we do see noise or Ups and downs, we see volatility in FX market relaying into customers sending more, typically more with us over short time horizons. So what that means is if you see rates move, people maybe with the larger payments might decide right now is the time to do this. or maybe now's not the time, but tend to be like now's the time to do this in certain directions. So whenever I see this volatility kind of start, I'm always cautious in that this could be short-lived. And I was definitely starting the year, I was, it's a very first, very, very kind of strong first quarter and saying this could move away. Now that volatility has hung around, but actually over time, I would expect this to be, Over the very long term, I think this phenomenon doesn't exist because people only have a finite amount of money to functionally move around the world, if that makes sense. So that bring forward would largely have happened, if that makes sense, and I think we'd have seen some of that. So I think we do judge how it's a very good underlying strong growth in our product, in our business, which has given us the confidence to shift our outlook for the year from up to this 55% to 60%. Now, I do think this volatility will have driven some volume this year and maybe some more people to look for solutions and maybe they find wise. So we don't change our long-term outlook as to growth. But I think if this was like a one-time pull forward, which I think largely we'd have seen that already, Josh, if that makes sense. So over the six to nine months now that we've seen this volatility, I think a lot of people would have moved that money, pulled it forward already by now.

Thank you.

Thanks, Josh. Thanks, Matt. Next question comes from Aditya, Bank of America.

Hi, Aditya.

Hey, Christophe. Hey, Matt. Thanks for taking the question. So on the operations side, you said that you hired about 1,000 people in the first half. And I guess, could you maybe talk about how much of that was related to the ramp up in newer markets, let's say Brazil or Malaysia? And as you expand into newer markets in the future, do you have to ramp up on the operation side, sort of proportionate? That's the first question. Second, let's speak about from a macro perspective that it's not purely discretionary flows. Could you even give us a breakdown of actually the flows in terms of how much discretionary versus non-discretionary or some of the use cases on the platform? And then one last point. You are seeing some emerging markets, let's say India, trying to, let's say, facilitate low-cost cross-border transfers to a market like Singapore through their local payment network, QPI. So as you see some of those more initiatives in EMs, especially, what does that mean for VISA's expansion in those markets?

So operational impacts of new markets. I'll talk about breakdown of payments and then maybe talk about faster payment systems. Okay.

So on the headcount growth, I agree the expansion into new markets is one driver. And oftentimes, it's actually the language that is the driver. So if we go into the market that is served, it's usually served in a different language. So building up the operating capacity in that language takes a little bit of extra work. But often, the markets where we enter, they take a bit of while to get to the scale where The like operations need to be at scale as well, so I wouldn't consider this is the main driver of our. Our intent to build operating capacity, I think we just really think about us onboarding 60% more new customers than we did same time last year is the. There's a lot of work to be done across not just the new markets, but also the old markets. So that's this kind of driving. So yes, but it's not really a significant driver of this headcount expansion.

And then on use cases, we have an... we haven't disclosed like a mix of what is, it's very hard for us to judge for each customer what's discretionary, what's not, but we definitely see a mix of payments across our customers. One way to think about this is it probably doesn't look that different to if you looked at your own direct debits that go out of your account and your payments. A lot of our customers just need to do that across currencies and across borders. And so actually like there's clearly an element of it which might be discretionary, but there's, If you think about the big ones, the big ones that got on my account are the ones that pay my mortgage and other things that customers really depend on us on, just like for businesses. They might be paying their AWS bill or their stuff.

And coming to your question on payment systems, it links up with what Omar was asking before, I think. For sure, the silver bullet which we're using is we have these local really good domestic networks developing and what WISE is building is the overlay across them so that you can get the benefit if you're not in that country. from the instant payments that are happening around the world. And of course, I would expect or hope that others, if they are working on cross-border payments, they would use the same method, because it's a no-brainer. So therefore, I would expect that there's more development in that area. And I still think that we do the best job of that. And that's kind of seen in our growth as well. So yes, you're right. I think it's interesting. That's generally how it should be, that these good local networks are being put to use to international transfers as well. Thank you very much.

Thanks. We have one more question on zoom that comes from Greg while Herman at alpha value.

Hi, Greg.

Hi, everyone. Can you Can you hear me? Well, sorry. Okay, great. Thanks for taking my question. The first one, sorry, if you already addressed it, but on the on the free cash flow conversion. I think in the press release, you mentioned one of item, could you please expand on that and just telling what where does that come from, please, and the second one sorry again if it's if it's redundant but trying to ask the question differently on the the guidance on the top line growth, I mean. Could you sort of clarify what are the moving parts that undermine some kind of, I would say, conservatism on the guidance there? Is it a basis effect from this year's growth, which is expected to be quite high, or you expecting to shrinking the costs charged to customers quite heavily over the next years? Could you just clarify that again, please? Thank you.

Sure, so just on cash flow, we try and clean this, there's a bunch of, we talk about working capital movements in there, so there might be, we have, some lumpy movements where we recognize a gain and then you'll either see the cash flow come through or maybe other ways around. So where these are like not purely describing the operational flows of the product, we try and, we show it for transparency in the top lumber, but actually if you clean for those, you can see more of the underlying dynamics. So they might be like a working capital movement for, or a, we offer rebates with some of the, sorry, we get rebates from some of the card, two of the card schemes. So where those are lumpy and around, and you maybe fall either side of the financial year, in one year versus the other, we try and clean that out so that we get a clean view of what this looks like. Sometimes it will help us, sometimes it won't, but I think for what we're trying to get across to the investors just to understand the underlying dynamic, if you were interested in modeling this. So then on guidance, really like, we were guiding 30 to 35% this year on the top line growth. We've seen much stronger volume growth than we expected this year. Early on, we thought maybe is this one very early volatility. We're really continuing to invest in, as we've tried to share with you today, like how much of our, you know, we're continuing to invest in long-term growth. And we've got a lot of stuff to build as you've seen. So we have confidence we're going to be growing above this kind of 20% CAGR. But we very much focus that on the medium term. And we will drive down the cost of cross-border transfers. We will focus very much on driving the volume growth. But obviously, we want to maximize that long-term growth. But no further updates on the medium-term mechanics. So I think those were the two questions. I'll pull stumps there, as we say in the UK. And thanks very much for those that have joined us in person. It's very cool to see people in the office enjoy any of the pastries that get left. And then thanks everyone online for dialing in, especially if it's been early for you. I appreciate around the world people have been getting up a little bit early to listen in. So we'll speak to you again in a few months. and no doubt speak to some of you in between.

Thanks very much. Thank you, Raj.