TIL: Wise Interest is switching to monthly

Wise Interest is kind of a weird product. It does what it says, which is pay interest on available balances in Wise (as opposed to money set aside for savings).

This is obviously quite welcome. Not many financial institutions pay interest on available balances and if they do it’s usually at a crap rate. As of today, Wise are offering 3.32% on GBP balances: not exactly top of table but definitely not awful. This is even more true for businesses, to which banks tend to offer measly rates on savings, let alone available balances.

Extra money = good, but the way Wise handles this is kind of awkward. Interest gets added on a daily basis but there is no actual transaction. The number just silently goes up. With no transaction entry and no other action, balances in Wise would gradually drift up from the balances shown in connected accounting software like FreeAgent (who had this covered in their FAQ) and Xero (who last time I checked did not cover this).

This type of all-but-untraceable balance change is a very subtle form of torture for people who are required to care about how much money a business really has.

Screenshot of the Wise “How Interest works” page, showing three numbered steps: 1) Turn on Interest — money is invested in an interest-earning fund holding government-guaranteed assets, 2) Get gains daily — returns are added every working day and can be used right away, 3) Spend any time — money can continue to be sent and spent with no need to lock it away.

This approach is even advertised as a feature and from a marketing perspective I guess “money every day” does sound better than “money every month”, but is really quite odd for something that looks and behaves like a standard current account. We ended up building some annoying additional process around our monthly reconciliation workflow to account for this.

Anyway, getting to the actual learning: Wise are changing how Wise Interest works for the better:

Wise Interest invests your money in a low-risk fund. Currently, the income your investment earns stays in the fund, so you don’t receive it as a payment. Instead, it’s reflected in your balance which updates each day.

From 7 September, we’ll move your money to a version of the same fund that pays income at the beginning of each month.

Wise’s FAQ is not entirely clear on this but if interest shows up as a transaction then presumably this would make its way into bank feeds and fix the accounting software reconciliation issue.

So from October it should be possible to dump any process built around this while still getting some extra money. Hurrah.

I would love to know what Wise’s thinking was around the original setup and what finally led them to change this: hopefully a victory for solid user research practices.