International remittances continues to be one of the biggest financial services in developing countries, with $450 billion getting sent from countries like the U.S. to emerging markets in 2017 alone, according to the World Bank. Now, one of the bigger startups using tech to take on Western Union, MoneyGram and other offline incumbents in the space is announcing a large round of funding to meet that demand.
Seattle-based Remitly, which lets people in the U.S., U.K. and Canada send money electronically to friends and family in developing countries across Africa, South America and Asia, is raising a Series D round of $115 million led by PayU, the division of media and internet powerhouse Naspers that’s sometimes described as the PayPal of emerging markets. Previous Remitly investors Stripes Group, DFJ, and DN Capital also participated.
“We would like to offer our service to as many consumers around the world as possible, and now with this funding we can reach further, faster,” said Matt Oppenheimer, the ex-Barclays executive who co-founded the company and is now its CEO.
The round comes at a period of significant growth for Remitly. The company — which competes against others like WorldRemit, Azimo, TransferWise, Regalii, and Xoom (now part of PayPal) — has in the last year expanded to seven more receiving markets in South America (Guatemala, Honduras, El Salvador, Nicaragua Colombia, Ecuador, and Peru) and one send-side market, the United Kingdom. This has helped the company expand its annual send volume to nearly $4 billion, up from $1 billion a year ago.
It’s also coming at an interesting time in the remittance market. The WorldBank says that the past two years have seen a decline in the remittance market as economic and political forces — for example, Brexit and its impact on the value of the Pound in the UK — have weighed down on originating (that is, the money sending) markets and how much individuals have been prepared to send abroad. That is set to change as “relatively stronger growth” in countries in the EU, the US and Russia all will feed more money flowing through the system, the World Bank said. “Officially recorded remittances to developing countries are expected to grow by 4.8 percent to $450 billion for 2017,” its researchers write. Global remittances, which include flows to high-income countries, are projected to grow by 3.9 percent to $596 billion.
Remitly’s funding is almost, but not completely, closed yet: because of the size of the round, and the fact that Remitly is a licensed financial services provider, this Series D triggers a Hart Scott Rodino filing, as well as additional filings required under various state laws relating to the investment, according to Oppenheimer. It’s still close enough to being complete that both Remitly and Naspers are officially announcing the round today.
As with previous rounds, Remitly is not disclosing its valuation, but we are attempting to find out. Notably, this latest round of $115 million is bigger than all of the funding that Remitly had raised to date put together, which totalled $100 million. (Other notable investors have included Bezos Expeditions, QED, TomorrowVentures, Trilogy and the IFC.)
“It was a significant up round,” was all that Oppenheimer would say in an interview. As a point of reference, in Remitly’s last round of $38.5 million a year ago, the startup was at $230 million. This would mean that today’s funding is at least $345 million, but likely higher, given Oppenheimer’s comment.
PayU is a significant strategic investor for a couple of reasons. The first is the company’s geographical footprint.
PayU got its start in India — a market where it has expanded aggressively in part through acquisitions, buying Citrus Pay for $130 million in 2016. Under the ownership of Naspers, it’s also been used as a brand to consolidate a number of Naspers’ holdings in smaller financial services businesses in other developing markets. Now, using its PayU relationship, Remitly can expand more aggressively into that footprint, too.
In fact, Remitly is already active in sending funds to India — “India is a big market for us,” Oppenheimer said. But this will be a way to expand that even more, as potentially Remitly can now potentially start to offer money receiving services to PayU’s existing customers in the country (rather than market itself primarily as a money sender from the originating countries).
As one of the fastest-growing economies in Asia, and the second-biggest in terms of population, India represents a massive remittance market, accounting for $68.9 billion of the global total in 2015 and projected to grow. “We expect this market to continue to grow year over year,” Oppenheimer said.
The second reason that PayU is an important investor to Remitly is that it potentially points to ways that the startup might start to expand its services.
“Our main focus right now is to grow our presence globally and offer our current service to more consumers around the world,” Oppenheimer said, but notably PayU’s primary business is in payments, and there has been a recurring theme in the remittance market for transfers to be set up to pay directly into, say, utility bills, or for grocery shopping at particular stores.
This could be one potential way to grow Remitly’s application, while still staying squarely in the remittance space, by freeing up capital for recipients in markets where they may not otherwise have access to bank accounts and credit cards, and might not want to, or be able to, use cash in all situations.
Not only does PayU itself have a large network of its own services, but a relationship between PayU and Remitly could pave the way for partnerships with others. PayU is one of the more prolific investors in fintech startups, for example also pouring hundreds of millions into Kreditech, which focuses on online loans and financing at the point of sale.
“This substantial investment in Remitly follows our recent $100 million-plus individual investments in Kreditech and Citrus Pay, and demonstrates our commitment to becoming a leading corporate venture capital investor in fintech,” said Laurent le Moal, PayU CEO, told TechCrunch. “We are looking forward to working with Remitly to develop more products and services that can benefit customers in high growth markets around the globe.” LeMoal is also joining Remitly’s board with this investment.
One area, however, where Remitly isn’t likely to move soon is using cryptocurrencies or the blockchain. Money transfers is one area that we’ve seen start to emerge as possible applications for the new technology, and PayU has even invested in Coins, one of the startups working on building a business in this area.
“We follow crypto trends closely but at this time don’t see it solving our customer’s pain points as they send money around the globe,” Oppenheimer said. “At the end of the day, it’s all about the customers and their needs and we’re not seeing a demand for bitcoin right now.”
Whether it’s by bitcoin or other method, the larger trend remains that remittances, delivered to mobile phones at the receiving end, are shaping up to be a useful and increasingly powerful proxy for bank accounts and payment cards for many of the so-called “unbanked” of the world, giving them access to funds and services that they might not otherwise be able to get and use.
That trend means that Remitly and its peers are giving incumbents like Western Union a run for their money.
“I think that the offline cash based segment still accounts for the vast majority of remittances,” said Oppenheimer, “but it is shrinking and it will consolidate to digital remittance companies that provide the best customer experience.”
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