Money transfers
The fintechs breaking down borders
Last updated: 25 Aug 2022
Market 101
It’s 2022, and there still isn’t an efficient way to funnel money across borders through legacy banks. Burdened by sprawling networks and schemes without a single system to connect them, as well as fluctuating exchange rates, crossborder payments are notoriously slow and expensive. This has led to the emergence of so-called money transfer operators, the most enduring of which — Western Union — has dominated the sector for close to 150 years.
But a new wave of fintechs is taking on an industry characterised by bricks and mortar locations and opaque pricing by offering digital payments focused on speed, transparency and lower costs. The challenge for them will be building viable businesses in a sector consisting of huge transaction volumes but razor-thin margins — and providing not just the convenience but the customer experience needed to retain users in an increasingly crowded market.
Early stage market map
Key facts
$589bn
global remittance to low and middle-income countries in 20211
70
% proportion of remittances that are cash rather than digital payments2
6.4
% global average charge for a cross-border transfer of $2003
Trends to watch
1. Charging premiums
→ Cross-border payments haven’t evenly benefitted from the drop in transfer fees over the years.
→ Companies hoping to resist price wars may be able to charge premiums in underserved niches of the market, particularly industries struggling with inefficient payment flows such as gambling.
2. Add-ons
→ To build lasting relationships with customers, which can reduce the risk of churn inherent in one-off transfers, both incumbents and later-stage fintechs have moved into adjacent services.
→ Early-stage startups are increasingly integrating these considerations from the outset, by offering transfers and currency exchanges as part of broader wallet or card products.
3. Infrastructure
→ To bypass or speed up the process of funnelling money through the legacy banking system, startups are matching peer-to-peer transactions against each other or building their own networks of partner banks.
→ On paper, crypto offers another way for nearly instant global payments, yet its adoption is held back by price volatility and the challenges of converting currencies back into fiat.
4. Brave new world
→ With their digital offering, startups are primarily targeting young, whitecollar users — but the bulk of remittances are sent in cash by typically lower-waged migrant workers.
→ While the pandemic-induced switch to card payments has gone some way in challenging this dominance, startups will need a strategy for capturing these cash-loyal potential users — by launching their own pick-up points, for example.
Startups tracked by Sifted
Sifted take
As newcomers seek to chip away at incumbents’ dominance by offering cheaper transfers, the sector is at risk of descending into a price war. With margins already slim, this will benefit neither startups nor incumbents, both of which would be better off considering alternative points of differentiation as a way to not only acquire, but retain customers.
Rising stars
Offers multi-currency business accounts and international payment services to SMEs. Investors include Target Global and angels like Chris Adelsbach.
Round
Seed
Date
2022
Size
€1.8m
Cofounded by former management consultants, Moneco is a neobank for Africans living in Europe that offers free international transfers. The startup was selected for Y Combinator’s summer cohort.
Round
Pre-seed
Date
2022
Size
€500k
Backed by the likes of Kleiner Perkins and Index Ventures, Atlantic Money offers money transfers for a fixed fee, without FX markups. Its cofounders were early employees of Robinhood.
Round
Seed
Date
2022
Size
€2.9m
Early stage startups to watch
Atlantic Money
Multicurrency platform
€7.4m
€2.9m
-
Centiglobe
Cross-border payments infrastructure
€6m
€5m
-
Crezco
Cross-border payments infrastructure
€4m
€3m
€15m
Kapaga
B2B cross-border payments
€2m
€1.8m
-
Leatherback
Multicurrency platform
€9.1m
€9.1m
-
Moneco
Alternative bank account
€500k
€500k
-
Neofin Ventures Limited (trading as Unizest)
Alternative bank account
€555k
€305k
-
PayQin
Alternative bank account
€1.5m
€700k
-
SendSpend
Multicurrency platform
€2m
€110k
€17.7m
Zazuu HQ
B2C cross-border payments
€1.8m
€1.8m
-
Europe’s success stories
Who early stage startups are up against
(Pre-)Seed
Series A
Series B
Series C
Series D+
IPO/Exit
→ Went public at a valuation of £8bn
→ Has over 13m customers, whom it charges a fee for transactions without also earning on FX spreads
(Pre-)Seed
Series A
Series B
Series C
Series D+
IPO/Exit
→ Peer-to-peer money transfer service, counting 11m users by 2021
(Pre-)Seed
Series A
Series B
Series C
Series D+
IPO/Exit
→ Provides infrastructure for companies to send, receive and convert international payments
→ Acquired by Visa for £700m
Sources
Research reports
1 Borderless payments report 2022 | 2022 | Mastercard
News articles
How close are we to frictionless international payments? | July 2022 | Sifted
Is cryptocurrency an alternative to remittances or an additive factor? | December 2022 | TechCrunch
2 Money Transfer Startups: race against time? | September 2021 | Save on Send
3 Lex in depth — remittance fintechs herald a payments revolution | August 2021 | Financial Times
How Western Union is fighting back against fintech startups | June 2021 | TechCrunch
Transformation in the money transfer industry: The impact of customer expectations | September 2020 | Zendesk
How Is the International Money Transfer Market Evolving? | Toptal
Your feedback
How would you rate this briefing?