“High fees, large incumbents, and a $400B+ market are under attack by a slew of remittance startups.”
CB Insights, February 26, 2015
For disruption to occur, it only takes one determined startup with a long-term vision spanning two or more decades. The disruptive force of innovation only required one Amazon for books, one Spotify for music, and one Netflix for entertainment. After more than two decades since the founding of Xoom and over a decade since the launch of Wise (formerly TransferWise), the cross-border money transfer industry still does not know which fintech company will be such a disruptor. However, a decade of keen observation in this fiercely competitive space gives us a reasonable understanding of which ones still have a chance, which ones don’t, and why some fintechs are no longer around.
The good news for fintechs over the last decade is that the market keeps growing. In remittances alone, the volume has been increasing by $25-50 billion annually, and the World Bank conservatively projects a 3% annual growth rate in the coming years:
The bad news is that the transition in consumer habits towards embracing fintechs and digital channels has been gradual. A decade ago, conventional wisdom suggested that the widespread availability of affordable smartphones and the shift from tech-averse elders to tech-savvy millennials would result in a swift increase in the utilization of online channels for cross-border money transfers.
Three years later, in 2018, some of the same folks were predicting that cash agents would completely vanish within the next five years:
Not only did none of that transpire, but in 2022, Azimo’s struggles resulted in its acquisition by a payroll company to salvage some of its payment technology. The competition among money transfer players has proven to be significantly more challenging than initially expected, and it is far from reaching its conclusion.
Money Transfer “Disruptors”
Around 2010, the potential for disrupting cross-border money transfers for consumers appeared enormous. The prevailing perception was that established players like Western Union, MoneyGram, and Ria were committed to their brick-and-mortar branches and might be unwilling or unable to provide consumers with a more streamlined digital alternative. Xoom had been in the market for a few years and was experiencing significant growth, but it was only targeting outbound corridors from the United States. Moreover, given the immense size of the market, it seemed feasible to accommodate more than one fintech, especially during the early stages of the digital revolution.
Hence, the aspiration to become a larger and more superior alternative to Western Union didn’t appear too daunting. So, a new generation of fintech founders challenged the CEOs of established money transfer businesses.
Bottom row: Ria Money Transfer, MoneyGram, Western Union Digital Ventures, Xoom, Transfast
Some of the noteworthy startups that emerged during those years were:
- Zepz, aka WorldRemit (founded in 2009)
- Wise (2011)
- Remitly (2011)
- Azimo (2012)
While Azimo is no longer around, Wise passed Western Union’s transfer volumes in 2022, and Remitly has inched closer to the top five global players:
Has the disruption affected traditional players so far?
Since the early days of Xoom (the original fintech for remittances), Western Union has doubled its transfer volumes. However, this growth wasn’t sufficient to keep pace with the expanding market, leading to a gradual erosion in its market share of remittances over almost two decades:
While not disruptive, it’s evident that once fintechs achieved scale by 2021, they collectively hindered Western Union’s expansion in digital channels:
Another sign of the collective impact as fintechs achieved scale is the decline in the margins of the incumbents, commonly known as the “take rate.”. Before fintechs reached scale in 2020, incumbents didn’t pay much attention to this aspect. Here’s how the CEOs of Western Union and Euronet (parent company of Ria Money Transfer) described the competitive pricing environment in 2018.
Starting from 2020, Western Union’s margin declined by over 20%, falling from around 5% to less than 4%. Other incumbents also reduced their margins, while those of Wise and Remitly remained relatively stable:
The second-largest incumbent, Ria Money Transfer, has also not experienced disruption yet, but its growth rates, which were previously around 20%, have now decreased to 5-10%:
MoneyGram, once the second-largest incumbent in the industry after Western Union, is in a stable state now but is grappling with a lack of growth after a near-death experience in 2019 (as discussed in this SaveOnSend article):
In addition to traditional money transfer operators, banks play a significant role in cross-border money transfers. In the US alone, consumers send more than $100 billion annually via banks. Banks not only have yet to experience disruption, but they have also nearly doubled their transfer volumes in the last decade (for more information, you can refer to this SaveOnSend article). The largest consumer bank in the US, JPMorgan Chase, has remained among the top 5 players.
