Accelerated Digital Payments Will Expand Global Reach Despite Compliance Risks

Key Takeaways

• Wise's efficiency, cost control, and automation enable margin expansion and growth, even amid take rate declines and rising regulatory costs.
  
• Global expansion, integration with major banks, and a U.S. listing enhance Wise's market reach, brand, and potential for long-term revenue growth.
  
• Wise faces margin pressure and slower growth from geopolitical risks, stronger regulation, fee compression, competitive intensity, and possible market saturation.

Catalysts

Provides cross-border and domestic financial services for personal and business customers in the United Kingdom, rest of Europe, the Asia-Pacific, North America, and internationally.

• Analyst consensus focuses on competitive take rate compression, but Wise's unique infrastructure and relentless efficiency investments have enabled industry-leading cost reductions-significantly outpacing peers-which could drive sustainable volume-led revenue and gross profit growth even as take rates decline.
  
• While analysts broadly expect regulatory and compliance costs to be a prolonged headwind, Wise's successful history of direct payment network integrations, disciplined cost control, and ability to scale automation have consistently delivered operating leverage, suggesting future margin expansion is more achievable than consensus expects.
  
• Wise is poised to benefit from accelerating global digitization of financial services, as adoption of digital-first banking and payment solutions expands Wise's addressable base and supports long-term customer acquisition, high retention, and ongoing revenue growth.
  
• Direct integration of Wise Platform with major partner banks and rapid onboarding of new geographies (such as Brazil and Asia) materially increases the utility and stickiness of its services, underpinning a much larger total addressable market and driving a higher share of global cross-border payment volumes.
  
• The upcoming U.S. primary listing is a catalyst for increased share liquidity, broader institutional investor access, and elevated Wise brand-awareness-particularly in the world's largest fintech market-which can accelerate business partnerships, customer inflows, and ultimately boost earnings growth.

Wise Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Wise compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Wise's revenue will grow by 16.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 25.3% today to 16.3% in 3 years time.
• The bullish analysts expect earnings to reach £425.3 million (and earnings per share of £0.41) by about July 2028, up from £416.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 41.3x on those 2028 earnings, up from 24.6x today. This future PE is greater than the current PE for the GB Diversified Financial industry at 16.7x.
• Analysts expect the number of shares outstanding to decline by 0.4% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.46%, as per the Simply Wall St company report.

Wise Future Earnings Per Share Growth

Risks

• Heightened geopolitical risk and trends toward financial deglobalisation threaten to reduce global cross-border trade and remittance flows, which would shrink Wise's overall addressable market and limit the long-term expansion of its revenues.
  
• Increased regulatory scrutiny on anti-money laundering and data privacy in multiple jurisdictions may drive up compliance costs and slow Wise's international expansion, thereby eroding operating leverage and reducing net margins over time.
  
• Industry-wide commoditization of cross-border payments due to advances in open banking, the rise of real-time domestic payment networks, new central bank digital currencies, and additional new entrants is expected to place persistent downward pressure on transaction fees, making it harder for Wise to sustain its current pricing and adversely impacting both revenue growth and profitability.
  
• Intensifying competition from global banks, Big Tech, and challenger fintechs may force Wise to continue cutting prices and/or to ramp up investment in product development and marketing, compressing net margins and potentially leading to muted earnings growth if increased volumes do not offset lower take rates.
  
• Potential saturation in Wise's core transfer corridors and the risk of operational missteps or regulatory challenges during geographic expansion could slow transaction volume growth, diminish economies of scale, and lead to periods of flat or even declining revenues and margins.

Valuation

• The assumed bullish price target for Wise is £14.1, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Wise's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £14.1, and the most bearish reporting a price target of just £7.5.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be £2.6 billion, earnings will come to £425.3 million, and it would be trading on a PE ratio of 41.3x, assuming you use a discount rate of 7.5%.
• Given the current share price of £10.09, the bullish analyst price target of £14.1 is 28.4% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.