Wise, the cross-border payments giant, has consistently impressed investors with its remarkable growth trajectory. Active users, volume, and profits continue to climb, painting a picture of a company poised to dominate the international banking arena. However, buried deep within the Q2 2024 earnings call transcript lies a revelation that most analysts seem to have overlooked – a hidden engine driving Wise's future: the burgeoning "Other Revenue" segment.

While cross-border transfers remain the company's flagship product, Wise has quietly been building a robust ecosystem of financial services centered around its Wise Account. This platform, offering multicurrency accounts, debit cards, and domestic spending capabilities, is rapidly gaining traction. The Q2 transcript reveals a staggering 90% year-over-year growth in card spend, a figure that overshadows even the robust growth in cross-border volume.

This surge in "Other Revenue" is not just a side hustle; it's a strategic masterstroke poised to fundamentally alter Wise's business model and its position within the financial services landscape. Here's why:

The Power of Recurring Revenue

Wise's traditional cross-border transfer business, while immensely successful, relies on transactional revenue. Each transfer generates a fee, creating a dependency on consistently attracting new users and driving volume. "Other Revenue", however, is primarily driven by recurring income streams like interchange fees from debit card transactions. This creates a stable and predictable revenue base, making Wise less susceptible to fluctuations in cross-border transfer volume.

Unlocking the Network Effect

The Wise Account becomes even more compelling as more users adopt it. As the network grows, domestic spending volume increases, generating more interchange revenue and strengthening the financial engine. This virtuous cycle incentivizes further investment in Wise Account features, creating an even more attractive proposition for both existing and new users.

Building an Unbeatable Moat

This shift towards a recurring revenue model strengthens Wise's already impressive competitive moat. Competing with a company that can offer cheaper cross-border transfers is difficult; competing with one that can do so while also generating significant recurring revenue from a loyal user base is a daunting prospect for any challenger.

A Hidden Gem: Unpacking the 20 BPS Take Rate

While Wise doesn't explicitly break down the take rate for its "Other Revenue" segment, the numbers paint a compelling picture. If we consider that "Other Revenue" already accounts for approximately 20 bps of the overall take rate, and that only 40% to 60% of Wise's customers are currently using the account features driving this revenue, the potential is enormous.

A simple back-of-the-envelope calculation suggests that if all of Wise's 7.2 million active customers were to fully utilize the Wise Account features, the "Other Revenue" take rate could potentially double, further accelerating Wise's growth and profitability.

A Paradigm Shift for the FinTech Industry

This strategic shift within Wise has significant implications for the broader FinTech industry. It demonstrates that cross-border payment companies are not limited to transactional models; they can evolve into full-fledged international banking platforms, challenging traditional banks on their own turf.

The Wise of the Future: A Holistic Financial Ecosystem

Wise's relentless focus on customer experience, coupled with its strategic investment in building a comprehensive financial ecosystem, positions the company for long-term success. "Other Revenue" is no longer an ancillary stream; it's the fuel powering Wise's transformation into a global financial powerhouse.

Analyzing Wise's Revenue Breakdown

Let's visualize the shift in Wise's revenue streams using data extracted from the earnings call transcripts.

Key Numbers to Watch

These metrics will provide valuable insights into the trajectory of Wise's hidden engine and its potential to reshape the financial landscape.

"Fun Fact: Did you know that Wise was founded by two Estonian friends, Taavet Hinrikus and Kristo Käärmann, who were frustrated by the high fees charged by traditional banks for international money transfers? Their solution, born out of personal need, has now revolutionized the way millions of people manage their finances across borders."

"Hypothesis: We hypothesize that Wise's "Other Revenue" segment will become the primary driver of its growth and profitability within the next five years."