by Ingrid Lunden
WorldRemit,
a London-based startup that is tackling the antiquated consumer money
wiring/remittance market with an easy and traceable online solution, has
collected some money of its own: a $40 million investment from Accel Partners,
the storied VC that has backed big consumer plays like Supercell and Facebook
but also a number of financial services startups like GoCardless, Funding
Circle and Braintree. This is the startup’s first VC investment, and one of the
largest-ever Series A rounds achieved in Europe.
WorldRemit is addressing two different business
opportunities with its product. The first is a basic consumer issue: there are
a number of people who live abroad or immigrate to make more money, with the
intention of sending some of those earnings back home — home being a range of
different countries and currencies around the globe. They typically want easy,
cheap and reliable ways of doing that, but many of the most common routes today
involve spending the time travelling to a physical location that offers Western
Union or MoneyGram transfers, paying a large commission fee, and then getting
recipients to do the same at their end.
The second is more of a business and
legal issue: financial regulators looking to reduce money laundering and
funding for illicit activities like terrorism are increasingly cracking down on
remittance services that cannot provide a clear enough electronic track of how
money has moved.
“This industry has largely remained
offline until now,” co-founder and CEO Ismail Ahmed tells me. “The market share
for online remittances is just 5% today, but we expect this to increase to
30%.” Driving that will be incumbents needing to change practices to meet
regulatory compliance, but also, the ongoing pressure on brick and mortar
businesses. “It’s just not fit for the 21st century,” he says.
WorldRemit lets consumers make transfers from any
computer or phone, and receive that money either straight into bank accounts,
or mobile wallets or in the form of mobile airtime. And by its nature, the
transfers are electronic and more traceable than those of offline services.
The company currently lets people send
money to some 100 different countries and the funding will be used to extend
that to over 200, Ahmed says.
It will also be used to extend the
variety of ways that the money can be paid out: one other big issue for people
sending money to family back home is the concern that it may not be getting
used as intended, and so creating more channels for specific payments — say,
for utility bills or education fees — is one way of solving that problem.
It’s a solution that is also being
tapped by a startup I wrote about last year called Regalii, which cleverly
offers its customers the option of selecting gift cards for specific services
as one way of guaranteeing how the money gets spent. And these two are not
alone. Just today another money transfer service, Azimo, raised $10 million. And TransferWise, which also recently raised a round, is another
contender — although typically the average amounts being sent on WorldRemit are
of a lower value so less directly competitive.
Harry Nelis, who led the investment for
Accel, says that he was attracted to WorldRemit both because of the traction
that the startup has already seen with users in the markets where it operates,
as well as because of the track record of the founders.
“We like their focus on the long tail,
and on the smaller corridors,” he says of WorldRemit. “Instead of focusing on
Sterling to euro or to U.S. dollars, what WorldRemit does is think of how to
service, for example, Filipinos in Norway remitting back to the Philippines.”
He says that there are some 30-40 corridors like this one that are underserved
by competitors right now, making for a very nice niche business.
What the long tail business also brings
is repeat custom. “Once WorldRemit acquires customers, they end up transacting
20 times per year.”
Ahmed and Catherine Wines, his
co-founder and COO of WorldRemit, both have been working in the remittances
industry for 20 years. Ahmed has an economics PhD and has been a compliance
advisor at the UN, with a focus on East African money transfer services, and he
founded WorldRemit while studying at London Business School.
Wines is a qualified accountant who had
been MD of First Remit, another international money transfer business acquired
by Travelex.
Source: techcrunch.com
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