WorldRemit, a remittance payment provider whose mobile app is already used by 2 million migrants to send money home to family and friends, entered the NY market last week, one of its most critical states. It has nearly full coverage of the U.S. market, which it expects to become its largest by yearend.

Its forecast is for 10 million customers by 2020.

The move says a lot about U.S. immigrants’ changing preferences for digital rather than cash payments.

There are about 43.7 million immigrants in the United States, and remittances sent from here by foreign-born immigrants rose to $66 billion from $50 billion over the past five years, according to the World Bank.

In New York state, where WorldRemit just won a money transmitter license, there are 4.5 million immigrants. One in five people living in the state is an immigrant, while one in six is a native-born U.S. citizen with at least one immigrant parent.

Currently immigrants face much uncertainty: Immigration and Customs Enforcement officers arrested 42% more people in 2017 than the year before; ICE’s leader, Thomas Homan, has announced plans to crack down on sanctuary cities and those who have entered the country illegally; and the fate of the 800,000 so-called Dreamers, who came into the U.S. under the Deferred Action for Childhood Arrivals program, is unknown.

So why does WorldRemit see so much potential here?

Growth in global remittances

First, the U.S. is still the largest center of remittances worldwide.

And the company doesn’t have to worry about border control agents because it does not serve illegals. Its app can only be used by documented immigrants who have a bank account.

Moreover, tech-savvy migrants who were born outside the U.S. are beginning to change the way they send money back home, according to Ismail Ahmed, founder and CEO of WorldRemit. The U.S. is moving faster in this direction than many other markets, he said.

When WorldRemit first started, because communication with family members outside the country was difficult and international calling cards were expensive and call quality poor, customers typically only used the service once a month, Ahmed said.

“Now in New York, the Uber driver is talking to family members back home every day through WhatsApp,” Ahmed said. “So they’re more aware of the situation back home, and sometimes they are sending money more frequently to meet emergencies. So our regular customers are sending about three and a half transactions per month. In the next few years, we will expect to see customers doing more like one transaction a week or sometimes up to 10 transactions a month.”

Today globally, 90% of remittances go through convenience stores where migrants hand over cash, often after standing in long lines.

“In the next three to four years we’re expecting to see 60% of remittances move to digital,” Ahmed said. “We’re seeing a significant shift from offline to digital. So we’re riding on that trend.”

Gareth Lodge, senior analyst at Celent, said that it is about time.

“The remittance space has traditionally been slow and expensive, with a degree of risk, making it ripe for new technologies to improve,” he said.

WorldRemit has also raised enough in investment money to fund a U.S. expansion, Lodge said.

In December, it received $40 million in Series C funding from LeapFrog Investments, which is backed by JPMorgan Chase, Prudential, Omidyar Network and others. WorldRemit’s $100 million Series B round was led by TCV in 2015; its $40 million Series A came from Accel Partners in 2014. The company has raised $220 million to date, and since 2015 its transaction volume has grown by 400%.

Yet, as Lodge pointed out, WorldRemit has many competitors, including PayCommerce and PayPal’s Xoom. There’s also TransferWise, which serves European expatriates, and Remitly, which has U.S. customers sending money to the Philippines. There are the incumbents Western Union and MoneyGram and fintechs like Abra and Circle, too.

Ahmed argues that WorldRemit has a strong geographic advantage: It can be used to send money from 50 countries and send it to 147 countries. It also says it charges less than others — in the U.S. it charges are either less than 1% or 2-3% of smaller amounts.

WorldRemit's technology is different in a few ways, one being speed, Ahmed said.

“In New York, if a daughter is talking with her mother in the Philippines and she needs 10 dollars tomorrow, she can receive that money while they’re chatting on WhatsApp,” Ahmed said.

WorldRemit moves payments through a network of partners — banks, retailers, foreign exchange companies and telecommunications companies. But it maintains large balances at receiving banks, so it can send payments quickly through its service and settle with the banks with one payment at the end of each day.

WorldRemit can handle small dollar amounts, which some others cannot, he said.

It also has the ability to send money directly to mobile money accounts, through relationships it has with telecom companies. In fact, a third of its global transactions go to mobile money, Ahmed said. WorldRemit has 70% of that market.

“We’re not only digital on the send side, but we’re also digital on the receive side,” Ahmed said. “Two-thirds of our transactions to developing countries are cashless.”

One of the biggest challenges in the U.S. remittance market, according to Ahmed, is the threat of a tax on remittances.

“There is a risk because migrants fear even the talk of whether remittances are likely to be taxed,” and this could send them back to the informal, underground networks they once used, he said.

The U.S. market isn’t easy for payment companies to break into. They have to obtain money transmitter licenses in every state. WorldRemit started applying for state licenses in 2014 and on Thursday received its 49th from New York.

“New York was the most challenging one — it took two and a half years,” Ahmed said. “You have to submit a detailed application, then the company officers have to go through a detailed due diligence and background checks, which normally take quite a long time. You have to do fingerprints. Once all those are put together, then they have questions.”

New York regulators like to examine money transmitters’ investors. WorldRemit has an advantage in that it has many U.S.-based investors.

Now that WorldRemit is established here, getting the word out to U.S. immigrants should be less of a problem. Because the company already has customers in so many other countries who have U.S. relatives, it received 500 transaction requests before it even announced the New York launch.

“When we sent an email to our existing customer base, they contacted relatives and said WorldRemit is live,” Ahmed said.

At some point, WorldRemit might offer other bank-like services to U.S. immigrants, most likely in partnership with banks or other providers.

“At this stage, the focus is on continuing to scale our operations globally,” Ahmed said.

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