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Remittance flows from USA in 2015

What is the cheapest way to send money to India? What is the difference between Xoom and TransferWise’s models? How to transfer money online to Mexico? Do startups like Remitly or WorldRemit have a chance to gain a sizable market share? What is the fastest provider to send money to Philippines? Is it safer to use mobile app or a cash agent for transferring money? Why use legal money transfer and not hawala when sending money to China? Will Bitcoin/blockchain destroy Western Union? Why some nationalities use cash agents while others prefer online? Are banks‘ remittance business really being disrupted?…

If these and other such questions seem interesting to you, you have come to the right place. Thank you for visiting our blog! First, let’s clarify who this blog is for, then why we started it, and what to expect.

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TransferWise: Rebel, What is Your Cause?

TransferWise Money Transfer: billboard

Tale of Two TransferWises

“Revolution is a tough business. You can‘t make it wearing white gloves and with clean hands”

– Lenin

TransferWise’s origins are usually described like this. Entrepreneur from Estonia, who was the first Skype employee, got tired of paying huge fees to banks for transferring money from UK to Estonia. So he came up with a brilliant idea of matching remittance senders and receivers in the same country. TransferWise was launched with an office sauna and employees who don’t mind getting undressed to take on banks, evil entities with no value for consumers. The startup got funding from crème de la crème of investors like Peter Thiel, Richard Branson, Ben Horowitz, becoming the most expensive “unicorn” with $1.1B valuation:

Remittance providers - Latest Market Cap or Valuation Q2 2016

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Western Union: permanent leader of international money transfer?

Western Union gorilla

“… long, sorry decline has left the 140-year-old company a shell of its former self. Today, it is fighting for its very survival. Western Union fell victim to technological advances…”

Associated Press, 1991

Reading current reporting about Western Union’s role in international remittances could make us think that the company has been a successful monopoly of this space forever, but, now, with the arrival of some disruptive innovation (“P2P”, “Bitcoin-blockchain”, “Social”, “Mobile”…), there is a real danger of its imminent demise. In reality, Western Union’s subsidiary, Western Union Financial Services Inc., began providing international money transfers in mid 80s when deregulation allowed a previously domestic service to expand internationally. By mid 90s, Western Union’s coverage included major remittance destinations like China. In those first ten years of its money transfer business, Western Union’s parent (renamed into New Valley in 1991) had plenty of upheavals going near or into a bankruptcy. After changing hands few times, the money transfer subsidiary was resurrected as an independent entity in 2006. Western Union’s stock performance has been highly volatile ever since with 20% decline in price since IPO, dwarfed by the overall market:

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Money Transfer Startups: race against time?

Money transfer startups - Race against time

“High fees, large incumbents, and a $400B+ market are under attack by a slew of remittance startups.”

– CB Insights, February 26, 2015

The best feature of being a startup during a bubble is TIME. Investors, usually impatient folks, are doing much better and encouraging startups to focus on growth rather than boring corporate stuff like “revenues” or, even worse, “profits.” Why bother with positive cash flows when investors are stuffed with money and more are available with a quick WhatsApp message? This is especially true when considering such seemingly easy and huge market as international remittances: $0.6T in size, ruled by one, hopefully, incompetent, colossus:

Money Transfer Providers X-border Volume Comparison for Previous 12 Months 2017 Q1

 

 

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International Money Transfer Services: Lean and Hungry

International Money Transfer Services

Do remittance startups have fundamentally different cost structure vs. incumbents? What are the primary customer acquisition channels for money transmitters? What can explain massively higher relative valuations of remittance startups vs. established providers? If you are interested in such questions, this article is for YOU.

We will cover the following topics:

  • Customers

  • Operating models

  • Acquisition channels

  • Valuations

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International Money Transfer News

Hello Dear Reader, here you will find collated news about International Money Transfers: providers’ fundraising and valuations, providers’ performance, industry trends, and consumers’ perspective. If you come across another interesting article, please add its link in the comments section.

