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Cross-border remittance and banking are two of the largest financial services markets in the world. The cross-border remittance market is estimated to be approximately $1.5 trillion in total migrant remittance inflow volume in 2020 (including both formal and informal person-to-person channels). It generates approximately $40 billion in transaction fees globally. The scale of this industry is an indicator of the essential role remittance plays in our economy and society.
However, the lack of innovation and financial inclusivity has challenged the traditional approach. Dominated by banks, operators of brick-and-mortar locations, and informal channels, the players in these markets typically rely on disparate legacy systems and processes. This results in a poor customer experience and additional operating costs that are passed down to the customer. When technology is used, these players typically utilize solutions that may not be scalable, integrated, or built to address the diverse immigrant communities’ cultural and local market requirements.
Today, over 280 million immigrants worldwide may be excluded from fair access to everyday financial services used to build wealth and financial security. For them, sending money internationally is often unreliable, inconvenient, and expensive. The experience can also be daunting – they risk having their identity stolen, losing their money, or having no way to ask a service question in a moment of need. Additional financial services, even when available to them, such as savings, credit, investments, and insurance products, often come with high fees and can be deceptive.
Remitly wants to transform the lives of immigrants and their families by providing the most trusted financial services on the planet. In this strategy story, we will analyze the business model of Remitly and understand how does it work and make money. We will also look at the major competitors for Remitly.
What is Remitly? How does Remitly work?
Remitly is a leading digital financial services provider for immigrants and their families in over 150 countries worldwide. Remitly focuses on meeting the financial services needs of immigrant communities. As of 2021, Remitly has an active user base of 2.8 Million customers.
The inspiration behind Remitly came when Matt, Remitly’s co-founder and Chief Executive Officer, was working in Kenya. There, Matt realized how reliant some families were on the money sent from their loved ones working abroad. He also saw how difficult it was to send and receive money overseas – the process was painful, opaque, and expensive. This first-hand look at cross-border remittances was an eye-opener, and Matt became convinced there was a better way.
In 2011, Josh and Shivaas, two other co-founders, joined Matt to start Remitly and began working on the problem immediately. Their goal was to make a difference for immigrant communities by using technology to disrupt traditional cross-border remittances initially.
Remitly has expanded its core cross-border remittance product to over 1,700 corridors worldwide and extended its offering to a broader suite of financial services.
Remitly customers are primarily immigrants from developing countries who have moved away from their families to seek new opportunities and build a better life for themselves and their loved ones. While the customers may be physically distant, they remain closely connected with and deeply committed to their family and friends back home – often sending money home multiple times per month.
Remitly’s Technology Platform
Remitly’s technology platform powers its mobile-centric suite of products, enabling it to localize products and experiences, connect global networks, and drive a data-driven approach. Remitly’s technology platform, which includes a combination of internally developed and third-party solutions, was built to be scalable, extensible, and seamlessly integrated.
Remitly’s technology unites critical front- and back-end functions into a single, vertically integrated stack. This allows Remitly to provide a low-friction customer experience, efficiently operate the business, and maintain control over product development. Remitly utilizes a cloud-hosted infrastructure which gives Remitly cost and scale advantages.
Remitly’s Growth Flywheel
Remitly benefits from a Powerful Flywheel. Remitly collects more data as it grows its customer base and completes more transactions. This data enables Remitly to refine its marketing strategy, improve the customer experience, and accelerate innovation. Having a broader suite of services attracts more customers and enhances the experience, which could drive more transactions to Remitly and fuel further compounding organic growth.
Remitly’s global network of funding and disbursement partners is at the core of its business model. Remitly has strategically expanded its network in existing corridors to provide customers with increasing disbursement options and in new corridors as part of its expansion strategy. Remitly’s partners create a broad and effective payment acceptance (pay-in) and payment delivery (pay-out) ecosystem for its customers.
Payment acceptance: Remitly has relationships with top-tier banks, including Barclays, Chase, HSBC, and Wells Fargo, and leading global payment processors, including a direct relationship with Visa. These relationships provide customers with an array of payment (or pay-in) options to fund remittances with a bank account, card-based payment, or alternative payment method.
Payment Delivery: Remitly has access to over 3,600 global disbursement partners, including major banks, cash pick-up, and mobile wallet partners. These relationships give its customers the choice of delivery and enable Remitly to send funds within minutes, or even seconds, to more than 3.7 billion bank accounts, over 670 million mobile wallets and alternative payment methods, and approximately 390,000 cash pickup locations (including retail outlets and banks).
What is the business model of Remitly? How does Remitly make money?
- Remitly provides a digital cross-border remittance product accessible via mobile app or the web.
- Remitly provides access to banking services that don’t require them to pay account or international transaction fees, and they can personalize their Visa debit cards.
