Remittances — when people send money internationally to family and friends, or as a payment — has long been one of the most important levers for getting funds to people in developing economies.
However, the persistent spread of the coronavirus is having a tough impact on that, with the World Bank estimating that remittances to low and middle-income countries will fall 20% this year to $445 billion (down a record $554 billion in 2019). That’s due in part to the economic slowdown (and job and wage loss) in sending countries, and in part to a general shift away from using cash and spending time in shops to make physical transactions.
That trend is not universal, though: remittance companies that are building solutions based on technology are seeing a surge in business. And one of them, Remitly, is today announcing that it has raised $85 million in equity to double down on its growth.
The round is being led by PayU, the payments business owned by Prosus (Naspers’ technology holdings), with participation from DN Capital, Generation Investment Management, Owl Rock Capital, Princeville, Stripes, Threshold Ventures, and Top Tier. All are previous backers, and Remitly’s valuation with the deal is now $1.5 billion — an upround compared to its Series E last year.
Matt Oppenheimer, Remitly’s co-founder and CEO, said in an interview this week that customer growth has increased by 200% compared to a year ago, with 300 million customers served in aggregate spread evenly across the 17 send-from markets and the 57 send-to countries where Remitly operates. He attributes that to Remitly offering not just competitive rates, but its focus on doing it virtually — that is, without requiring people to come into physical shops to send or receive money, as they might more typically do with Western Union or MoneyGram.
(I’d also argue that the connection might be a little more direct: it may also be that Remitly is used by migrants who are in better economic circumstances themselves, less impacted by job and wage losses than others, and this has also helped its business to thrive.)
“We aren’t seeing that downturn in remittances,” he said. “Over half of global remittances these days are sent via physical cash locations, and during a pandemic, many don’t feel as safe doing that, and so that will impact numbers.” He added that the amounts might seem modest in the developed world, but even incremental transactions are meaningful. “$200-$300 goes an incredibly long way.”
Just before the pandemic really started to take hold in the US and Western Europe, Remitly launched Passbook, a “neobank” in partnership with Greendot, as part of its strategy to expand into a wider range of financial services for immigrants.
In retrospect, given how events unfolded globally — where people who were not being forced into new economic situations were likely going to stay put and hold tight until things returned to normal — it was a challenging launch, to say the least.
Oppenheimer said that the company is not disclosing the number of users but “have gotten a lot of customer feedback about offering basic banking and more, and we are excited to scale it.”
The funding being announced today will also go towards the company working on expanding the range of services, with credit a likely next candidate for services.
“We have seen how the business is evolving, and the focus of its customers. Passbook is not just about digital banking. If you are a migrant worker without a social security number, this is the only way to open a bank account,” said Laurent le Moal, PayU’s CEO and a member of the board. “Remitly is doing well on every metric, and being mission driven means something. It was easy for us to say we want to double down and lead this round. This is the time and moment for a new story and a new leg to that business.”
Notably, PayU has continued on as a member of Facebook’s Libra project, where a kind of crypto/virtual currency is being developed to run financial services on Facebook’s own rails and those of its partners. Le Moal says PayU continues to be very optimistic for how this will evolve, although nothing to announce yet on that front. Currently, Remitly is not a member, nor does it have any strategy at the moment around blockchain, although Oppenheimer notes that it’s something it’s watching.
Although PayU is a strategic investor insofar as it is focused on financial services and developing markets, it’s not directly interested per se in remittances as it is about the wider financial opportunity and how it can support it as an investor, he added.
“We have not tried to acquire Remitly, and the reason is very simple: PayU is about payments and credit and so this is about integrating remittances, which are important in the markets where we are but we are not in [remittances] directly. This is a fantastic story and this is an IPO type of company for sure. If we can help in that, that’s great.”
On the subject of IPOs, Oppenheimer declined to comment. But given some of the large investments we’ve seen into fintech in the last several months — Robinhood’s raised $320 million; Revolut added $80 million to a $580 million round; Scalable raised $58 million; True Link raised $36 million; TransferWise closed $319 million in secondary sales; and those were just in the last couple of weeks — there is no shortage of money in the private markets for promising ideas being well executed, so there will continue to be multiple options for companies like Remitly.
And as the economy makes its recovery in line with that of the global population’s physical recovery from the pandemic, it’s putting itself in a position to be ready for the rebound.