Global remittance startup Remitly has made its trading debut on the Nasdaq under the ticker RELY, raising about $300 million through its IPO, which was priced at $43 — slightly above the previously announced expected range of $38 to $42.
But since then, shares have declined, and the company fell below its $43 share price on Monday (Sept 27) to about $41.
It’s been a decade-long journey to an IPO for the company, which entered the trillion-dollar cross-border remittance market in 2011. At the time, the company focused on one market, helping immigrants living in the U.S. to send money to family and friends in the Philippines through a mobile app.
Today, the Seattle-headquartered money transfer startup allows immigrants to make international money transfers from 17 sending countries to more than 100 receiving countries. But fending off growing competition in the remittance market is a constant exercise as the firm aims to attract new customers and increase retention.
In this piece, PYMNTS takes a closer look inside the newly listed money transfer startup, highlighting five things discovered in the analysis:
1. Growth is increasing and losses are shrinking.
The revenue generated from transaction fees paid by customers, as well as foreign exchange markup rates, resulted in year-over-year growth of about 103% between 2019 and 2020, reaching $257.0 million at the end of December 2020, up from the $126.6 million recorded in 2019. Decreasing net losses of $51.4 million and $32.6 million, respectively, were recorded for those same periods.
The firm showed a similar trend of growing revenue and shrinking losses for the six months ending June 30, 2020 and 2021, generating a year-over-year growth of approximately 92% with revenues of $105.1 million and $202.1 million, respectively. Net losses stood at $21.1 million and $9.2 million, respectively, for those two periods.
2. Remitly is still not profitable.
But despite these shrinking losses and current billion-dollar market value, Remitly is still not profitable. In the company’s S-1 filing registered with the Securities and Exchange Commission (SEC) ahead of the IPO, it stated that given its history of net operating losses, “there is no guarantee that its business will become profitable or that, if we achieve profitability, we will be able to sustain it.”
Achieving and maintaining profitability is closely tied to the uncertainty surrounding the growth of its customer base, as well as its “ability to retain our customers, [and the] aability to efficiently attract new customers, corridor mix, revenue mix and seasonality,” the prospectus stated.
Profitability is also hindered by the significant funds dedicated to further developing and securing its technology platform, as well as developing new products and functionalities and investing in marketing programs to drive new customer acquisition, among others.
3. Keeping ahead of the competition is tough.
Remitly’s IPO comes a few months after one of its main competitors, U.K. FinTech giant Wise, started trading on the London stock exchange at an $11 billion valuation in July. Last month, PYMNTS reported that another competitor, WorldRemit, was raising funds ahead of a possible IPO at a $5 billion valuation.
This is an indication that the money transfer business once dominated by legacy players like Western Union and Moneygram is now a highly competitive field, with a wave of FinTech startups leveraging technology to make it faster and cheaper to send and receive money around the world.
The development of neobanking and the proliferation of cryptocurrency have also contributed to the intense competition in the remittance space. In regards to cryptocurrency, the firm acknowledges that a failure to keep up with new entrants in the market or to integrate cryptocurrency or other new financial technologies into its services will affect its ability to compete successfully in the domain
4. Obtaining or maintaining necessary money transmission licenses can be expensive and time-consuming.
The highly regulated money transfer sector, and complex regulatory environments around the world, mean that juggling requirements from one jurisdiction to another can be expensive and time-consuming.
Remitly’s business is registered under several domains depending on where it operates, including as a money services business in the U.S., a payment institution license in the U.K. and Ireland, a major payment institution in Singapore and a registered remittance service provider in Australia.
In other markets, the company works with disbursement partners, such as locally licensed businesses or regulated banks, to release funds to recipients. And expecting these partners to comply with local laws and regulations is a risk in itself, because their failure to do so would implicate Remitly and force the firm “to seek an alternate solution, which could impact our service and our business.
5. The firm is eyeing services beyond its core remittance product.
Remitly intends to expand to “thousands of additional corridors” and partner networks in addition to the 1,700 corridors it presently supports around the world.
The firm is also targeting a broader expansion of its remittance services, Passbook and Remitly For Developers, into broader financial services to diversify its revenue base. Passbook, for instance, has had an “encouraging early adoption;” by leveraging the data and insights it is gathering from its immigrant customers, the company can gain access to share revenue and fees from its bank partners.
Further reading: Remitly Taps Immigrant Market With New Passbook Banking Service
Launched in February 2020, the mobile app feature operates in partnership with the digital banking service, Sunrise. Customers can sign up for a Passbook account in less than 10 minutes, through which they can deposit, spend and send money around the world.
The company could be creating an ecosystem similar to the ones Western Union and MoneyGram have put in place, but it will have to compete with these legacy players to successfully launch it at scale.
Plans to leverage both its localization expertise and technology platform are also being considered to increase “the number of disbursement, payment and other partners in our global network,” as well as to boost the number of direct integrations with these partners.
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