if they do spot market execution for unbalanced flow then they are making loss on those transactions now?

No, they don't take a loss. They are actually highly profitable on unbalanced flows, and it comes down to the math between the institutional bid/ask spread and the explicit fee they charge.

Here is the exact microstructure of how that trade clears:

1. Eating the Half-Spread

When Wise has unbalanced flow (e.g., too much USD, not enough EUR) and routes the order to the institutional spot market, they have to cross the spread to execute. Because their platform guarantees the user the exact "mid-market" price, Wise does technically eat the cost of the half-spread out of their own margin.

2. The Math on Basis Points

However, the math heavily favors Wise because of their access to Tier-1 liquidity:

• The Execution Cost: On the interbank market, the spread on highly liquid major pairs like EUR/USD is microscopic—often just 0.1 to 0.5 bps (a fraction of a pip). Wise pays roughly 0.2 bps above the mid-price to acquire the currency.
• The Revenue: Wise charges the user a transparent, upfront fee to process the transfer, which typically ranges from 40 to 60 bps (0.4% to 0.6%).

If Wise pays 0.2 bps to cross the institutional spread and collects 45 bps in fees from the user, they net 44.8 bps on the transaction. They are essentially monetizing the user's lack of direct access to institutional liquidity.

3. Instantaneous Flattening

They also carry zero directional risk because there is no holding period. The moment an unbalanced order is locked on the user's end, Wise's execution engine automatically fills the offsetting spot trade with their liquidity providers (LPs). They flatten their inventory instantaneously.

When they can match flows internally between users (their peer-to-peer model), their execution cost is strictly zero, and they pocket the full 45 bps. When they have unbalanced flow and must route externally, they pay a fraction of a basis point to the market makers and pocket the remaining 44+ bps. In either scenario, the explicit fee acts as a massive cushion that guarantees a net-positive trade.

Want to know how they handle wide spreads on exotic currencies?