High fees, large incumbents, and a $400B+ market are under attack by a slew of remittance startups. Here are 13 to watch.

Western Union, the titan of the “cross-border money transfer” market, with a ~15% worldwide market share, is being challenged by multiple well-capitalized upstart companies targeting the $436B remittance market. These new companies are aiming to get a piece of the fees that companies like Western Union and MoneyGram charge. Reports estimate that these changes could save developing countries as much as $16B/year.

There has been pressure on their fees for some time as the graph below shows the decline of global average costs associated with sending $200 internationally from 2008 to Q3’14. Specifically, the global average has fallen from ~10% of the transaction to 7.9% in Q3’14, while the average weighted by the size of the bilateral remittance flows has fallen from ~8.5% to 5.7% in Q3’14.

cost to send remittances

Source: World Bank

The Future of Fintech
A 123-page report covering VC funding trends for fintech and the developments in large categories such as wealth management, blockchain, remittance tech, and insurance tech.

Below we’ve compiled a list of 12 startups going after the incumbents in the remittance space. Some, like BitPesa and ZipZap, are among those looking to leverage bitcoin as a potential solution to this problem. Others, like London-based WorldRemit, have raised over $100M in funding and are using digital payments paired with the increasing penetration of mobile devices in developing countries to lower fees and make remittances more financially accessible worldwide.

12 Remittance Startups to Watch
Company Last Funding Round Total Disclosed Funding ($M) Select Investors
WorldRemit Series B 140.0 Accel Partners, Technology Crossover Ventures
TransferWise Series C 90.3 Seedcamp, Andreessen Horowitz, IA Ventures, Valar Ventures
peerTransfer Series C 43.25 Spark Capital, Accel Partners, Bain Capital Ventures, QED Investors
Currency Cloud Series B 17.0 Atlas Ventures, Silicon Valley Bank, Notion Capital
Azimo Series A 11.5 Greycroft Partners, e.ventures, TA Venture, Frontier Investments Group
Remitly Series A 11.25 Bezos Expeditions, Trilogy Equity Partners, QED Investors, TomorrowVentures
Pangea Payments Series A 6.0 OCA Ventures, Chicago Ventures, KGC Capital, Jump Capital
Ripple Labs Series B 5.5 Lightspeed Venture Partners, Google Ventures, Andreessen Horowitz, IDG Capital Partners
Chime Angel 4.27 Undisclosed Investors
Ayannah Information Solutions Seed VC 4.0 Wavemaker Partners, Golden Gate Ventures, Beenos Partners, IMJ Investment Partners
CurrencyFair Seed VC 2.5 Frontline Ventures
Zipzap Seed VC 2.3 Blumberg Capital, TriplePoint Capital, 500 Startups
BitPesa Seed VC 1.13 Stephens Investment Management, Bitcoin Opportunity Corp., Future\Perfect Ventures, Pantera Capital


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  • https://saveonsend.com/ Yakov Kofner

    NO, [enter your favorite company name] is NOT taking on Western Union!

    First of all, let’s remember that Xoom, which has a somewhat similar online model to WorldRemit’s, raised ~$115MM pre-IPO and another $100MM during IPO. It has been 13+ years since Xoom’s founding – let’s see where it is now and how it fares with top players

    2014 revenues (current Market Cap)

    - Western Union: $5,6B ($10.1B)

    - MoneyGram: $1.4B ($0.5B)

    - Xoom: $0.159B ($0.6B)

    - WorldRemit: $0.025B ($0.5B)

    WorldRemit was founded in 2010, it raised $140MM so far, and one could extrapolate an approximate number of years and additional funding it might require before WorldRemit has a chanche to catch up with Xoom… but even when that happens, WorldRemit would still be about 1/35th of Western Union, so, “No, WorldRemit is NOT taking on Western Union”

    On a more tactical level, WorldRemit is not even yet offering an international money transfer in top 15 states (CA, FL, TX, NY, IL, …); and in smaller states, where WorldRemit is available for such transfers, its current FX Markup for top destinations (China, India, Mexico, Philippines) is mid-high vs. top providers and fees – on a high side (compare prices at https://www.worldremit.com/en with other providers for same transactions with our quick tool, click https://www.saveonsend.com/). Hence, in USA, WorldRemit is not yet offering the most demanded remittance product to a lion share of retail remittance customers; and where it is offered, WorldRemit doesn’t seem to be offering a competitive pricing.

