London fintech Wise misses earnings estimates | PaymentsSource

As it preps for a potential U.S. public listing, London-based digital payment firm Wise touted its international growth and future prospects, despite reporting earnings that fell short of analysts’ expectations.

“We’re building out apps to serve hundreds of millions of customers, we have been able to support banks that are switching correspondent banks to the Wise platform, so we’re just getting started,” Wise co-founder and CEO Kristo Käärmann said Thursday during Wise’s earnings call with analysts. 

For the quarter ending June 30, Wise posted underlying income, or profits, of 362 million pounds, or $485 million, up 11% over the prior year. That was less than the 372 million pounds, or $499 million, projected by Bloomberg analysts. Wise’s payment volume was $55 billion, up 24% over the prior year. Wise affirmed its full year outlook of 20% growth in income. Wise’s stock fell about 5% on Thursday. 

Wise’s path

Wise, which was founded in 2011 and changed its name from TransferWise ahead of its 2021 London IPO, competes with payment fintechs such as PayPal, Block and Stripe, correspondent banks that manage cross-border payments and other U.K. challenger banks. Wise has expanded beyond the U.K. through direct connections to local domestic payment systems in countries such as the Philippines, Brazil and Japan — its number of direct connections doubled in the past year to more than 60. It has also upgraded its internal technology to support instant settlement, with about two thirds of its payments immediately available to the recipient. 

The fruits of these connections and technology will not be immediately apparent, the company cautioned analysts on Thursday.

“The investment horizon is in years, so things we released today will not show up in the next quarter, but will show up in the next decade,” Käärmann said.

Read more about earnings. (Corporate Earnings News | American Banker)

Analysts attributed the quarter’s earnings miss to international currency volatility. Though they did not mention Trump’s tariffs, the subsequent trade war has caused shifts in the currency markets that could impact the value of international payments.

Wise in its most recent earnings call said it is prepared to manage a trade war, and it did not address the tariffs during Thursday’s earnings call. In a research note, analysts at Jeffries said Wise’s earnings miss was driven by “higher FX headwinds.”

But they also said Wise’s stock decline on Thursday was partly driven by a boost in Wise’s stock the prior week after signing UniCredit as a client. 

New York listing

Wise did not release a timeframe for a New York listing, which would require shareholder approval, and did not comment on a U.S. IPO during Thursday’s earnings call.

The company earlier this year said a primary U.S. listing would help it accelerate the company’s expansion and would bring capital market benefits to Wise. It also noted the U.S. is the “biggest opportunity in the world for its products and would enable better access to the world’s most liquid capital markets.”

In an email, Wise’s public relations team said “Last month we also announced our proposal to dual list our shares in the U.S. and the U.K., with the strategic and capital market benefits positively received by owners. We believe the addition of a primary U.S. listing will help us accelerate our journey to becoming ‘the’ network for the world’s money, and ensure our mission and the interests of our customers and Owners remain deeply aligned over the long term.”

Analysts also asked Wise about its plans for stablecions. Payment and bank executives this week have weighed in on plans to issue or support stablecions in anticipation of the passage of the Genius Act in the U.S., which is expected to cause a rush of stablecion issuance from banks, financial institutions and other companies. 

“Every time there is a crypto or stablecon question, our opinion hasn’t changed. If we see something that enables the movement of funds faster, cheaper and more confidently we will consider it. But we have nothing more to report,” Käärmann said.