Remitly Reports Third Quarter 2023 Results

These anecdotes presented above not only point to competition, they point to opportunity for the eventual winner(s).

In fact, the local competitors are not solving the issue outside of their local network.

Where this truly becomes relevant to future sustainable high growth relates to the network effects from the winning competitor(s). Do these network effects matter? - or not.

Just for fun, I went to westernunion.com and trialed $100 as a model transfer to another location for cash in person. The fees are considerable!

Debit: ~18%
Credit: ~20.5%
Bank Account: ~9%
In-store cash/cash: 13.5%
Money Transfer Fee & Cost Calculator (westernunion.com)

How are these people getting fees lower than 8%? This looks like opportunity.

10 Likes

CrazyCzech that’s a great callout bringing the attention to Wise. Interestingly enough I was familiar with this company TransferWise when it was a 500 person company operating in Estonia. I was living in Estonia at the time and it was the hottest company to apply for workers there. I hadn’t realized they’ve gotten so big in the meantime and are competing here.

Something to consider here is Wise is European based and Remitly US based. The banking systems are much different. For EU banks, it’s quick easy to send person to person transfers that go through in a day. Generally you need is account number and name of the person. US banks are using ACH which is ancient and slow. Seems a lot of Remitly’s business is US → elsewhere, and Transferwise is Euro → elsewhere.

From what I’ve gathered online Wise works for bank to bank transfer while Remitly has more options but costs more. Seems like Remitly has a worse currency exchange with lower fees, but the end result is a higher overall cost.

I’d be interested to hear if anybody can confirm that the record add of customers this report came from higher spend (lower bottom line). It’s possible the management views the space as a land grab and wants to spend more for customer acquisition.

6 Likes

Try sending a larger amount. The fees will come down considerably.

For instance, I am in Canada, and if I model sending USD 100 to the US I also get a $13.50 transfer fee (13.5%).

However if I model sending $1000, the Transfer Fee is $60 (6%), or $5000 it’s still $60 (1.2%).

7 Likes

Here is a side-by side comparison between Remitly and Wise from Nov. 2, 2023.

The topline summary says:

Wise and Remitly have some overlapping services for international payments, but their focus and their product range vary significantly. Remitly payments can be made from around 30 developed countries, to 170+ countries globally, to allow people working abroad to send money home to loved ones. Wise offers business and personal payments from a broad range of countries, to 160+ destinations, and has multi-currency accounts and debit cards to hold 40+ currencies.

And here’s their verdict:

Remitly offers an important service to customers who want to send money home on popular remittance routes, especially if they’re looking for cash collection or mobile money pay-outs.

Wise on the other hand is a specialist in transfers direct to bank accounts, and offers the mid-market exchange rate with low, transparent fees. Wise also has a multi-currency account with a linked Wise international debit card.

If Wise supports payments to the country you’re sending to, and you want your transfer to be delivered to a bank account, it’s worth checking out the fees for your specific payment from both providers. And for payments to be collected in cash, Remitly is worth considering thanks to its broad reach and extensive agent network.

It’s worth noting that search results for comparing the two brings up a lot of results; and looking at the ones from last year–or even early this year–show Wise further ahead than the above comparison from a few days ago. It looks to me like Remitly is gaining more quickly.

In videos (I think in this one), Remitly CEO Matt Oppenheimer has described a very slow and deliberate ramp that is now gaining speed. They spent their first years (four years, if I remember correctly) only going from Seattle to the Philippines. Their strategy has been to work out every imaginable detail for one location before expanding out. That intensive and slow work in the early years is now letting them spin the flywheel to expand to more countries and currencies more quickly and to work on their cost efficiencies.

I could be wrong, but my impression is that Remitly is a story of “Objects in the mirror may be closer than they appear.”

JabbokRiver

9 Likes

**Try sending a larger amount. The fees will come down considerably.

For instance, I am in Canada, and if I model sending USD 100 to the US I also get a $13.50 transfer fee (13.5%).

