Wise PLC’s shares made a strong trading debut in London Wednesday, as investors bet on the online money-transfer service’s ability to win business from established banks.

The U.K.-based fintech, formerly known as TransferWise, closed its first day of trading with a market valuation of about £8.75 billion, equivalent to around $12 billion. That compares with market expectations of $6 billion to $7 billion ahead of the anticipated public listing, according to a person familiar with the matter. Wise didn’t disclose a targeted valuation. Wise closed at £8.80 a share.

Founded a decade ago, the company aims to make transferring money across borders easier and less expensive. It has grown revenue in each of its last three fiscal years and tripled profit over that period to £30.9 million.

The listing underscores the strong appetite among investors for new stock market entrants. IPOs globally raised a total of $331 billion in the first six months of 2021, more than four times the $75 billion raised in the year ago period, according to Dealogic. London, in particular, saw volumes surge to almost $14 billion from $668 million over the same period.

Customers use Wise to transfer money, get paid and buy goods in different countries. Its popularity has grown along with the rise of e-commerce, which increasingly involves businesses selling goods across borders.

Startup lenders, such as the U.K.’s Monzo Bank Ltd., piggyback on Wise’s technology to offer discounted money-transfer services to their customers.

Wise said it charged an average price of 0.68% of the amount of money transferred in the first quarter of 2021. Credit cards and banks have traditionally charged several percentage points for similar transactions. The company says it has more than 10 million customers and processes £5 billion in money transfers across borders every month

The company offers clients the midmarket exchange rate and charges a service fee plus a percentage of the amount being sent. It has a network of bank accounts in different countries that allow, for example, a client to pay British pounds in the U.K. and Wise to pay out euros into a client’s account in France.

Wise’s strong debut marks the biggest technology listing in the history of the London Stock Exchange, based on market value. The reception could help reset the LSE’s reputation as a lure for tech issues following widespread disappointment over the March IPO of Deliveroo Holdings PLC., the U.K. food-delivery company.

That flop made a successful Wise listing all the more important, as the LSE tries to offset its overweighting in old economy and slower growing financial and resources companies.

Closely held U.K. fintechs such as WorldRemit, another digital money transfer service, Monzo, and Starling Bank are expected to follow the listing closely to help gauge their IPO prospects in London, some bankers and institutional investors say.

“This is going to be a very good litmus test because if Wise is a successful listing, I think it demonstrates that there is a lot of appetite among investors to support the European fintechs,” said John Meehan, a partner of Arma Partners LLP, a London-based investment bank which advises technology companies.

Wise chose to go public through a so-called direct listing, in which the company didn’t raise new funds. Instead some of its existing shareholders, which include U.S. venture-capital firm Andreessen Horowitz and Baillie Gifford, a Scottish fund manager and well-known Tesla Inc. investor, agreed to sell a portion of their shares to create a market.

That way the company bypassed the more traditional route of hiring a syndicate of banks to oversee a weekslong campaign educating investors and marketing an offer ahead of the IPO pricing. Wise’s strong debut shows the benefits of the process as a less time-consuming and cheaper alternative.

Other notable direct-listing companies in recent years include music streaming service Spotify Technology SA and data miner Palantir Technologies, Inc.

Wise’s London listing is also a test case for the U.K.’s efforts to compete against New York for technology companies. The company is listing two classes of shares to give the company’s founders greater voting rights over public investors, a traditional structure for tech companies in the U.S. but, until recently, frowned upon in the U.K.

U.K. regulators recently unveiled proposed rule changes that make it more inviting for companies that have multiple classes of shares—typical among tech firms—to list and to feature in London’s benchmark FTSE 100 index.

Write to Ben Dummett at ben.dummett@wsj.com and Simon Clark at simon.clark@wsj.com