The lack of disruption so far is in part caused by traditional players not standing still. They are typically slower than fintechs in launching new features, but eventually, they catch up by observing startups and copying what works. For example, between 2021 and 2024, the Trustpilot rating of traditional players has improved, while that of fintechs has declined, making the two groups indistinguishable regarding customer satisfaction:
The crucial role of focus in disruption
As Jim Barksdale, CEO of Netscape (the world’s largest browser at the time) famously said in 1995, “… there are only two ways I know of to make money: bundling and unbundling.” Fintechs are generating revenue by unbundling incumbents until they reach a sufficient size to begin bundling additional products themselves. Subsequently, new fintechs emerge to unbundle the previous generation. In the context of cross-border money transfers for consumers, Xoom and Remitly were introduced to unbundle Western Union, Wise to unbundle banks, and Atlantic Money was launched to unbundle Wise.
One of the most challenging dilemmas for a growing fintech company revolves around the timing of bundling new products and entering new regions. With the rise in product and geographical complexity, founders and key employees may find their attention stretched too thin. Additionally, they might become disengaged with the core product, especially if its growth begins to slow down, and prefer to work on a new internal venture with higher growth potential. A straightforward way to determine if bundling is premature is by examining the growth rate of the core product to assess whether it’s decelerating rapidly or gradually.
The most notable recent drop has been observed with Wise, which saw consumer cross-border volume grow by only 8-17% in recent quarters. While this is a respectable figure for an incumbent, it is likely insufficient for a disruptor.
Money transfer funding and valuation
The appeal of disruption and the substantial assets held by VC firms ensured an abundance of capital available to fintechs in this space. Between 2010 and 2019, just four startups attracted over $1.5 billion in funding:
As is customary with faster-growing fintechs, they command higher valuation multiples. For instance, the valuations per unit of transfer volume for Wise and Remitly are two to three times higher than those of Western Union, MoneyGram, and Intermex:
While there hasn’t been a disruption in the volumes of the incumbents yet, it is fascinating to note that the value of Wise and Remitly, which didn’t exist before 2011, is now three times greater than that of Western Union and MoneyGram, respectively. Investors are clear about which type of companies have a much higher potential in cross-border money transfers.
Performance differences across fintechs
Investors began to distinguish fintechs based on their performance quality, encompassing business, operational, and technological models, after the initial couple of years. When examining the speed and scale of funding rounds from their launch, Wise had significantly outpaced the competition by Year 3. Remitly and WorldRemit were striving to keep pace with varying degrees of success, while Azimo never quite gained traction:
By September 2018, Remitly had reached $6 billion in annualized transfers. While this might appear substantial, it paled in comparison to TransferWise’s growth trajectory. Both companies were founded around the same time and received their first $1 million+ in funding in April 2012. However, TransferWise reached a $2 million monthly transfer volume just a year later, more than two years ahead of Remitly. By mid-2015, TransferWise was transferring thirty times more per month than Remitly:
The underlying reason is in Remitly’s much slower scaling. In the first three years, Remitly launched, albeit large but only one corridor: USA-to-Philippines. In February 2015, the startup launched the second corridor, USA-to-India, and in October 2015 – USA-to-Mexico. In July 2015, Remitly also announced its first acquisition of a failing application Talio to bring in local talent (both companies are based in Seattle) and beef up messaging features in Remitly’s mobile technology. In April 2016, Remitly opened an outbound business from Canada to India and the Philippines. In September 2016, the startup added seven more countries in Latin America for transfers from the US:
In early 2017, Remitly expanded its services to include a couple of outbound corridors from the UK. Given the excitement surrounding the digital remittances niche, it was not surprising that in the October 2017 funding round, Remitly was valued at “at least” $345 million.
