Data released by the Pew Research Centre shows that migrants the world over sent around US $574 billion to their home countries in 2016.While the cost of sending money from one country to another was rather high until recently, a number of specialist money transfer companies are now using technology to disrupt the market. Given the potential this sphere has to offer, venture capital firms looking this way comes as no surprise.
In 2014, UK-based WorldRemit received a Series A investment of US $40 million from Accel Partners, a venture capital firm that backed Facebook and Spotify early in the day. The following year, it raised US $100 million through its Series B funding round, led by Technology Crossover Ventures (TCV). In 2017, the company raised a further US $40 million through its series C round of funding, with LeapFrog Investments being the lead investor.
In 2015, Singapore-based InstaReM received US $500,000 as seed capital from Global Founders Capital, a Germany-based venture capital unit of Rocket Internet Founders. In its Series A funding round in 2016, it raised US $5 million from Vertex Venture Holdings, Global Founders Capital and Fullerton Financial Holdings. GSR Ventures led the Series B round in 2017, when InstaReM managed to raise US $13 million. Series B also saw participation from Global Founders Capital, SBI-FMO Ventures, Fullerton Financial Holdings and Vertex Ventures.
Headquartered in the UK, TransferWise raised US $1.3 million as seed funding in 2012. The consortium of investors included Index Ventures, IA Ventures, NYPPE Holdings and IJNR Ventures. Interestingly, individuals such as Max Levchin, David Yu and Errol Damelin also saw an opportunity and hopped on the bandwagon. In 2013, it raised US $6 million in an investment round led by Peter Thiel’s Valar Ventures. In 2014, it received US $25 million, at which point Richard Branson came on board.
Its Series C investment round in 2015 raised $58 million, with Andreessen Horowitz at the forefront. In 2016, it received US $26 million, with the entry of some new investors such as Sapphire Ventures, World Innovation Lab and Mitsui & Co.
Other money transfer companies such as CurrencyFair, Azimo and Remitware Payments are also backed by venture capital firms, and the trend is set to continue. The funding is put to use in different ways, be it setting up infrastructure or coming up with ways to reduce costs. InstaReM, for instance, is able to provide mid-market rates to its customers by piggybacking off existing banking currency corridors. TransferWise, on the other hand, primarily makes use of the peer-to-peer model.
The cost of sending money across borders is set to decrease further in the near future. According to Gav Smythe, founder of iCompareFX, “relatively new players like TransferWise, WorldRemit, and InstaReM are doing well to give the older more established players a run for their money”. With venture capital providing the funding they require, they have the means to innovate and expand, and the turbulence in this sector is far from over.