What opportunities exist for U.S. or European startups within the remittances sector?

Remittances (or Migrant Workers Money Transfer) by the numbers, is a large industry. Today, (May 2013 estimates) show officially recorded Remittance data to equal to roughly about US$ 401 Billion. World bank's estimates for 2013 was at US$ 404 Billion, a mark which would very easily be surpassed.

The remittance to the developing countries will continue to grow at an annualised rate of 8.8% to reach US$ 515 Billion by 2015.


Very few US start-ups are actually in this vertical. There are many startups in the payments field, but very few in the cross-border remittances vertical. The earliest known one was PayQuik, which used to serve the US-India, US-Pakistan, US-South-Asia corridor. PayQuik was later acquired by Citibank in early 2008. The other well know US start-up example is Xoom (company) (who recently went public and are VS funded).

European start-ups are way ahead in this game because of the licensing and the remittances corridors that EU/UK serves.

Remittance business is a straight-thru profitable business. There is no, 3 years period to profitability. Profitability is achieved per remittance corridor literally within a 4-5 months (if not earlier).

You can get some form of semblance on the cost of sending money via the graph below, the decline over the last 5 years (considering the competition and players in the market) has faired well.

You can also refer to World Bank's Remittance Prices database to find out the cost of sending remittances: Remittance Prices Worldwide: Making Markets More Transparent (Caution: these figures are weighted averages and should not be deemed as final figures). For some countries there is a large variance in pricing, depending on the players who are in the market.

The margins are very decent. Certainly better than say the PSP market or the domestic US payments market.

The countries below are needless to say, the most important countries to work in as far as remittance corridors are concerned.


Innovative remittance products from corridors like US, Canada, EU/UK, Middle East (huge market), AUS/NZ can easily enable companies to make a lot of money.

Then there are other remittance corridors that may not be that evident or profitable, but trust me they are. There is no doubt that these countries do represent some challenge from the outside, but once you have studied these countries and are well versed with the market dynamics governing remittances, making an entry into these markets with the right ground partner is not difficult.


Here is another graph to help you visually understand Remittances as per of their GDP (for each country):



The US is one of the largest sending remittance corridor for sure, and it is in many ways under served. It is dominated by players like Western Union, MoneyGram and RIA. There are literally 100s of small MSBs who are funnelling business to beneficiary countries, but there is much room for improvement, i.e. a huge opportunity does exist.

Do refer to this post, which will show you bilateral money transfer figures around the world (albeit this is World Bank 2010 data), nevertheless it offers an interesting insight as to how remittance flows between two countries are shaped. Infographic: Remittances.

The hurdles (if you will) are by understanding that the remittance world is not a one-sided equation, i.e. if you develop a product/service state side, then you need to have on-ground partners in the beneficiary countries (as payout agents or settlement banks). Without such a relationship, you can have the best product, but will not have much progress without an on-ground partner. On-ground partners are able to provide business intelligence with regards to specific remittance corridors, remittance data & statistics, legal and compliance understanding, market competition, seasonal up/down cycles, correspondent settlement, regulatory reporting, etc.

From the US side, MSB and MT are the two issues that many startups venturing into this area do not fully comprehend. The US financial regulators (both Federal and State level) have made it a complex stew. Unlike their Canadian, UK or European counterparts, becoming an MSB with the ability to do cross-border transfers, is a very well black-and-white laid out procedure. The US, is very gray in this manner. Think 50 States and 50 shades of gray.

If one were to just assume that a start-up would be looking to work in the US-Country-X corridor, then that in itself can be a big plus. You develop a product for say US to India, then you can very easily replicate the same for Pakistan, Bangladesh, Vietnam, Thailand, Nigeria, Egypt, Nepal, Lebanon, etc. The aggregation helps.

Although technology plays an importnat part in this field (owning your code versus buying it, has tremendous advantages), the real differentiator is thoroughly understanding the remittance flows between two countries. This requires a lot of reading.

• You need to understand what the regulatory issues are.
• What the AML/KYC requirements are and how they would be handled.
• Who will the funds capture and payouts take place.
• How to mitigate risk and fraud.
• What sort of reporting is required and how will it be fulfilled.
• How will agent/principal settlement work.
• How will the FX component work.
• Nostro arrangements.
• Etc.

Whilst, this may seem like a gargantuan task, it is not for a well-versed company / partner.

Startups who wish to venture into such a field need to comprehend the flow areas which are profitable, volume-based and are easy to enter into. This may include your principal country or may not. For example a US based startup may find it inherently very difficult task to enter the Saudi-India market, or the Kuwait-Philippines market. These markets are extremely closed, yet equally profitable and high-volume.

Understanding the breakdown of remittances of each country is essential. Then further on-ground business intelligence can be obtained regarding each corridor and the break-ups of the channels: Who provides these remittances? How much they charge? Average charge? Etc.



Africa, for example is a continent that is shunned by many. African countries are perhaps the most exploited countries when it comes to remittances. The cost of delivering a remittance to Africa is quite high (I've personally seen figures as high as 30% for remittances up to $300).



In the remittance world, it is all about relationships, the risks arise when you partner up with entities that either refuse to follow the rules and regulations and try to make a quick buck, or by having weak relationships, which will affect your bottom-line because you may not have enough transactions traversing through your system to make the corridor profitable.

Relationships does not just start and end with the partner, but must also include banks, regulatory authorities, industry experts in the field of transactional banking and cross-border money transfers, AML & KYC experts, etc.

Many big banks North America, EU/UK do not get involved with small markets or for that matter even large markets. A recent example is a tsunami that is happening right now in the UK, where Barclays Bank (of UK) has sent notices to 100s of MSB in the UK and is terminating its relationship with them, deciding only to work with 10-15 large MSB businesses (WU, MG, RIA, Etc.) This decision was based on the small and mid-sized players exploiting loops holes in the AML/KYC process and Barclays Bank did not want to end up being chastised for it financially by the Financial Regulator, as was the case with HSBC in US.

For start-ups to leverage this market, they need to have the domain knowledge (amongst other variables) and a half-way decent marketing budget. The technology aspect can very well be developed and/or leased. The market is not difficult to enter, but you cannot expect to win in this market by sitting on one side of the fence only. Proactive reaching out is a must.