Remitly utilized the funding to expand into new markets, such as Australia in May 2018. By July 2019, Remitly had operations in 16 countries and had surpassed $2 billion in quarterly transfer volume:
The progress of Remitly, while commendable, is overshadowed by TransferWise’s rapid expansion. TransferWise launched hundreds of corridors in the first four years, reaching $1 billion in transfers within its first 12 months in the US alone. By mid-2019, TransferWise was handling seven times more volume than Remitly, with only 60% more employees. By 2021, TransferWise had expanded to cover over 40 outbound countries…
… while Remitly covered only 17:
However, the battle for global dominance in consumer cross-border transfers is far from over. While Wise prides itself on a low-cost referral channel (aka, paid “word of mouth”) responsible for 70% of its growth, it is no longer a differentiation. Spending only 5% of revenues on marketing is not as impressive if the volume growth has declined to 8-17% in the recent quarters.
Remitly has the opposite challenge: it has maintained a growth rate of around 40%, but at the price of being unprofitable with 25% of revenue spent on marketing:
Moreover, that rapid growth hasn’t been evenly distributed across outbound regions. In the US, it has declined to 28%, resulting in a gradual decline of the US share in the overall volume:
Why do money transfer fintechs fail?
A successful fintech typically takes five years to achieve profitability, necessitating investments of hundreds of millions of dollars in the interim to acquire millions of customers. VC firms step in to fund this cash flow gap. Given that most fintechs fail, VCs are only willing to take such significant investment risks if they believe the fintech has the potential to become a market leader, at least in one large region. Remitly was primarily seen as a player in the US outbound market, WorldRemit in Africa inbound, and Wise in Europe outbound.
Unfortunately for Azimo, it began operations a year after Wise with a similar regional focus. While its customer base comprised blue-collar migrants, in contrast to Wise’s focus on white-collar expats, Wise’s remarkable growth indicated to investors that eventually, all types of cross-border consumers would be interested in its service.
However, Azimo’s slower growth compared to Wise wasn’t solely due to the one-year lag. It was also attributed to less capable leadership, although the comparison was against an extremely high bar. Without a comparable success to Wise and Remilty, Azimo founders appeared more inclined to speak at conferences about its achievements and make unsupported statements about the imminent disappearance of offline channels. Instead of actively acquiring new customers, they seemed to rely on the digital wave to bring customers to them.
Even more unusually, the lack of intensity manifested in Azimo openly discussing their desire to be acquired as early as 2015, just three years after launch. A negative impact of Azimo’s less competent management team and lower intensity compared to leading fintech competitors was exacerbated by the sudden exit of a co-founder in 2017, who was described by employees as the “heart and soul of the place.”
Similar to Xoom, Azimo also limited its growth ambition to just one outbound geography (in Azimo’s case, it was Europe, whereas, for Xoom, it was North America for the first decade). As a result, Azimo’s growth slowed down to 25% by 2020, even as expenses increased by 50%:
While investors were willing to provide hundreds of millions of dollars to Wise, Remitly, and WorldRemit, Azimo’s final funding round in May 2018 amounted to only $20 million, and the underlying valuation wasn’t disclosed. By early 2022, Azimo was acquired by a payroll payments company for a valuation similar to that of 2018.
TransferGo and WorldRemit (Zepz)
A somewhat similar fate met another Europe-based startup, TransferGo, although it is still in operation. The startup was founded a year after Wise by Lithuanians who openly admitted they were trying to clone their Estonian competitor. While Wise was small enough, and the market was expanding, TransferGo managed to grow rapidly, with a 100% growth rate in 2018:
By 2021, TransferGo’s growth slowed down to 25% with a cumulative volume of $6 billion over the previous almost decade. Remitly was already transferring $6 billion annually, not in total, 3 years earlier. Wise crossed $6 billion in cumulative transfer volume in 2015, six years before TransferGo. In 2022, its main UK subsidiary was showing declining revenues and increasing losses. In 2024, 12 years into existence, TransferGo raised only $10 million without disclosing its performance.
