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Does Bitcoin/Blockchain make sense for international money transfer?
“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…”
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/Blockchain for Sending Money
In this context, we are always grateful to find discussion about Bitcoin/Blockchain for remittances which attempts to be more objective. Here are some examples: Bootstrappers guide to bitcoin remittances, Tackling bitcoin price swings OR
Banks And Money Transfer: Sleeping Giants?
“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?
TransferWise: Rebel, What is Your Cause?
Tale of Two TransferWises
“Revolution is a tough business. You can
– 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:
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International Money Transfer Services: Lean and Hungry
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:
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Customers
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Operating models
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Acquisition channels
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Valuations
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Xoom Money Transfer: The Disruptor That Wasn’t
“Xoom…. think Western Union without the excessive fees…”
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.
Money Transfer: 5 Hacks to Nudge Consumers
“The end may justify the means as long as there is something that justifies the end.”
― Leon Trotsky, Their Morals and Ours
So you built a mobile app for international money transfer, got seed funding, engaged few hundred early adopters, and are now ready to go after those outdated-bureaucratic-price-gouging incumbents. How hard could it be? But a year goes by and your cumulative revenue has barely scratched $100K. The dream of new office digs and sharing success story with schoolmates is getting delayed while investors are starting to be more inquisitive about the timing of “hockey stick”… and it is all because those strange migrants keep clinging to their existing providers.
Well, don’t fret, we have gathered 5 “best practices” for nudging those close-minded consumers to embrace your service. Most of cool FinTech kids are doing this and even some incumbents and banks sample them at times, so it must be perfectly legal and not too immoral… at any rate, it is for consumers’ own good, right?
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:
MoneyGram: whack-a-mole of money transfers?
“…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:
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:
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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Western Union: permanent leader of international money transfer?
“… 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…”
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