Founded in 2011, Remitly is a Seattle-based leading digital financial services company that offers low-cost cross-border money transfers. It is a digital remittance service that allows users to send money internationally through a mobile app or web interface at cheaper rates.
But how does Remitly make money? As a provider of money transfer services, Remitly makes money by charging fees from the sender and marking up the exchange rate for each transaction they facilitate.
Let’s take a look at Remitly’s business model and find out how it makes money from its customers in more detail.
About Remitly
Remitly is a fully digitized remittance service with a simple business model that provides multiple layers of simple and cost-effective remittance service.
Remitly is different from other remittance companies in its easy-to-use platform, giving users access to a multi-factored pricing scale with instantaneous quotes and multiple pick-up methods for the recipient.
In our current post-pandemic environment, Remitly’s service has become more relevant than ever before.
Business Model of Remitly
Remitly operates on a fee-based business model as a remittance company, both for B2C and B2B. It is completely digitized, with no brick-and-mortar outlets.
Remitly’s business model is based on providing low-cost, affordable remittance services to global consumers and businesses.
What makes it different from a brick-and-mortar cross-border wire transfer, such as a bank, is that everything can be done electronically. Also, basic questions like fees and transfer times can be answered through a website without actually needing to contact a live person.
What makes Remitly different from other existing payment systems, like PayPal, is that there are no hidden costs.
The cost of the transfer is apparent from using the platform on the website, based on various factors, such as:
- The country where the payment is being received
- The speed of the payment
- The amount of money involved
It should also be noted that PayPal and some other online payment systems are not accepted in some countries, such as Ukraine.
Remitly, however, is accepted in Ukraine and all over the world and the particulars of Remitly’s relationship with each country can be viewed on the platform.
This digitized model has given Remitly a huge advantage during the pandemic era.
Physically putting actual cash in people’s hands and unnecessary travel has become increasingly unpopular relics of the past and might even be considered to be dangerous.
Online remittance systems are needed for a robust world economy because offline, brick-and-mortar systems are very susceptible to possible future lockdowns.
Any business that does not have a secure, digital remittance system should be considered fragile in the world economy of the 2020s.
How Does Remitly Make Money?
Remitly operates as a Fintech, specifically an online, cross-border wire transfer service. Remitly makes money through transaction fees and is both B2B and B2C. The former with enterprise solutions like Remitly for Developers and the latter with immigrant-friendly solutions that allow users to send money to their mother countries.
Remitly makes cross-border money transfers for its customers and charges a fee. This is not the company’s only revenue stream as it also makes money by marking up the currency exchange rates.
The quality of the company’s revenue streams, however, is determined by multiple factors:
- Rates and Fees
- Security
- Venues for Recipient
- Service
Transfer Fees
Remitly’s website has a very well-organized user interface. When you click on the Rates & Fees button, you are taken to a page that has its own platform.
You can simply choose the country you want to send money to, and a table will be displayed. The table will show all pricing in USD for that country depending on:
- How much you want to send
- Whether you want to pay the express or the economy fee
Remitly guarantees satisfaction or the transfer fee will be refunded.
Remitly has account verification procedures to ensure a high level of security. In order to set up an account with Remitly, the user must provide personal information and complete an email verification process.
Once the user’s account is activated, Remitly runs various “manual and automated risk management procedures” in order to “highlight suspicious account activity”.
As a precaution, Remitly contacts the user’s ISP (internet service provider) to verify all information supplied by the user. Remitly claims that they will not misuse the user’s information and use it only to ensure the successful completion of user transactions.
A final layer of protection, for both the user’s account and password, is Remitly’s use of a secure server connection. Remitly uses SSL (Secure Socket Layer) with 256-bit encryption. This is considered the industry standard in secure server protection.
When reading about security procedures, you must understand that this is the remittance business. Online security measures are important for any business, especially when purchases are being made online.
The remittance business, however, is not about credit card transactions. Rather, the remittance business involves giving companies like Remitly direct access to your banking information.
Therefore, the importance of online security for Remitly or any remittance company cannot be over-emphasized. It is, in consequence, vital for any analysis of such a company to include a conversation about that company’s online security measures.
You might find it annoying to read Remitly’s website and get all of this advice about protecting yourself against online scams. Again. This is the remittance business.
Remitly has a whole section of their security page dedicated just to “phishing”. Remitly actually warns that there are emails sent by websites pretending to be Remitly that are really on “phishing” expeditions. These fake websites can steal the user’s payment information and Remitly recommends using some type of anti-virus protection and keeping it updated at all times.
Remitly also establishes 8 key points for protecting users from phishing expeditions and fraudulent emails and, most importantly, Remitly will NOT ask for the following by email:
- Social security number
- Date of birth
- PIN
- Credit card number
- Credit card security code
- Updates to any of the above
Remitly also clearly states their domain is https://www.remitly.com/. Anything else is not authentic. Remitly also gives instructions on how to spot fake emails and fake websites.
Remitly also allows multiple options for the recipient to receive the money that is sent during the transfer. These options include:
- Cash deposit
- Cash pickup
- Mobile money (sending money into a mobile account)
- Home delivery
Obviously, in order for cross-border money transfers to go smoothly, banks have to be involved.