WorldRemit (aka Zepz), falls into a middle-ground category, being more successful than Azimo but trailing behind Wise and Remitly. The underlying reason for its lower valuation compared to the leading fintechs is essentially the same: relatively weak planning and execution. For instance, in 2015, WorldRemit significantly overestimated the speed of its growth across markets, which led to employee layoffs in both the US and the UK.
In 2017, WorldRemit was eager to expand in the US and drastically cut pricing by two-thirds in its two top corridors, resulting in a loss of approximately 0.5% on each transaction. However, realizing that this strategy wasn’t working or sustainable, WorldRemit eventually raised its prices back to previous levels:
Mistakes in regional expansion efforts cost years of hard work and resulted in a combined market share outside of Europe that was lower in 2018 than it was in 2014, only starting to recover afterward:
Compare that with Wise’s more consistent expansion:
The performance gap is also evidenced by a critical difference in employee reviews of working for Wise versus WorldRemit, which has remained consistent since 2016:
WorldRemit’s uneven management also led to forecasting misses. In June 2015, its founder & CEO expected to triple 2015 revenue compared to 2014. By November, WorldRemit downgraded expectations to “at least double”… and finished 2015 with 80% growth.
WorldRemit also underperformed in developing a scalable business model. A company growing by 50% should be enjoying rapidly increasing operating margins. However, WorldRemit doubled its losses between 2017 and 2018:
What was even more uncharacteristic for a near-unicorn fintech is that to address its management deficiencies, WorldRemit was spending millions on management consultants, tripling the spending to $8.5 million in 2018:
More fundamentally to its growth strategy, WorldRemit has faced a similar dilemma as Remitly: it was also growing rapidly but due to spending almost 25% of revenue on marketing and being unprofitable. In 2022, under pressure from investors, WorldRemit had to cut marketing spend by 40%, to 13% of revenue. Not surprisingly, that resulted in a collapsing growth rate of just 14%:
Other fintech joining the money transfer game
One might assume that the competitive nature of the money transfers for consumers would dissuade other fintechs from entering the market. However, that hasn’t been the case. In 2021, Revolut ventured into the world’s largest remittances corridor, from the US to Mexico (worth over $60 billion), by offering nearly free transfers with no foreign exchange markup to its customers:
The impact was so strong that MoneyGram had to publicly acknowledge it:
In 2020, Atlantic Money was introduced in the UK by former employees of renowned fintechs, Robinhood and Tinkoff. Their marketing approach aimed to directly compete with Wise. Atlantic Money offered fixed fee transfers for £3 or €3 at the prevailing exchange rate (eliminating foreign exchange markup):
Interestingly, Wise initially included Atlantic Money in its comparison tool but later removed it without explaining. In response, Atlantic Money filed a complaint with the UK’s competition authority, the Competition and Markets Authority (CMA).
In its first full year of operation, Atlantic Money reported remarkable results, surpassing the initial growth of leading money transfer fintech companies by a significant margin:
After 1.5 years, Atlantic Money was running one year ahead of Wise, which passed the same £30M/month milestone around the 2.5-year mark. Additionally, Atlantic Money was planning to expand to the US three years sooner. Its tiny fee and zero FX markup were naturally attracting higher send amounts:
Atlantic Money questions the premise of variable costs for cross-border money transfers. Do the costs actually increase with larger amounts? And if they are more or less fixed, why should providers charge more depending on the amount? This challenges Wise’s supposed mission of reducing transfer fees and its inability to decrease average take rates for a decade. The disruption in international money transfer never stops:
Banks ← Western Union ← Xoom ← Wise ← Atlantic Money ← Who is Next?
Conclusion
Hopefully, you found this overview useful in forming your perspective on which of these players will become the dominant leader in consumer cross-border money transfers. As with all our analyses, if you encounter any errors or believe we’ve missed important perspectives in this article, please don’t hesitate to comment below. We value your feedback and will continually update this post, so be sure to check back soon for more insights!