    TransferWise has been operating in the US for awhile. Out of top-5 corridors from USA, it started with USA-India in 2014 and then few weeks ago added USA-Philippines. Their P2P model sounds great in theory, but it is yet to be seen what exactly would be fundamentally different about their back-end vs. more established players in the online space like Western Union Digital and Xoom. Across top corridors, there are massive dis-balances in payment flows and that extra liquidity requirement in destination countries need to come from somewhere. Especially for top corridors, most of large money transmitters already have margins (fee + FX markup) of less than 2%, for the transaction types similar to TransferWise’. TransferWise indeed provides very competitive pricing and is usually in top-3, but it is not the least expensive one (while it is not charging for FX markup, TransferWise’ fees are not the lowest – click https://www.saveonsend.com/)

    About bitcoin, in a few years, we will hopefully stop comparing a blockchain vs. non-blockhain models as the blockchain becomes an ubiquitous underlying protocol (a-la “Internet”). In the meantime, we could look at this question from a more narrow perspective: for remittances originating and ending in fiat currencies, what would make a bitcoin-blockchain-based approach less expensive when compared to existing online models (Western Union Digital, Xoom, TransferWise, etc.)?

    If a bitcoin-based approach is only different in how it moves funds across countries and how it records details of transactions, two conditions would need to be met: a) costs of those specific back-end processes need to be a substantial component of a provider’s P&L, b) existing providers approach those processes in a substantially inefficient manner. Neither of those seems to be the case: existing providers spend a lion share of their costs on customer engagement, service, and compliance and their back-end processes are built on highly-scalable platforms. Fraud is the major issue in the remittance industry (recent example: http://www.bloomberg.com/news/articles/2015-01-06/xoom-falls-as-fraud-leads-to-overseas-fund-transfer-cfo-departs) , but it is not clear why a bitcoin-based provider might be much better at preventing a similar type of “employee impersonation” fraud.

    But even if we assume that a bitcoin-based provider has a significant cost advantage, would it have enough pricing space to position “price” as its main differentiation? Try an experiment at our site: plug in $2,500 from USA to Philippines, USD-to-USD, or same amount but for USA to China, either USD-to-USD or USD-to-CNY. Pretty close to zero?! These two corridors are in Top-5 globally by the remittance volume, and competition from even non-bitcoin-based providers is only intensifying. To be price-competitive versus Western Union Digital, TransferWise and Ria (online), a bitcoin-based provider is facing a double impediment: they have to perform an extra FX conversion AND the bitcoin currency is more volatile thus creating a higher FX spread on both ends.

    Yes, margins are higher out of the UK market because it is less developed than US, but incumbents could easily cut margins there if they start perceiving a real threat.

  • Marc C

    Take a look at what http://saldo.mx/ is doing with Ripple and you’ll understand that you’re calling pure bullshit. Ripple has a free FX integrated and the margin s will be SUBSTANTIAL lower … And https://gatehub.net/ will be the next one … and more will come your way soon.
    They all will be faster, easier, cheaper, safer and completely currency agnostic, exchanging between whatever currency you like and on the best conditions possible.. Not convinced? Discover and try before you speak!

  • Alex

    2015 Market Cap)

    - Western Union: $10.61B
    - Xoom: $0.64B
    - MoneyGram: $0.43B
    -Euronet $0.3B

  • https://www.SaveOnSend.com SaveOnSend

    Yeap, some shift in stock prices over the last couple months, but magnitude-wise are more-or-less the same. Let’s see if there would be significant changes after this week’s earnings reports.