One of the biggest success stories of the Estonian technology scene in recent years is a business that has ties to the country's best-known tech heavyweight, Skype. And, like Skype before it, it's a company based around a disarmingly simple business idea that sprung from the need for change in a very traditional industry.

Several years ago, Estonian Taavet Hinrikus, Skype's first employee, had just moved to London and faced a practical problem: he wanted to move money from his Estonian bank account to his UK bank account. However, if he wanted to do so, he have to put up with losing five percent of the money transferred to the bank – an amount largely hidden in the interbank exchange rate.

Hinrikus figured out a way to transfer the money without these using the banks' costly services, using the help of a friend who also needed to use two currencies in his everyday banking.

Bank with a friend

Hinrikus was paid in euros but lived in the UK, where the currency is the pound. His friend, financial consultant Kristo Käärmann, was paid in British pounds, but had a mortgage in euros. Hinrikus worked out a way around the problem: after checking the interbank rate, he simply moved money an agreed amount of money from Estonian bank account to Käärmann's Estonian bank account, while Käärmann sent the equivalent money from his UK account to Hinrikus's UK account. That way, Käärmann got to pay his mortage in euros, and Hinrikus didn't lose out changing his wages into pounds.

Read this Is England the best place to start your start-up? For those wanting to set up a tech company, there's a lot to consider. ZDNet takes a look at some of the major start-up hubs in EMEA and what each can bring for those wanting to get their own IT business off the ground. Last up, a look at London. Read More

The arrangement saved them thousands of pounds in a short time and, in January 2011, the pair were inspired to cofound the crowdsourced peer-to-peer currency exchange service TransferWise, which allows users to transfer money between countries and make foreign payments cheaper and faster than through the traditional banking outlets.

TransferWise's currency transfer system works like this: to convert currency, a user has to make a domestic bank transfer into TransferWise's bank account for the amount of money they want to transfer to a foreign bank account.

After the domestic payment, TransferWise converts the money into the user's currency of choice without changing the interbank exchange rates (TransferWise's slogan is "bye-bye banks, you've had your fun") and the amount is sent to the foreign bank within two days. TransferWise charges a flat rate of €1 or £1 for any transfer up to €200, and a small transaction fee for larger amounts.

Growth milestone

According to Hinrikus, the company recently hit a milestone of £100m transferred in total.

"Just three to four months ago that number was £50m," Hinrikus said. He didn't specify the amount of money he hopes to be moved through TransferWise this year, but hinted the scale would be hundreds of millions.

Right now the service allows conversions between Euros, British pounds, Norwegian, Danish and Swedish krone, Swiss francs, Polish zloty and US dollars, but the company's plans include expanding the list with 10 more currencies this year.

The company isn't profitable yet, but, according to Hinrikus, it's not profitable by choice because it's still growing fast and is investing to fuel that growth.

"We've grown the team to 30 people by now and will add another 20 people this year," he said.

The company is backed by well-known names – from the institutional side come IA Ventures, Index Ventures and Kima Ventures, and the angel investors include PayPal co-founder Max Levchin, Wonga's Errol Damelin and former Betfair CEO David Yu, among others. It also this month announced another $6m funding round with the investment led by Valar Ventures, an international fund started by PayPal founder Peter Thiel.

Despite its Estonian roots, the company is based in London. The UK is an early adopter market in general and having its own currency creates a need for services like TransferWise's. Of course, being a big financial services centre and one of Europe's startup meccas doesn't hurt either.

As part of that startup scene, TransferWise recently gave 1,000 start-ups $100,000 worth of free international money transfers. While there's no doubt that the campaign was a shrewd marketing plan, Hinrikus said it also served as an attempt to help the whole startup ecosystem.

"We are looking to be an active part of the ecosystem and as such looking for ways how we can help. The startups campaign was just one example of that," he said.

As a startup rapidly growing into an established company, TransferWise has seen its fair share of change. How does it think the market it operates in will transform in the years to come?

"We can think about what has happened in other industries — telecommunication or aviation, for example," Hinrikus said. "Both of these industries have changed dramatically within the last 20 years and in both of these we can see right now that incumbents and disruptors are having large market shares. We expect similar to happen in the money transfer segment."

And beyond TransferWise, currencies figure large in Hinrikus' life outside of work, thanks to a fondess for both sport and travel. "Next up, a weekend trip to Iceland," he said.