Wise shares will fall as transfer volumes fall in the last quarter of 2022

The amount of money Wise sends across borders fell in the fourth quarter, sending shares in the London-based fintech sharply lower on Tuesday morning.

Wise said the value of cross-border transfers fell to 26.4 billion in the final three months of 2022, its first decline in more than a year and down 2 percent from the last quarter.

Fintech shares were down more than 6 percent by mid-morning.

Wise said the average amount transferred by private customers fell to £3,500, the lowest level in two years, and blamed the drop on a higher-than-usual volume earlier in the year.

The company said customers had accelerated remittances in the first half of the year due to fears of currency volatility and rising inflation.

“Volatility in the currency markets has definitely been a tailwind over the last couple of quarters,” said Matthew Briers, chief financial officer at Wise, adding that the negative impact on volume “could last a quarter. [or] it may last longer than this”.

Despite the declining payment volumes, rising interest rates and higher prices boosted total revenue for the quarter, prompting Wise to upgrade its guidance for the year.

A rise in how much Wise charges to send money, which the company said stemmed from higher foreign exchange costs, contributed to the 80 per cent rise in total revenue to £268.7m.

The average price for customers to send money was 0.66 percent in the quarter, an increase of 6 basis points year-on-year. It is the second quarter in which Wise has raised prices since 2020.

“Obviously our goal is to try to reduce prices, but we will only do this when it is sustainable in the long run,” Briers said.

Net interest income on customer balances rose to £43.5m in the quarter, boosted by higher interest rates, compared with a loss of just under £1m a year earlier.

Wise expects total revenue – which consists of transfer revenue and net interest income – to grow between 68 percent and 72 percent this year, compared with the 55 percent and 60 percent it previously forecast. It also expects an increase in its adjusted ebitda margin of 22 percent in the first half of the year.

However, the medium-term goals remain unchanged, including a 20 percent revenue growth.

Analysts at Numis remained bullish on the outlook for Wise, stating that they “see no reason why revenue growth should not remain above 20 percent in the coming years as the group continues to take market share from the banks”. The volume of transfers per customer was closer to long-term trends, they added.

Fintech is seeking to move on from several scandals in the past year. In June, the UK’s Financial Conduct Authority launched an investigation into CEO Kristo Käärmann for willful non-compliance with tax payments.

In August, the subsidiary was fined by the United Arab Emirates Financial Supervisory Authority due to a failure in anti-money laundering controls.

Wise’s share price has fallen more than 10 percent in the past year, part of a selloff among fintechs hit by falling consumer sentiment and investor wariness in an environment of rising rates. Shares in online remittance service Remitly fell 18 percent in the same period, while the value of PayPal fell more than 50 percent.