Is Wise a Bank? Short answer: no, it is not. The company does not hold a UK banking licence and balances are not protected by the Financial Services Compensation Scheme (FSCS).

Long answer: Wise is not a bank as it does not lend out customer deposits to third parties. It is primarily a low-cost international money transfer app that allows users to save money when sending money abroad.

However, Wise provides some of the features that banks also provide, such as holding and exchanging multiple currencies, sending and receiving payments, and a linked card.

Wise offers three main products: Wise Account, Wise Business, and Wise Platform – they also now offer “Wise Assets” where you can earn interest like returns on your cash help in your Wise account.

Why do people ask “Is Wise a Bank?”

The firm is defined as a Money Services Business. With a Wise account it is possible to hold a balance of funds in more than 40 supported currencies. However, this money is not protected by the standard FSCS guarantee, which covers balances up to £85,000 per eligible person, per bank.

Wise lets customers send payments to more than 80 countries and spend internationally with the Wise card. Local bank details are provided for up to nine currencies including US dollars, pound sterling, euros,

Wise was launched as Transferwise in 2010 as a peer to peer currency network, helping to revolutionise money transfer services, which had formerly been dominated by Western Union.

The group has since grown to provide money transfers to over 15 million customers sending more than £9 billion a month.

Its transfers work by matching up buyers and sellers of currency in different countries, rather than moving money internationally.

The latest Good Money Guide review of the app in August found Wise to be “one of the cheapest and easiest ways to send money abroad”.

One criticism was that the firm does not have a telephone number and as such it is not possible for customers to contact the firm this way if there is a problem with a transfer.

Wise does make money like a bank though

Like many banks and financial institutions, Wise can earn money from customer cash balances.

When customers leave money sitting in their Wise account, the funds are held in safeguarded accounts and generate interest as central bank interest rates rise. Rather than paying this interest to customers, Wise has traditionally retained most of it as part of its revenue.

This is similar to how many banks make money. Banks collect deposits from customers and earn a return on those funds, either by lending them out or by holding them in interest-bearing assets. They then decide how much of that return to share with customers through savings accounts, keeping the remainder as profit.

Wise operates differently from a bank because it safeguards customer money rather than lending it out. However, it has still benefited from higher interest rates. In 2023, the company said rising interest income on customer balances helped almost triple its pre-tax profit to £146.5 million as interest rates increased around the world.

For customers who want to benefit from those higher rates themselves, Wise now offers Wise Assets. Instead of Wise keeping the return generated on your money, your balance is invested in a government money market fund managed by BlackRock, allowing you to receive the investment returns after fees. Because this is an investment rather than a savings account, returns are variable and your capital is at risk.