However if I model sending $1000, the Transfer Fee is $60 (6%), or $5000 it’s still $60 (1.2%).

**

That is the same logic my wife uses when she goes shopping at 50 percent off sales. :joy: :joy:

Andy

16 Likes

Globally, sending remittances costs an average of 6.20 percent of the amount sent. This figure is used to monitor the progress of the global effort for reduction of remittance prices. Please check our June 2023 report for further details.

(https://remittanceprices.worldbank.org/#:~:text=Globally%2C%20sending%20remittances%20costs%20an,2023%20report%20for%20further%20details)

"On average, migrant workers send between US$200 and $300 home every one or two months. "

Remittances matter: 8 facts you don’t know about the money migrants send back home | UN DESA | United Nations Department of Economic and Social Affairs

3. Remittances remain expensive to send

“These international money transfers tend to be costly: on average, globally, currency conversions and fees amount to 7 per cent of the total amounts sent. To ensure that the funds can be put to better purposes, countries are aiming through Sustainable Development Goal (SDG) 10.C to “reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent by 2030”.”

I had not considered .gov interventions (subsidy) to reduce or legislate payment transaction fees.

There are many other services. See

Remotely comes out as a cheaper option in many cases and in some cheapest. They may be cheapest now but competition is strong and I know people who do send money monthly from the US comparison shop using this tool.

8 Likes

I think the market for International Transfers is way more competitive. In US to US transfers, the service aims probably at low income individuals without traditional bank accounts. If you have a bank account, Zelle and Venmo are basically free.

6 Likes

This information is being provided to show a real world example of competition to Remitly. It is not a “pitch” for the competition. Hopefully it will not be deleted because it is impossible to describe the competitive threat without naming the off-topic subject.

I am attaching a link that describes one source of competition for international remittances. Note that it is not necessary to send or receive funds using the asset that shall not be named. Strike is using the network of that asset to make the transfer to different countries, but they are partnering with local entities (in the receiving country) to automatically convert the asset that shall not be named into the local currency (if that is what the recipient wants). So, the person receiving the funds just receives it as their local money - they don’t even need to know what network was used to send it to them.

This method of transfer is not necessarily cheaper than standard remittance companies, but it is instant and it can be done with amounts as low as $5 - and in some instances, it is cheaper than sending with standard remittance companies.

Also note that they are using the Lightning network to keep fees lower than sending on the main chain of the asset that shall not be named. So, the concern that some have raised about large fees on the main chain does not apply.

This is one example.

African countries where this is currently available are: Benin, Ghana, Ivory Coast, Kenya, Nigeria, Rwanda, Senegal, and Togo.

7 Likes

So the sender deposits funds in the local currency of their residence and the recipient receives funds the the local currency of their residence. This will require two currency conversions rather than just one.

No matter if the transaction is conducted in fiat currency or digital currency, there will be a conversion fee associated with transaction. With fiat currency there will be one conversion. With digital currency there will be two conversions. True, the conversion fees will differ to some degree, but I find it difficult to imagine that two conversions will be cheaper than one.

Also, in that the sender and recipient both realize this transaction in their local currency, they will not have the anonymity that they might enjoy if the transaction were conducted entirely in a digital currency.

So what is the advantage of using a digital currency strictly with respect to the money in “motion” as it were. I can’t see how anyone comes off any better - No, I didn’t read the article you linked. Considering the source, I can’t but help to think that it would be highly biased, maybe not dishonest, just disingenuous, describing only the best outcomes of the numerous outcomes possible.

4 Likes

Since Send Globally is still built on top of the network it requires hiring employees and then doing all of that local work to build “channels” and meet regulatory compliance that companies like a Remitly or DLocal need to do for allowing as many payment methods as possible in the local area.

From the article,

Bitcoin in and of itself is already a meaningful solution to that problem, given transaction fees of around $2 to send any amount of BTC. But it still presents challenges to trust and usability for many.

