Remittance market doubling down on digital
While remittances worldwide have fallen in the past year, companies offering a digital platform for remittances have seen a spike in business. The space has seen a large-scale shift from traditional cash to digital, spurred by reduced costs, convenience and increased accessibility when physical agents were shut during the lockdown.
Traditional remittance companies are focusing their efforts on expanding digital channels. Even as Western Union has seen revenues from C2C (customer-to-customer) remittances decline, it has identified digital money transfers as a key driver of profitable growth. The share of their digital revenue increased from 21% in Q1 to 48% in Q2. Moneygram also saw its growth fueled by digital cross-border transactions, with 174% growth in digital revenue in Q3 2020 over Q3 ’19. It experienced a growth of over 111% in digital transactions and 114% growth in revenues, year over year, via its Moneygram app.
The increased digitization of Western Union is apparent in the surge in its website traffic of 47% YoY in Jan ’21. While the pre-covid era saw a 14% YoY growth for website traffic as reported in Mar ’20, its YoY growth accelerated threefold to 47% in Jan ’21. Upstarts in the remittance space are also turning to digital to fuel growth. Transferwise, Airwallex and Remitly saw more than 2x increase in their website traffic over the past year.
Airwallex expanded its workforce by 35% YoY in Dec ’20 to manage the increase in volume of remittances which drove a 100% increase in net revenue in Q3 compared to Q2 2020. Tipalti has seen its transaction volume surge by 80% YoY. Remitly and Tipalti have strengthened their employee count by 21% and 48% YoY.
Remitly saw a 200% increase in consumer growth in the months following the pandemic and raised $85M at a valuation of $1.5B. Remitly, Xoom and Xe have also seen impressive growth with their play store review count rising by 124%, 534% and 117% YoY in Jan ’21 respectively. There was a major surge in the app adoption, as can be seen in the app reviews in the initial months of lockdown.
Remittances are predicted to rise as the GDP of sender economies rebound with the roll-out of vaccines and release of pent-up demand. We can expect consumers’ shift to the digital channels continue, and, consequently, digital remittance platforms to prosper.
