WorldRemit,
a UK-based startup that is going after the Western Unions and
MoneyGrams of the world with a commission-beating online and mobile
remittance service, has raised another $100 million — funding that it
will use to continue building out its service globally, and specifically
in the U.S., where it has laid down roots in Denver.
The funding comes from new investor Technology Crossover Ventures — the firm behind mammoth investments in Vice, Spotify, Minted, Swagbucks and in earlier days Facebook, ExactTarget and many more — and existing investor Accel. This is only the second time that WorldRemit, founded in 2010, has raised money: the first time was in March 2014, when Accel put $40 million into the company.
“A good chunk of that money still in the bank,” Ismail
Ahmed, co-founder and CEO of World Remit who once worked for the UN,
tells me. He describes this recent raise as “opportunistic.”
This latest round values WorldRemit north of $500 million.
WorldRemit is still relatively small: it processes 250,000
transactions per month, and has been steadily growing revenues, with
$25 million in sales in 2014, compared to $9.3 million in 2013. It says
it’s on track to grow at the same rate this year.
But on a wider scale, the remittance market is very big business. The World Bank estimates
that by 2016 there will be more than $700 billion sent overseas between
family and friends, with $646 billion sent in 2015. (WorldRemit
meanwhile estimates that the value today is closer to $550 billion.)
Interestingly, the U.S. is the biggest market for sending
money today — which is one reason why WorldRemit is doubling down on its
presence there. Some 10% of global remittances originate in the U.S.,
working out to $50 million per year. Saudi Arabia comes in second place
after that.
“Remittances are now nearly three times the size of
official development assistance and larger than private debt and
portfolio equity flows to developing countries,” the World Bank writes.
“They exceed the foreign exchange reserves in at least 14 developing
countries, and are equivalent to least half of the level of reserves in
more than over 26 developing countries.”
Economics aside, remittances also have a very real value for average consumers.
Many people, especially in developing and poorer
countries, rely on family and friends living and working in wealthier
economies to help them out by sending earnings.
WorldRemit positions itself as a disruptive force in this
context: it lets users transfer money at far lower commissions than
those charged by larger outfits like Western Union, and it does so using
online and mobile technology. But it’s still very early days in online
money transfer: Ahmed tells me that only about 5% of remittances are
sent online today. And besides large incumbents, there are a lot of
finance startups also swarming around the potential of leading the
charge on overturning the remittance market. They include TransferWise, which today (perhaps carefully timed to be announced with WorldRemit’s news) announced that it will open for business in the U.S. on the back of a big fundraise last month; Azimo; and smaller but very innovative players like Regalii, which
focuses specifically on remittances that can be used for specific
purposes, such as paying bills for your friend or family member abroad.
“We see a huge opportunity for us in terms of the growth
and what we have achieved so far, with the the rapid shift from offline
to online,” he says. “Remittances is one of the last frontiers of the
financial services industry.”
Today, WorldRemit lets users in 50 countries send money,
and people in 117 countries receive it, giving senders the option to pay
into bank accounts, cash pick-up points, or into mobile wallets that
can be used for airtime top-ups. Airtime top-ups are especially popular:
they currently account for half of all of WorldRemit’s business in
Africa.
The last of these — mobile wallets — looks like it will be
WorldRemit’s growth engine in future years, through partnerships with
telecoms carriers. Carriers play a role in offering mobile wallets to
mobile phone users who may not have regular bank accounts. One recent
deal, with African carrier MTN, covers 22.5 million users in 16 countries across
the continent. In contrast, cash pickups, which were 100% of
WorldRemit’s business when it first started, now account for only 30% of
its terminations.
Where Ahmed would not be drawn out is around questions
about whether WorldRemit might ever partner with other kinds of
companies, such as messaging apps, to facilitate money transfers.
The backstory to this is that Facebook has been reportedly looking at offering a service to its users to send money to each other by way of its messaging platforms.
Ahmed concedes that messaging platforms like Facebook,
Viber and Skype are very complementary to WorldRemit — after all, users
communicate about sending the money, and then turn to WorldRemit’s apps
to do it. But he wouldn’t comment on whether his company is in talks
right now with any of them to enable more integrated services.
Still, you have to think that as WorldRemit looks to scale
its business, integrating with messaging apps and putting their service
front and center with billions of users makes a lot of sense.
For investors, it’s not a matter of whether remittance is a
good market to be in — that is a no-brainer — but that WorldRemit seems
to have tapped into some interesting routes for cracking it open.
“The $550 billion global remittance market is undergoing
significant disruption with a clear shift to online and mobile solutions
for international money transfer,” said TCV General Partner John
Rosenberg in a statement. “The WorldRemit team… are at the forefront in
offering convenient, low-cost solutions, backed by a market leading
technology platform, compliance infrastructure, and geographic
footprint”.