Funding Performance Other Data
Azimo
May-2016 $15MM at $100-150MM Valuation
Jun-2015 $20MM at $100MM Valuation
Mar-2014 $10MM
Sep-2013 $1MM
Jan-2013 $0.5MM
CurrencyFair
Real-time Cumulative Volume
May-2015 Cumulative volume: 2B EUR
Apr-2015 10MM EUR 50 employees
Mar-2014 Cumulative volume: $1B
Nov-2013 $2.5MM
MoneyGram
Feb-2016 Wal-Mart represents 19% of revenues
Jun-2015 Share in USA-Mexico: 13%
Remitly
Feb-2017 Annualized volume: $2B
Sep-2016 $38MM Annualized volume: $1.5B 150 employees
Apr-2016 $38.5MM at $170MM Valuation
Jan-2016 Annualized volume: $1B
Sep-2015 Annualized volume: $500MM 100 employees
Jul-2015 Volume in 2015: $300MM
Mar-2015 $12.5MM Volume in 2014: $100MM, grew 4 times from 2013
Jan-2014 $5.5MM
Jan-2013 $2.6MM
Apr-2012 1.7
Oct-2011 $0.75MM
TransferWise
May-2017 Reaches profitability
Oct-2016 Monthly: volume – $1B+, revenue – ~$6M Transferred $2B from USA in 2015
Sep-2016 Montly: volume – 0.8B GBP, revenue – 5M GBP
May-2016 $26MM at $1.1B Valuation Monthly revenue: $5MM 600 employees
Oct-2015 Cumulative volume in USA: $1B 430 employees
Jun-2015 Monthly volume: 500MM GBP 350 employees
Jan-2015 $58MM at $0.5B Valuation Cumulative volume: 3B GBP 250 employees
Jun-2014 $25MM
Apr-2014 Cumulative volume: 1B GBP
Oct-2013 Daily volume: 1.2MM EUR, Cumulative: $250MM GBP
May-2013 Cumulative volume: $125MM GBP
Apr-2012 $1.3MM
Nov-2011 Monthly volume: $1.6MM
Sep-2011 Cumulative volume: 2.5MM GBP 23% MoM growth, 1K repeat customers
Western Union
Feb-2015 80% of new wu.com customers are net new
Apr-2015 $40MM media budget for USA
WorldRemit
May-2017 USA represents 10% of revenue
Sep-2016 Expecting 42M GBP in 2016 revenues Average txn size: $261
Feb-2016 $50MM at $500M Valuation Grew 80% in 2015 Mobile money is 25% of revenues
Nov-2015 Will grow 2 times in 2015, $1B annual volume
Jul-2015 Laying off staff in USA
Jun-2015 Will grow 3 times in 2015
Feb-2015 $100MM at $500MM Valuation Revenues in 2014: $24MM, 2013 – $9.3MM 250 employees
Mar-2014 $40MM
Jan-2010 4.4MM GBP
Xoom
Apr-2016 Expecting 10% growth in 2016 ($200MM in revenue)
Apr-2015 Average trnx size for India is $1,500
Interesting articles
Jul-2015 Why older people are more likely to oppose ‪‎immigration‬?
Apr-2015 Overview of Bitcoin and Ripple for money transfers Paying bills of relatives vs. sending them money
Mar-2015 Behavior of Remittance users
Bitcoin
Jul-2016 Interview with CEO of Bitspark
May-2016 Bitcoin experts debate remittances
Oct-2015 Bitcoin does not make remittance cheaper
Sep-2015 Abra raises $12M
Apr-2015 BitPesa raises $1.1MM
Countries
India
May-2016 Are Indians really sending more money home?
Philippines
Apr-2015 31% are banked Vision and action for Filipino diaspora

MoneyGram: whack-a-mole of money transfers?

behemoth-moneygram

“…to date MoneyGram has refused to open a meaningful dialogue with us, leaving us no choice but to make this proposal public…”