“If I’m going to send money to my Grandma,” as Rios puts it, “I’m going to have a hard time convincing her to use bitcoin.”

I get they are using the Lightning network which is cheaper, but I don’t see what would prevent Remitly from implementing the same underlying mechanism if that proves cheaper.

This company Strike/Send Globally is 50-100 employees as a series B startup. Remitly is 2,200 employees and publicly traded. Sure it’s “competition” but I wouldn’t say it’s meaningful competition at this point.

Even people who are regular users of the tech are still confused by why the fees are so high, here’s a post from Reddit today.

Why Are BTC Fees So High Now?

Just tried to send or convert BTC to another wallet, and my Trust Wallet has said this transaction will cost about $20 USD. When did BTC fees begin to skyrocket? I don’t remember seeing BTC transfer fees this high before. Perhaps I’ll wait until after the Thanksgiving Holiday and the Bitcoin markets might settle down a bit.

9 Likes

It was one example. There are more.

Yes, if it is successful at reducing costs then Remitly can copy it and use the same method. And so can every other remittance company. Seems like that might impact Remitly’s revenue, margins, and share price.

I’m not saying that Strike is THE competition - I’m saying it is one example representative of the type of wave of competition that is coming.

6 Likes

Every company faces competition. What this thread proves to me is that it really doesn’t matter who is sending the money. It can be in crypto, USD, travelers checks (haha)…the “send” side is just the easy part of the transaction.

The “receive” side is the hard part, and that’s where all the value and differentiation lies with all of these solutions, and any yet to come. Remitly seems to be one of the big leaders because they’ve built out a network. On any smartphone I can use Paypal or Venmo to send money to anyone else with Paypal or Venmo…regardless of what country either of us is in. So that’s not what Remitly means when they say they deliver to 170+ countries! They mean they have partners on the ground from whom the recipient can get the money, in their own currency, with all the conversion worked out, and fast, and reliably, through many different delivery methods!

Isn’t this all part of Remitly’s moat?

Bear

15 Likes

I’d like to again point out to all of you investing in this company that there are many competitors with similar or identital cofferings and in many cases better pricing. I’ve used many of them in the past and there is none that has been able to be consistently superior.

There are also several comparison engines that give you current pricing accross all these platforms. The existence of these engines tells me that customers do compare and choose cheapest options.

I don’t see moat here.

16 Likes

You don’t see a “Brand” aka Intangible Asset moat. I agree. Remitly isn’t Nike or Coca-cola. No one is seeking it out even if another option is more convenient or cheaper.

And of course, there’s no switching cost moat here. It’s easy to switch.

Probably not much of a Network Effects moat either. Except that, the more people that use it in a given country or currency, the better it will get in that country or currency, because Remitly will focus more efforts there.

But what about an Efficient Scale / Low Cost of Production moat? The larger they grow, and Remilty has close to $1 billion of revenue now, the better they can provide service to more countries – faster and cheaper and more reliably.

Maybe it’s a little like ELF. There are beauty brands with more annual revenue – but ELF is joining the leaders fast with close to $1 billion revenue itself. There may be an Efficient Scale moat for them too. As ELF scales and their per-unit production costs decline, they can throw their weight around a bit and create more and more cost-competitive products.

These probably aren’t strong long-term moats, but I think it’s certainly possible there are weak moats in place.

Does anyone know the size and scale of any of Remitly’s competitors? I would imagine most are at a much smaller scale (much less send volume and revenue) than Remitly. I would guess that just Remitly and a couple others are at a scale advantage.

Bear

8 Likes

It is a pretty fragmented market. In the US Western Union (public) should have the largest market share.

Each country usually has a dominant player or two that cater to their expat workers. India comes to mind with government owned postal service offering virtually free service to expat Indians sending money back home.

I suspect that there are two types of customers 1) people like me who occasionally need to send money to foreign countries and care about convenience more than price. I’d guess Remitly caters to this group along with Wise, Western Union and several others. I don’t think this is a huge market. 2) expats (think predominantly first gen 3rd world emigrants) sending money back home to their families. I suspect this is where all the money in this space is and it is fragmented and competitive.

