“…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
In the past, MoneyGram and Western Union were often called the “monopolies” of cross-border money transfers. However, MoneyGram’s valuation was significantly smaller than Western Union’s and had a multiple below that of any competitor.
MoneyGram’s valuation had been erratic since its IPO in 2004, even reaching near-zero levels in 2019 and 2020, until it was finally acquired by a private equity firm, Madison Dearborn Partners, in 2023:
Throughout its history, MoneyGram has stood out as the most irrational player in remittances, defying the stereotype that incumbent financial services companies are too conservative. The only explanation for such behavior could be the curse of an eternal “silver medal.”
Since the publication of “Bitcoin: A Peer-to-Peer Electronic Cash System” in 2008, international money transfers, although constituting a smaller portion of cross-border payments, have emerged as one of the most promising use cases for crypto.
The initial assumption was that remittance users were experiencing exorbitant fees and subpar services from traditional players like Western Union. The prospect of an almost cost-free and instantaneous blockchain-based solution appeared to be a much-needed relief. Additionally, it presented an opportunity for affluent individuals in Western countries to showcase their efforts toward promoting financial inclusion in developing nations.
Subsequently, many startups received funding to test this hypothesis with consumers and partner with money transfer operators (MTOs). Additionally, one country recognized this as a national priority and encouraged its citizens to explore cryptocurrency-based remittances.
Despite this, the adoption of cryptocurrencies for remittances has not increased in the last decade. Using crypto for international money transfers remains a pilot or pay-per-play. More importantly, nobody can articulate an in-depth case for using private, public, or government crypto instead of or on top of Swift + local real-time rails.
In contrast, non-crypto fintechs such as Wise and Remitly have emerged among the global leaders. What factors have contributed to the disappointing start for crypto, and will this innovative technology have a more significant impact in the future?
Innovation Adoption: 3 Cases
Consumers and businesses possess trillions of dollars of disposable income that they eagerly spend on various products and services, regardless of whether they are beneficial. For instance, consumers collectively spend around a trillion dollars annually on alcohol, junk food, or tobacco. Introducing genuinely innovative technology is an even more straightforward proposition. Financial services and insurance companies allocate a trillion dollars annually to technology spending alone. Apple generates $200 billion just from iPhone sales. While generative AI is still in the early phase, Nvidia’s annual sales of AI chips have already reached $150 billion. To achieve similar success, blockchain technology only needs to address one of the three following use cases:
Do remittance startups have a fundamentally different cost structure vs. incumbents? What are the primary customer acquisition channels for money transmitters? What can explain remittance startups’ massively higher relative valuations vs. established providers? If you are interested in such questions, this article is for YOU.
“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 a 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 a 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 the 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?
“Only when the tide goes out do you discover who’s been swimming naked.”
Warren Buffett
Transfast presents a particularly interesting case among providers of international person-to-person remittances. While we often read about startups or bitcoin taking on the industry’s largest players, Western Union and MoneyGram, Transfast was unique in being till 2019 acquisition by Mastercard an independent, private equity-backed company that is in-between those extremes. Transfast straddled mostly offline with some online business worlds across the globe while being nimble enough to maintain an entrepreneurial / startup culture. Between 2008 and 2016, Transfast grew ten times, expanding from a narrow focus of sending money between the U.S. and Latin American corridors to a truly global provider. Their story and insights on the industry are quite unique and informative.
This blog is specific to Transfast – if you are looking for more general knowledge on the best ways to transfer money, check other SaveOnSend blog posts.
We will cover questions like:
Should I use Transfast to transfer money from the U.S. to India, the Philippines, Mexico, or China?
How do Transfast’s fees and exchange rates compare with other money transfer companies?
How is Transfast different vs. other online remittance providers?
We will structure this post as follows:
Transfast’s history in money transfer
Transfast’s pricing: fees + FX markup (exchange rate)
Whether or not you should use Transfast for money transfer
Transfast CEO’s views on the money transfer industry and current trends
Money Transfer scams are here to stay. With a Bitcoin/blockchain technology, there is now even more use cases. You can find the main types in this article.
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