– Euronet CEO’s letter to employees, December 13, 2007

MoneyGram and Western Union are usually mentioned in the same breath as “monopolies” of international money transfers. But when considering MoneyGram’s valuation in late 2016, it was not only tiny in comparison to Western Union’s but with a revenue multiple far below of any competitor:

money-transfer-providers-valuationrevenue-comparison-nov-30-2016

At that point, MoneyGram was valued at less than six months of its revenue. Rather than a fluke, since IPO in 2004, MoneyGram had a four-year streak of being nearly worthless and dropping again in value to $350 million by October 2016:

mg-stock-performance-since-ipo

There was a clear disconnect between MoneyGram’s image as a slightly smaller Western Union sibling and a recurring hopeless view from investors. Was that the curse of “silver medal”?

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Xoom Money Transfer: The Disruptor That Wasn’t

Xoom…. think Western Union without the excessive fees…

TechCrunch, Sep 28, 2007

Xoom’s 15-year history is full of missed opportunities and second chances. The child of so-called “PayPal Mafia” and protege of Sequoia Capital, Xoom was founded in 2001 to disrupt cross-border remittances. At that point, Western Union already had a website where customers could initiate and track money transfers, but it seemed clunky and wasn’t attracting much usage. The shift of remittances online was expected imminently, so creating an online-only provider with a better user experience was a no-brainer.

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Does Bitcoin make sense for international money transfer?

Bitcoin money transfer: competing with fast elephant

“I think we will know when bitcoin has reached prime time when it is transferring more value each day than Western Union or Money Gram…”

Roger Ver, November 2013

Bitcoin money transfer is usually discussed in either sensational or downright misleading way. There is a significant category of Bitcoin or, currently more popular, blockchain stakeholders and observers who seem to be completely vested in this innovative product’s awesome potential and are unable to entertain a deviating opinion. This very smart and capable, but, unfortunately, close-minded group believes that Bitcoin cancels a need for regulation and would soon destroy Visa, Western Union and “banks.” Articles written for and by such audience are easy to find, and we will not link to them to avoid enabling such either outrageously ignorant or deceptive opinions.

Rational view of Bitcoin for Sending Money

In this context, we are always grateful to find a write-up about Bitcoin for remittances which attempts to be more objective. Here are some examples: Bootstrappers guide to bitcoin remittances, Tackling bitcoin price swings OR

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Money Transfer to India: Review and Tips

Are you NRI or POI transferring money from USA to India? Want to get the most rupees for your dollars? Not sure which provider is the best, cheapest or fastest? YOU came to the right place! We will cover all most important topics:

  1. Current state and key trends for sending money from USA to India

  2. Rupee to dollar exchange rates and timing

  3. Top money transfer providers

  4. Finding fastest and cheapest vs. better and best money transmitters

Please note this post is specific to India. If you are looking for general knowledge of how to best transfer money, please review this other SaveOnSend blog post first.

Before we get started… Great news if you are a consumer transferring money from USA to India: it is currently the most competitive corridor from USA, attracting much more competition and larger investments than any other destination. You are in luck with variety of choices and lavish promotions which for many other destinations simply don’t exist. So you could make a relatively safe assumption that when transferring money to India with any top provider you would get a reasonable price and service.

But we are recommending trying providers with the cheapest price – this way, you are not just helping more your family but also supporting India’s growth. By always using the least expensive method of sending money home, each 1% in savings generates additional $100MM annually for your families and India’s economy.

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Banks And Money Transfer: Sleeping Giants?

Caravan as a symbol of banks for remittances

“The dogs bark, but the caravan moves on.”

– Arab Proverb

The premise of money transfer startups’ PR pitch revolves around a relatively intuitive notion when it comes to the role of banks: they are sleeping giants with bureaucratic culture, awful customer service and backward digital capabilities, so it is just a matter of few years before banks will be disrupted out of cross-border money transfers, also known as “remittances.” Paradoxically, this premise is not wrong. Moreover, most banks don’t view money transfers as strategic business or care which flavor-of-the-month startup is bragging about their imminent disruption. However, while some of those remittance startups would disappear in few years, the leading role of banks in this space will remain forever. How could that be?

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