By Kayla Vestergaard
Undeveloped nations have long been overlooked as potential money-making hotspots for large corporations. Recently, more corporations have been recognizing that low-money transfers in poorer areas add fluidity and strength to nations’ economies. Kenya, for instance, rebased its GDP after realizing that slums actually have a much larger flow of money — through mobile money transactions and telecommunications — than initially estimated. Despite a lower quantity of money being traded, slum economies are have a remarkably high volume of transactions.
Tides are changing in the remittance market. In addition to smaller start-ups like Remitly and WorldRemit that are partnering with messaging services to transfer money globally, Google, Amazon, Microsoft and Alipay are researching how they can gain footholds in the market as well.
The World Bank estimates that the remittance market, currently estimated to be a $400 billion industry, is growing at a rate of 3-4% annually. Start-ups are in a race to gain creedence globally before the market settles. In order to differentiate themselves from the larger money-transferring companies, which may be faster and have lower rates, many are seeking to expand in undeveloped countries. The need for sending money between undeveloped nations (and even to developed ones) is immense. Businesses and families will be better connected, local entrepreneurs will have more revenue streams and greater financial sustainability, and transactions will be safer. Currently, the market is dominated by companies limited to developed “send” countries and many undeveloped “receive” countries.
Remitly is one such company. It’s only “send” countries are the United States, Canada, Australia, and the United Kingdom, and people can use those countries’ bank accounts, debit and credit cards to transfer money. However, Remitly’s main “receive” countries are India, the Philippines, and some Latin American countries. For a small company, Remitly has a rather large transfer cap — you can send up to $30,000 a month once your information is confirmed.
WorldRemit is another company shifting its focus on undeveloped countries. Its goals for this year include turning its 148 “receive” countries into “send” countries, but local regulations to prevent money laundering and other crimes pose one of the greatest challenges. WorldRemit also plans on expanding into Africa and Asia (especially the Philippines), and smoothing out the transferring process with accompanying messaging services, such as WhatsApp and M-Pesa.
Although WorldRemit had overestimated its own growth in the past few years, creating some uncertainty for investors, it recently secured $40 million in funding for these initiatives — mainly from its large partner, LeapFrog Investments.
Both Remitly and WorldRemit have higher transaction speeds and average exchange rates relative to other remittance companies. The transfer process is facilitated by smartphones, whose presence in undeveloped nations is growing. Adding to the ease of WorldRemit and Remitly’s mobile apps are their locked-in exchange rates – that is, that rate at which you begin transfer will hold to the end. However, credit card transfers have a higher fee than those from bank accounts. Security and speed are also major advantages to using services like WorldRemit or Remitly, as with these companies, your banking information is well-encrypted.
The expansion of the remittance market has widespread implications from individuals to entire countries’ GDPs. Greater interconnectedness and security are at the forefront of the changes, which are creating a world in which there are fewer barriers to sending and receiving money.
