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Latest Business News
Wise Shares Soar Nearly 18% on Rising Interest Income
Wise Reports Tripled Profits
Wise, the online money transfer firm, announced a 51% revenue growth to £846.1 million and tripled profits before tax of £146.5 million. Earnings per share also more than tripled to 11.53 pence. Wise saw a 34% customer growth and now has 10 million total users as of March 31, 2023. Volumes also increased 37% to £104.5 billion. The company traded at £6.18 per share, up almost 18% on the day. Wise benefited from the surging interest rates, which rose to 5% by the Bank of England to manage high inflation. As a result, Wise was able to accrue income from interest on funds sitting in customer accounts.
Fintechs Boost Income through Lending
Wise's profitability was echoed by Monzo and Starling Bank, who both reported respective profitability milestones citing increased income from lending. Still, Wise faced a number of less positive developments, with CEO Kristo Kaarmann becoming the subject of investigation by Her Majesty's Revenue and Customs over his failure to pay £365,651 in tax on time. FCA is still conducting an investigation to see whether Kaarmann breached UK tax laws. However, Kaarmann reported that the investigation has little to do with the business they're running, clarifying that it was a personal mistake, and has settled the fines.
The CEO Takes a Sabbatical
Earlier this year, Kaarmann announced his plans to take a three-month sabbatical between September and December to spend time with his family. Harsh Sinha, Wise's chief technology officer, is to replace him as CEO in the meantime. Some investors speculate that Sinha may assume the CEO role permanently, but Wise has yet to comment.
Anti-Money Laundering
Wise was also fined $360,000 by regulators in Abu Dhabi stemming from issues encircling its anti-money laundering controls. However, Kaarmann says that this issue has since been resolved.
The success of Wise, Monzo, and Starling Bank reflect the growth and appeal of fintech companies that offer innovative solutions in the financial industry. As demonstrated by Wise's performance, fintech companies that can tap into emerging technology and changing market conditions can stand out in a crowded industry and reap big profits. However, the industry is also faced with new challenges and increasing regulatory scrutiny. As Wise's fine in Abu Dhabi highlights, regulatory compliance and anti-money laundering controls are critical concerns for fintech companies. Furthermore, any personal legal issues of senior executives can also negatively impact the company's reputation and financial performance. It is important for new fintech businesses to carefully consider these factors as they start up and seek to expand. Finally, the temporary departure of Wise's CEO highlights the importance of building a strong team and having a succession plan to ensure the consistent operation and growth of the business. As the fintech space grows and changes, so must these companies to stay poised for long-term success.
