Under the circumstances, Matt Crate could be forgiven for feeling at least a little discouraged. As the new CEO of the WeSwap currency exchange platform, he runs a travel industry-dependent company at a time when the borders have been closed, airlines are cutting plans and millions of consumers around the world tell their governments to “stay home.” For a company that has defined itself as a travel fintech, these are not promising times.
But despite the actual 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 are seeing right now is that companies in the industry are proactively approaching us to talk about partnerships,” he says.
To some extent, this may be swagger in the face of an unprecedented crisis, but before the Covid pandemic, WeSwap had already adapted its business model to deal with 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 of the journey that must certainly – at some point – take place.
As Crate explains, WeSwap started its life as a business-to-consumer game. “Our plan was to create a community,” he says.
In essence, the company created a peer-to-peer platform that offers a range of convenient currency services, including exchange with others. A user who returned from vacation with, say 100 euros could use WeSwap to exchange that amount for dollars or pounds. The idea was that people who travel very often end up with small pots of currency that are not really worth exchanging because of the associated exchange rates and commissions. WeSwap aimed to solve that problem, in addition to simply providing a means of acquiring and holding money for travel. In 2019, WeSwap reported revenues of £ 1.7 million and had 140,000 active users. But he was also facing a market squeeze.
“In recent years, new competitors in the shape of a challenging bank, such as Monzo and Revolut, have entered the market,” says Crate. “These were companies supported by VC.”
Faced with fierce competition, WeSwap sought a parallel path to the market through partnerships with airlines, travel agencies, travel insurance companies, car rental companies – indeed any travel organization that accepts online reservations.
And Crate claims it was a largely untapped marketing channel. “What we found was that no one else offered travel money as an accessory.”
A partnership model
To date, the airline has signed 25 partners, including the Jet 2 airline and a number of travel agents. Others are in the pipeline. So what’s the attraction for third parties? “Traveling is a low-margin activity,” says Crate. “We offer a means for airlines and other travel operators to increase their margins through revenue from travel money.”
It works like this. WeSwap provides an API that allows you to integrate your currency offering into partner sites. Consumers who sign up receive a prepaid card through which currencies can be bought and traded.
The cashier cites the example of an airline that could earn £ 5.00 per seat. Currency supply revenues provide a means of pushing that margin higher. As recognized by the cashier, around 0.5% of airline passengers could take advantage of ancillary offers during the booking process. Evidence so far suggests that WeSwap’s offerings are above average by some degree. To date, around a quarter of WeSwap’s customers come from partnerships.
All this explains Crate’s optimism. While the short run for the travel industry is, frankly, bleak, WeSwap believes that when the recovery comes, players in the industry will increasingly be looking for new earning opportunities. Equally important, Crate believes that the company’s offer – supported by its technology – is defensible in the face of competitors’ challenges.
The Covid-19 crisis still has a long way to go, but perhaps the broadest message here is that setbacks in the form of increased competition and industry crises create at least a stimulus for innovation. In the short term, however, this is an area focused on continuity and survival.