Remitly raises $38.5M more to take on Western Union, passes $1b transferred annually

Remittances are a huge business, with $582 billion transferred in 2015 and $432 billion of that sent specifically to emerging markets, according to the World Bank. Today, one of the bigger startups in the field has raised some funds of its own to help it better tap the opportunity, and better rival established players like Western Union and others like WorldRemit and PayPal’s Xoom.

Remitly — a Seattle-based remittance service co-founded and led by a former top executive from Barclays — has picked up $38.5 million in a Series C round of funding. Led by new investor Stripes Group, the round also had participation from Vulcan Capital (Paul Allen’s investment group) as well as existing backers DFJ, DN Capital, Bezos Expeditions (Jeff Bezos’ investment firm), Trilogy Equity Partners, and others that are not being named. (Other previous investors include QED and Eric Schmidt’s TomorrowVentures.)

The funding brings the total raised to date by Remitly to $61 million (including earlier rounds raised when Remitly originally co-founded by Oppenheimer, Josh Hug and Shivaas Gulati and was called Beamit). For some comparison, WorldRemit has raised just shy of $148 million and is currently valued at $500 million. And TransferWise has raised just over $90 million and is allegedly approaching a $1 billion valuation. (By the by, we have heard from more than one source that TransferWise is trying to close another round of funding at the moment.)

Matt Oppenheimer, Remitly’s co-founder and CEO, says his company is not disclosing its valuation, but we are trying to find out.

While the market for remittances is big, so is the field of companies that are working in it, with dozens of fintech players vying for a piece of the pie. Remitly sets itself apart from its competition in a couple of different ways.

First, there is Remitly’s geographic focus. While companies like TransferWise have developed platforms that work on the idea of catching as many money transfer opportunities as possible, Remitly has taken a different approach, building its business to target the very biggest corridors first.

Up to now, the company has only focused on transfers from US dollars to three countries — India, Mexico and the Philippines — which Oppenheimer says account for three of the top-five countries for receiving money transfers (the others two are China and Vietnam).

Remitly’s existing business has now passed $1 billion transferred annually, and today, to coincide with the funding, Remitly is expanding its sending options to include Canada, where immigrants and others send $23 billion abroad to families each year.

The other area where Remitly differs from some of its competitors is in how it works. Taking a page from Oppenheimer’s experience at Barclays, and understanding the fragmentation of the market — the leader, Western Union, has only 17% of the market at the moment — Remitly is trying to keep things simple, quick and cheap to stand out.

It says it has a “proprietary network of banks and cash pickup locations” for receiving money (versus some others that use aggregated services). The platform itself — via mobile app or online –is designed to transfer the money seamlessly and as fast as a few minutes if you opt for the ‘express’ tier (the economy tier takes 3 days).

The pricing, meanwhile, undercuts Western Union fees (which start at 8%): the economy service is free, while the higher tier starts at $3.99. Where it sometimes falls down is in the exchange rates. As of the time of writing, the locked-in rate for one corridor — U.S. to Philippines — is actually higher for Remitly than Western Union and Xoom.

It’s also made moves like acquiring a company Talio — to improve messaging communications from within their app (tapping into the fact that services like Facebook’s Messenger are becoming key platforms for people talking and subsequently sending money to each other).

This is all in the name of better quality of service, Oppenheimer said.

“Living in Kenya and running banking there for Barclays, I could that money transfers from abroad were a huge part of people’s lives, but also a huge problem because of the costs and infrastructure,” he said. “They deserve better, and I’m very driven to help them.”

And this is also why Stripes came in as the lead investor in this round.

“Remitly’s rapid growth in a large and well-defined hundred-year-old market is a great example of how a new generation of companies is using technology and leveraging mobile adoption to deliver better, faster, and more secure solutions to increasingly discerning consumers – all at lower costs,” said Stripes Group partner Ron Shah, in a statement. “By doing this, Remitly is impacting people’s lives in a significant way and we’re excited to join the team as they continue to expand their global footprint.”

Of course, there are some who are more skeptical of Remitly’s slower approach to the market. Remitly is currently the fastest-growing of the remittance players — over 400 percent in the first quarter of 2016 — but it’s seeing a much smaller volume of transactions, which has had a knock-on effect on valuation, funding, and subsequent growth.

Oppenheimer contends that this latest tranche of funding will give it “more than enough room to grow” and that its current growth rate is a testament to where it is going and the focused approach Remitly is using to get there.

“What you see is that you wouldn’t have the growth rates we have if you didn’t have strong repeat usage,” Oppenheimer said. “That sounds like something everyone could say but it’s unique to us in the industry.”

Featured Image: kentoh/Shutterstock (IMAGE HAS BEEN MODIFIED)

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