- Remitly speaks with customers in their preferred language and reaches them through the media channels they frequent to be culturally relevant throughout their journey. Remitly strives to deliver marketing, product, and support experiences that connect with customers in meaningful ways.
- Remitly’s electronic KYC, machine learning-based fraud scoring, and payment authentication processes take place in real-time to give customers immediate feedback.
Marketing Strategy of Remitly
Remitly achieves localized marketing at scale through a blend of deep cultural insights, consistent branding, rigorous analytics, and sophisticated channel management. As a mobile-centric business, Remitly leverages native app capabilities such as language preference, geolocation, and communication preferences to tailor the customer experience and fine-tune programs like promotions, referral, and activation campaigns.
Brand Marketing: Remitly strives to position the brand as a human-focused brand in a category of transaction-focused competitors. While Remitly consistently delivers across all its markets, Remitly develops modular templates that enable it to customize language, imagery and symbols, and currencies to ensure local relevance.
Performance Marketing: Remitly utilizes a highly-efficient, multi-channel marketing strategy that finds customers where they live: in their communities, where they consume media, and through the referrals of people they trust.
Word-of-Mouth Referrals: Word-of-mouth is a key component of Remitly’s growth. Remitly has built a proprietary referral product that enables customers to recommend Remitly to their friends and family members, with both the referrer and referee receiving promotions.
The business model of Remitly began with digital cross-border remittances. Over time, Remitly has developed a broader portfolio of financial services, many of which are not met by legacy institutions.
Digital Cross-Border Remittances: Remitly provides a digital cross-border remittance product accessible via mobile app or the web. Remitly’s customers can set up an account and send money to international recipients on Remitly’s platform without visiting physical agents, generally within minutes.
Recipients can receive funds in multiple ways using Remitly’s diversified and global disbursement network. Remitly’s customers and their families can also track the status of their transactions in real time.
Remitly for Developers: Remitly serves business customers through Remitly for Developers, its remittance-as-a-service offering that strategically leverages a custom-built global network and compliance and regulatory infrastructure.
With Remitly for Developers, businesses and their developers can integrate this network and infrastructure into their existing applications and websites through Remitly’s APIs in exchange for fees and foreign exchange markups paid to Remitly by business customers to utilize Remitly’s network. This enables them to offer digital cross-border payments to their customers in emerging markets.
Digital Banking Services: Remitly launched Passbook, a digital banking service available through a mobile app uniquely designed for immigrants. Passbook promotes financial access by giving customers a new way to store, spend and send money securely and promptly. With Passbook, customers can access banking services that don’t require paying account or international transaction fees.
How does Remitly make money: revenue model
Remitly made $485.6 Million in 2021. The business model of Remitly primarily makes money from transaction fees charged to customers and foreign exchange spreads between the foreign exchange rate offered to customers.
Transaction fees vary based on the corridor, the currency in which funds are delivered to the recipient, the funding method a customer chooses (e.g., ACH, credit card, debit card, etc.), and the amount of the customer’s principal.
Foreign exchange spreads represent the difference between the foreign exchange rate offered to customers and the foreign exchange rate on the Company’s currency purchases. They are an output of proprietary and dynamic models that are designed to provide fair and competitive rates to customers while generating a spread for the Company based on its ability to buy foreign currency at generally advantageous rates.
Customer promotions reduce revenue from transaction fees and foreign exchange spreads. For example, Remitly may, from time to time, waive transaction fees for first-time customers or provide customers with better foreign exchange rates on their first transaction.
Revenue increased $201.6 million, or 78%, to $458.6 million for 2021, compared to $257.0 million for 2020. This increase was driven primarily by the growth in send volume for the same time period, which increased $8.4 billion, or 70%, to over $20.4 billion for 2021, compared to $12.1 billion for 2020, along with an increase in active customers and average revenue per active customer.
Who are the major competitors for Remitly?
The top competitors to Remitly are TransferWise, WorldRemit, and Moneygram. Remitly has a diverse array of competitors who generally fall into the following categories:
- Incumbent providers with a scaled legacy platform: Traditional providers with large networks of brick-and-mortar locations and agents worldwide.
- Traditional banks: Traditional bank networks that offer a wide variety of financial services, including international remittances, but have limited disbursement options.
- Digital-first cross-border payment providers: Digital-first providers of payments, money transfer, and remittance products that aim to be convenient, transparent, and affordable, with varying corridor-related focuses, such as developed-to-developing or developed-to-developed markets.
- Emerging players focused on broader financial services: Online-only banks, cryptocurrency players, and other emerging players typically offer a subset of the financial services offered by traditional banks and generally place a greater emphasis on convenience and user experience.
- Informal person-to-person channels. Bringing cash home when immigrants travel, trusting others to deliver cash back home, establishing networks of “IOUs” based on documentation or passwords, and other systems of trust-based cash transfers that evade tracking and regulation.