My gut feel is that all these new companies like Wise and Remitly are taking share from Western Union for group 1 and are trying their best to get into group 2.
Just like in any business, it is possible to create superior product to anything else in the market. Stripe did that with POS. Remitly can do that in cross border transfers. My sole point here is that it may be a lot harder than their market stats make it look.

Another point I’d like to make here is about the nature of this business. At its very core, this is another financial company aka a shadow bank that needs to hold deposits in a bunch of countries with various currency controls and regimes. They are entirely dependent on the existing banking systems in the various countries they operate in. If one of the banks they hold money with goes insolvent… there goes their money. This happens far more often than you may think especially in countries outside of the developed world. They also transact with various FX brokers which too creates a bunch of risks including the so called Herstatt risk that could wipe them out completely.

Finally one more point, as any business dealing with money there is interest carry – interest company earns on cash sitting in their accounts. Transaction businesses like this always have some positive carry as they usually get money a day or two before they send it out and can earn interest in the meantime. I don’t know if Remitly discloses the amount of their carry I’m certain it is there and it may be quite significant. This of course this is subject to prevailing interest rates – zero or negative when rates are zero and more when they are not.

Check out this report re market in India. https://documents1.worldbank.org/curated/en/785341468269661757/pdf/662350PUB0EPI000India09780821389720.pdf

8 Likes

One point that hasn’t been mentioned in this thread is in the case of expats sending money back home, many times the recipients are unbanked. So a service that can only send money to a foreign bank isn’t particularly useful here. This is an area where Western Union does well as they have many agents where you can pick up cash if you have the correct ID and passcode.

I’m not invested in Remitly, just adding to the discussion.

3 Likes

The main competitor that Remitly investors need to focus on is Wise, a British company. They do about $1.2 billion in revenue and are growing over 20%. However, they separate income and revenue, where the former includes interest income. The “income” metric is growing more like 50% because of the rise in interest rates.

It’s a founder led company with a real focus on lowering costs. It’s a great customer experience and frankly, it’s why I haven’t invested in Remitly. I don’t see any differentiation between the two. Wise is a very capable competitor with slightly more scale.

The strategy is to lower prices which seems like a race to the bottom. I have a very difficult time seeing any pricing power here.

Best,
Fish

8 Likes

From my research so far, Wise appears to be more of an indirect competitor and i think they can both coexist. Wise’s transfer amounts are typically much higher, and they lack a cash distribution network, making them less of a remittance provider for migrants.

There are roughly 1.4 billion adults globally who do not have a bank account. Remitly caters to the migrant population, estimated at 300 million people. This is why they offer a global network of 460k cash pick up locations (Wise has 0). Around half their transfers are received as cash pickups.
The average Remitly transfer is a couple hundred usd and the average Wise transfer is a couple thousand usd. Wise is clearly catering to a different market.
Generally, migrants do not recognize Wise as something that is for them.

Wise would have to change its marketing strategy and build a cash pickup network to steal Remitly’s customers, which is possible, but not easy.

5 Likes

Yes, there is a portion of migrants who do not have accounts to facilitate bank to bank transfer. This is often the case because they are not allowed to open bank accounts in the countries they work in - think our illegal migrant population in many states. Remitly won’t help those people. There is a subset who do have bank account in originating country but are sending money to people who don’t have bank account. There is a common perception that 3rd world countries are poorly banked and that most people do not have bank accounts. That is no longer the case. India went from 40% banked to 80% in a decade. That is 80% of all adult Indians have access to a bank account. Argentina went from 50% to 70%. Brazil went from 50% to 80% etc.

However, don’t forget that there are other providers like Xoom owned by Paypal who also cater to this group and they do allow cash pickup. See Send Money to India - Transfer money online safely and securely | Xoom, a PayPal Service

2 Likes