Remitly adds 11 countries in heated digital remittance market

The digital remittance provider Remitly is adding 11 European nations to originate outbound cross-border payments, following up on its recent move to raise the stakes in the highly competitive cross-border remittance market by increasing its daily send limit in the U.S.-to-India corridor to $30,000.

The highly lucrative remittance business, once the sole purview of established players with large agent-based locations such as Western Union and MoneyGram, is under an all-out attack by digital fintechs that are leveraging consumers’ growing propensity to use mobile apps to send money. While convenience is a key factor to sending money using mobile apps, it also allows more of the process to become digitized. This enables fintechs to more easily authenticate senders and use artificial intelligence (AI) to eliminate fraud.

Just this week, London-based competitor TransferWise released its fiscal 2018 earnings, showing an annual profit of about $8.1 million, its second straight year in the black. Its profitability is striking at this early stage of its life, especially being a so-called unicorn (a startup with at least a $1 billion valuation), yet it’s a testament to the profitability of the industry and efficiencies gained in being digitally based. According to Crunchbase, a website that tracks investments into private fintechs, TransferWise has raised almost $400 million in capital with a valuation of $1.3 billion in its last fundraising round.

In Remitly's example, adding the 11 countries (Austria, Belgium, Denmark, Finland, Germany, Ireland, Italy, the Netherlands, Norway, Spain and Sweden) to the four existing ones (U.S., Canada, U.K. and Australia) where Remitly currently allows consumers to originate transactions brings the total “send” markets being served to 15. While the U.S. is one of the largest origination countries globally, with over $138.2 billion sent overseas in 2016 according to Pew Research, the combined total remittances sent from the 11 countries in the same year was $81.2 billion. For Remitly overall, its biggest destination markets are India, Philippines, and Mexico.

But as the Seattle-based company adds options, it must also reduce complexity.

“One of the pain points we observed early on was that customers were not aware of where their funds were during the process. After hitting send on the app, we provide a date and time when funds will be available and send updates during the three or four steps of the transfer,” said Karim Meghji, chief product officer of Remitly.

In May, Remitly added Australia as an origination or “send” country where consumers can transfer funds to its network of destination countries. In 2016, Australian consumers sent over $16.2 billion in global remittances, according to Pew Research, with about 35 percent of that volume being sent to China, India and the U.K. Remitly added the U.K. as a send country in 2017 with an outbound remittance value of $25.4 billion in 2016 according to Pew Research.

“It’s an extremely profitable business," noted Richard Crone, principal of Crone Consulting. "The hurdles are establishing the banking relationships and setting up the transfer service. Once you have these things established, adding countries is easy.”

The digital nature of these businesses make it easy for them to upgrade their services, he added.

“An advantage the remittance startups have is that they are using the digital channel, especially mobile," Crone said. "This allows them to use hard tokens and biometrics to authenticate senders and then apply AI and machine learning to the transactions. This allows them to create fraud detecting algorithms and virtually eliminate paper. By automating the process it reduces the costs significantly.”

The European push is part of Remitly’s ongoing global expansion efforts. Its U.K. entry in 2017 was “dipping our toes in the waters of Europe. We began with a UK product to send money to India and the Philippines and now we are expanding into 11 more countries,” noted Meghji.

Remitly has partnered with Stripe to facilitate the addition of the European countries by processing card-based transactions.

Initially, Remitly will offer a card-based “Express” product in the new European countries which can deliver funds to the recipient quickly (times can vary based on sending and receiving countries but can be in as little as a few minutes, e.g., the U.S.-to-Philippines corridor). Meghji noted that the second product Remitly will offer at a later, unspecified date is its bank account-based “Economy” service. This product, currently available in the U.S., is typically used when customers want to send larger amounts of money as it leverages more cost-efficient banking networks such as ACH.