Remitly - The Modern-Day Robin Hood of Startups
Imagine baking a cake to send to your loved ones.
Now, say they live in another district and all parties included in the transportation process take a piece of it for their troubles.
Instead of the delectable cake you've spent hours to make, your family receives crumbs - if there are any left!
So how do you deliver your entire pastry, and potentially fix the problem for thousands of other people?
Well, Remitly is that lovely elderly couple going on a cross-country tour who'd love to not only bring the cake to your loved ones, but come to your house to collect it, too!
Sending money abroad, or remittance, as a concept has been around since the 8th century and has gone through many changes, but one thing has remained the same: the high cost of this type of service.
In true Robin Hood Fashion, Remitly has successfully disrupted the remittance industry and has offered immigrants a money transferring service that is completely digital, transparent, easy to use and most importantly, significantly cheaper!
So, how does one become the Robin Hood of the 21st century?
Simple - by solving a problem!
Discovering the Problem
The remittance industry is a $574-billion-dollar industry, and about $422 billion out of that has gone to developing countries, involving some 250 million immigrant workers. From their hard-earned money, third parties like banks and remittance entities took at least 8-10% in service fees, which added up to billions of dollars annually.
The story of Remitly starts back in 2011, while Seattle based Matt Oppenheimer, fresh out of Harvard, worked as the head of mobile and internet banking of Barclays in Nairobi, Kenya. During his time there, he noticed the struggles that many of his acquaintances faced when trying to receive money from their loved ones who were working abroad. Consequently, they weren't able to send money either, and all of their hard work seemed to be in vain. Another common problem was that even if people were willing to pay the high money transfer fees, there simply weren't any receiving options for some countries. As if those problems weren't disheartening enough, people didn't know if and when their money would arrive, and the exchange rates and high fees reached a point where they were almost considered fraudulent!
Matt Oppenheimer, discovered the problem, but he didn't have the solution for it - yet! Wanting to help his acquaintances in the country, the idea of Remitly was born: a transparent, digital aid that later on proved to be a ripple in the pond of the remittance industry.
Beamit Mobile Starts Up
With the issues in mind, Matt considered different ways to alleviate the immigrants' problems. His vision was to make the already-hard lives of immigrants easier, and to give them financial stability and sustainability even in foreign countries, where they'd have no bank accounts, credit histories or any loan opportunities.
The business model behind Remitly aimed to provide a much simpler, easier, and most importantly, cheaper alternative to the pre-existing money transfer options already available on the market. To bolster these efforts, the company implemented state-of-the art security measures to ensure users could have continuous, secure access to the platform from their smartphones.
Having the example of his grandfather, who set up a successful business in Boise, Idaho and seeing the value that it added to employees' and customers' lives, he needed no further encouragement to enter the business world. Thus, Beamit Mobile - renamed to Remitly in 2012, a better and fitting wordplay on remittance - was born!
As most fintech companies, Remitly operated entirely digitally, which significantly reduced their operating costs. This reduced the fees to about 1.5% on average, depending on the country. Note that Western Union owns quite a few brick-and-mortar locations around the world and still charges around 5%!
With this comparison in mind, it's easy to see why Remitly exploded on the market:
They offered something that didn't exist - a cheap, quick, and efficient way to send money abroad!
Mentorship and Funding
Matt had the idea mapped out, but he needed the financial support to be able to do the project, and he got it from TechStars: a start-up accelerator which drastically changed his plans about the company. Before even being accepted into the accelerator, Matt met with co-founder Shivaas Gulati who now serves as the Head of Engineering. While going through the TechStars program, they met their third co-founder Josh Hug, who served as a mentor to the startup.
Shortly after, they received $750 000 in Angel funding, intended to help with the launch of the product. So the company set their sails to disrupt the otherwise calm waters of money transfer giants.
Through the help of the accelerator, the startup managed to raise $1.7 million in a seed round in 2012 and an additional $2.6 million at the very start of 2013. This created a snowball effect for the company's funding, piquing the interest of investors - and the numbers only grew from then onwards!
Primary demographic - Unbanked?
Remitly was successful at first because of their focus on only one segment of the market: helping out Filipino immigrants in the US send money back home. As a business model, it seemed to work, but very soon problems started arising - how could people in the receiving countries pick their cash up when most of them didn't even have a bank account?
Less than 30% of the entire adult Filipino population had bank accounts, which is around 15.8 million people - not a small number at all!
But what about the remaining 70%?
The reasons they didn't have bank accounts were revealed in a scientific study, the most interesting and common being the lack of money to open a bank account, as well as not having the necessary documents.
The trio of Remitly wanted to create the best remittance product in the world, and to achieve their bold mission they had to think of a new way to cater to that remaining 70%. They had already simplified the way their digital services worked and required far less bureaucracy than the usual - now, they needed to circumvent the problems and constraints posed by local banks.
Easier said than done!
They had to think outside of the box to serve their customers. Their revolutionary breakthrough came in the form of cash pick-up. In addition to sending money to a bank account or a mobile account, they set up several points where people could come and pick the money up.
To further simplify the process, they thought of adding the option of cash delivery, where you could get your money delivered to your door within 1-2 days of the digital transfer. This proved to be logistically and financially challenging as they would have to open up a delivery service of their own.
Instead they partnered with companies that offered home delivery services which in turn meant they were further expanding their business. They had to creatively approach problem solving to bypass any other possible problems. And that they did!
Remitly - The Indisputable Unicorn
Despite the difficulties they faced in reaching their target market, Remitly now mediates the transfer of money from 16 developed countries like the US, Australia, Canada to around 44 developing countries including Mexico, Rwanda and El Salvador.
The ingenuity of the service has only been further affirmed by the constant stream of funding. In 2019, Remitly had 100% revenue growth for the third year in a row, earning a top spot on the Forbes Fintech 50 list. In July 2019, they received an $85 million loan intended to speed up money transfers by pre-funding them. That same month, Remitly received $135 million in equity purchases. This money was to be used to expand to other markets and for another project called Passbook: an extension to Remitly's money transferring services.
The July 2019 funding round brought the company to an approximate $1 billion market cap estimation. Just a year later, on July 29th of 2020, Remitly went through another funding round, receiving $85 million which catapulted the company to indisputable unicorn status with an estimated worth of $1.5 billion. To this day, Remitly has received over $500 million in 11 funding rounds and has been generating revenue for over 5 years now, with no signs of stopping any time soon.
Remitly and its CEO continue to advocate for immigrants all over the world, continuously striving to simplify the money transfer services. With their global operations, offices in several metropolises and upwards of 1000 employees, they've successfully managed to avoid unnecessary layoffs during the COVID-19 pandemic.
Not only that, they're still hiring!