Matt Crate, Managing Director of WeSwap
Given the circumstances, Matt Crate could be forgiven for feeling at least a little despondent. As the newly appointed Managing Director of currency exchange platform WeSwap, he is running a travel industry-dependent company at a time when borders have been closed, airlines are slashing schedules and millions of consumers around the world are being told by their governments to “stay at home.” For a business that has styled itself as a travel fintech, these are not promising times.
But despite the real and present damage inflicted on the travel sector by Covid-19, Crate is optimistic about the medium and long-term prospects for his company, particularly in terms of partnerships with a wide range of third party companies. “What we’re seeing at this time is that businesses within the industry are proactively approaching us to talk about partnership,” he says.
To a degree, this may be bravado in the face of an unprecedented crisis, but prior to the Covid pandemic, WeSwap had already adapted its business model to address a very different type of market pressure. And according to Crate, a change in the company’s business model means that it is well-positioned to take advantage of a recovery in travel that must surely – at some stage – happen.
As Crate explains, WeSwap began life as a business-to-consumer play. “Our plan was to create a community,” he says.
Essentially, the company created a peer-to-peer platform offering a range of cost-effective currency services, including swapping with others. A user who came back from holiday with, say 100 euro could use WeSwap to exchange that sum for dollars or sterling. The idea was that people who travel a lot often end up with little pots of currency that aren’t really worth exchanging because of the associated exchange rates and commission fees. WeSwap set out to solve that problem as well as simply providing a means to acquire and hold travel money. In 2019, WeSwap rang up revenues of £1.7 million and had 140,000 active users. But it was also facing a market squeeze.
“In the past few years new competitors have come into the market in the shape of challenger bank, such as Monzo and Revolut,” says Crate. “These were VC-backed businesses.”
Faced with well-resourced competition, WeSwap sought a parallel route to market through partnerships with airlines, travel agents, travel insurance companies, hire car businesses – indeed any travel-related organization that takes online bookings.
And Crate says it was a largely unexploited marketing channel. “What we found was no-one else was offering travel money as an ancillary.”
A Partnership Model
To date the company has signed up 25 partners, including airline Jet 2 and a number of travel agents.More are in the pipeline. So what’s the attraction to the third parties? “Travel is a low margin business,” says Crate. “We offer a means for airlines and others in the travel industry to increase their margins through revenues from travel money.”
It works like this. WeSwap provides an API that allows its currency offer to be embedded in partner sites. Consumers who sign up are sent a pre-paid card through which currencies can be bought and traded.
Crate cites the example of an airline that might make £5,00 on every seat. Revenues from currency provision provide a means to push that margin higher. As crate acknowledges, about 0.5 percent of airline passengers might be expected to take advantage of ancillary offers during the booking process. Evidence to date suggests that WeSwap’s offer is surpassing that average by some degree. To date, about a quarter of WeSwap’s customers come via partnerships.
All this explains Crate’s optimism. While the short-term for the travel industry is, frankly, bleak, WeSwap believes that when the upturn comes, players in the industry will be increasingly looking for new revenue opportunities. Equally important, Crate believes the company’s offer – backed up by its own technology – is defensible in the face of challenges from competitors.
The Covid-19 crisis has a long way to run, but perhaps the wider message here is that setbacks in the form of increased competition and industry crises at the very least create a spur towards innovation. In the short-term, though, this is an industry focused on continuance and survival.