The banks Remitly has relationships with vary from country to country, depending on which country the user is sending money to.
Depending on the country, featured providers may include but are not limited to:
- PNB
- Citibank
- HSBC
- BDO Unibank
Remitly for Developers is an enterprise API solution that helps developers easily build international money movement capabilities into their apps. The use case was for enterprise users to be able to respond to errors on a transaction quickly and effectively.
These errors can be very problematic due to the following:
- Sensitive data being transmitted all over the world in large amounts
- Funds delivered during these international transactions can be very sorely needed, especially in a post-pandemic environment
Having enterprise solutions for the B2B market, allows Remitly to tackle larger social issues like a pandemic response, global climate change, and political instability. Recipients need to have confidence that the money will be there when they need it and enterprise users need to have confidence that they can adapt to the unexpected without letting their people down.
It is also important to note that enterprise remittance solutions are not always; sometimes they are about making a difference.
The COVID-19 pandemic has devastated lives all over the world, regardless of race, religion, sexual orientation, economic status, or politics. The pandemic has been especially merciless, however, in developing nations like India.
In areas where death due to starvation is a real possibility for a large percentage of the population, concepts like mask-wearing, social distancing, and having enough ventilators to go around could appear to be frivolous luxuries.
That is why Remitly is in partnership with DonateKart and various other charitable agencies: NGOs, non-profit organizations, crowdsourcing platforms, etc., to transfer funds and materials to the people that need them, where they need them and when they need them.
This type of charitable enterprise can be very problematic if the transactions are not secure and if the pick-up methods are not reliable. That is why, a fully digitized, fully-international remittance system like Remitly is up to the challenges of emergency relief efforts.
Forex Markups
Remitly does not put out a lot of information about this because it does not fit their altruistic image, but like with most cross-border money transfer services, there is a Forex markup fee involved. This is basically the fee for changing one currency, such as dollars, into another currency, such as euros.
This does not mean that Remitly is doing a disservice to its customers, however. According to the World Bank, some total transaction costs can go as high as 30%!
Therefore, Remitly can feasibly serve its customers well by getting a much lower rate on the Forex exchange while still having plenty of margin leftover for profit by taking a markup off the mid-market rates.
In fact, financial institutions make billions of dollars from their end clients off Forex markups.
Remitly Funding, Valuation, and Revenue
Funding is not a problem for Remitly, especially during their series A-E rounds. Over the course of seven years, Remitly’s funding has increased well over 150x.
Notable investors have included Bezos Expeditions, QED Investors, SK Ventures, Silicon Valley Bank, and Vulcan Capital.
| Date | Total Funding (A-E rounds) |
|---|---|
| Jan 2013 | $2.6 M |
| Jan 2014 | $8.1 M |
| Mar 2015 | $20.6 M |
| Apr 2016 | $59.1 M |
| Sept 2016 | $82.6 M |
| Oct 2017 | $197.6 M |
| July 2019 | $332.6 M |
| July 2020 | $412.6 M |
Because Goldman Sachs, JPMorgan Chase, and Barclays have been sought to advise on Remitly’s potential as an IPO, the company’s valuation has climbed to $5 billion, a 5x over the course of two years.
| Date | Valuation |
|---|---|
| July 2019 | $0.9-$1.0 B |
| July 2020 | $1.5 B |
| May 2021 | $5 B |
In June of 2021, BestEngagingCommunities.com claimed that Remitly’s revenue had been increasing “nearly 100% annually over the past five years”. Just over the course of two years, from 2018-2020, Remitly has more than tripled.
| Year | Revenue |
|---|---|
| 2018 | $80 M |
| 2020 | $250 M |
Is Remitly Profitable?
Remitly is still investing in growth, so it is not profitable yet. Since Remitly is growing rapidly, it is focusing resources on reaching new markets and investing in technology to offer the best experience to customers.
Remitly has been consistently increasing exponentially in its funding, valuation, and revenue and it would seem that Remitly is about to go public with an IPO.
Furthermore, with Jeff Bezos backing Remitly, it appears to be in place for continued growth.
Conclusion: How Does Remitly Make Money?
To sum up, Remitly is an online remittance service that makes money by charging users small fees for transferring money overseas apart from forex markups. The amount of fee is based on how fast the sender would like its money delivered. It also earns some extra revenue when customers use credit or debit cards to initiate their transfer.
Since Remitly is fully digital and doesn’t have tons of offices to manage, they are able to keep its costs low and pass on those savings to its customers.
Since its launch in 2011, Remitly has made leaps and bounds in the money transfer industry. It has had some hiccups along the way but eventually managed to win the trust of millions of customers. However, as they move forward with their goal of hitting a $10 billion valuation, they will have to continue to address criticisms that surround them and work hard to build up the trust of their consumers.
Thanks for reading this article. We hope you enjoyed reading it and gained value from doing so. If you have any questions, feel free to write us an email. We’ll try to answer as soon as we can.
Have a wonderful day!
