2023 has presented a tougher economic climate than previous years for many, however the money transfers space has largely seen a positive year. While there have been no major surges, the industry has for the most part seen a year of stability as it continues to move towards a digital-led future.
Send and receive markets were largely stable for remittances in 2023
Our recent analysis of publicly traded money transfers players speak positively of the industry, with Western Union, Intermex, Remitly, Euronet’s money transfers segment (which covers Ria and Xe) and Wise’s consumer segment all returning to revenue growth this year. This compares favorably to 2022, where some players did see contractions, most notably Western Union.
However, looking at the markets served by both publicly traded and privately held money transfers players indicates a sector that has seen little major market expansions over the past year and is generally fairly mature.
While there is significant variation in both the number of send and receive markets that companies serve, the picture generally looks very similar to 2022. Of those where it is possible to get precise, publicly stated send and receive market numbers for both this year and last year, only two saw a difference in send markets, while three saw a difference in receive markets.
WorldRemit saw a slight contraction in send markets it is now serving, while Remitly saw a slight increase. On the receive side, WorldRemit’s receive markets increased by slightly more than its send countries declined, while Sendwave also saw a minor receive market increase. However, Paysend was the only company to see a notable increase in the number of receive markets it serves, adding around 50 in the last year. It is therefore one of few companies in the remittances and consumer money transfers space to focus on geographic expansion this year as part of a broader, multi-year development plan.
Digital discussion down, growth up for money transfers players
While few companies in the consumer money transfers space focused on significant geographic expansion this year, there was still a focus on growth, as reflected in the earnings calls of some of the main publicly traded companies.
Among Euronet, Intermex, Western Union and Remitly, mentions of growth on earnings calls was at a higher rate this year than in the past few years, and steadily climbed throughout the year to reach a level only passed by Q4 2021 in the most recent earnings season.
This reflects an industry focusing on growth, but doing so in ways that sit beyond simple market expansion. For example, many players have been focused on increasing active customers, with Remitly reporting a 42% increase in Q3 2023 amid an increase in marketing spend. Intermex also saw customers grow 35% over the same period.
Ria and Xe, meanwhile, together saw an 8% increase in money transfer revenues in Q3 2023 – their highest growth rate in several years – while Western Union saw its digital business return to growth in Q3 2023 after a period of contraction.
Interestingly, we did find that the past enthusiasm for digital has lessened in earnings calls, with discussion of the subject at lower levels than the last three years. However, given that digital revenues have consistently increased for most players, this appears not to be a sign of a reduction in digital focus, but more a repositioning of digital.
While a few years ago many players regarded digital as an additional area to be discussed separately from companies’ main retail businesses, it is increasingly being seen as a core part of businesses in this space, garnering less specific discussion and less need to make the case for it to investors.
Crypto has been a focus – but only for a few
Meanwhile, while Bitcoin may be having a return to the spotlight, the use of crypto by money transfer players remains muted, with the majority having no active projects that they have spoken publicly about.
However, among those that do, 2023 has been a year for additions. While Chipper Cash has retained a business-as-usual approach for its crypto purchasing products, MoneyGram has extended its existing crypto offering.
Previously, the company made it possible for customers to purchase stablecoins from its branches and so serve as an on-ramp between physical fiat cash and the crypto world. However, this year the company announced the launch of a non-custodial wallet, which will increase its role as a fiat-crypto interoperability player. Set for launch in early 2024, it extends the company’s existing partnership with blockchain infrastructure player Stellar, which currently enables MoneyGram to offer USDC remittances, and will also enable unbanked customers to access crypto.
Beyond this, blockchain-related projects in the space have been relatively quiet, save for a partnership between Western Union and the Digital Dollar Project, which focused on a pilot CBDC for cross-border remittances. While it is unlikely that this will translate into an active product any time soon, it does indicate that Western Union is exploring the technology.
Funding and layoffs speak to a tougher environment
Across all areas of cross-border payments and beyond, 2023 has provided a tougher economic environment than previous years, with both a reduction in venture capital as well as the shocks following Silicon Valley Bank’s closure. While money transfers as a whole has not been significantly adversely affected, there have been some knock-on challenges for some players.
One such area is in layoffs. In general, money transfers avoided the worst of the layoffs that hit many parts of the tech industry, however there have been some companies who had to make redundancies this year.
Zepz, the parent company of Sendwave and WorldRemit, announced two separate rounds of layoffs that eliminated around 450 jobs – estimated to be slightly under a third of the company. However, much of this has been attributed to removing duplicates between WorldRemit and Sendwave as synergies between the two companies are increased.
A more direct casualty of the tougher economic climate, however, has been Chipper Cash. Prior to the downturn, the company was pursuing a sharp growth curve supported by significant spending, having doubled its workforce between 2021 and 2022. However, the company counted FTX and Silicon Valley Bank among its biggest investors, and is likely to have intended further raises that became untenable in the current economic climate.
As a result, it has focused on cost-cutting this year, with three rounds of layoffs that followed a significant initial round late last year where 40% of the workforce was made redundant. In 2023 alone, the company is reported to have laid off more than a third of its remaining workforce, with exact numbers thought to be around 165.
Despite the economic climate, there have been some positive developments, with a small number of remittance and money transfers players closing significant funding rounds this year. Africa-focused LemFi, which appeared on our market map of the 30 Most Promising Cross-Border Payment Companies, raised $33m in Series A funding earlier this year.
Meanwhile, Paysend closed a $65m funding round that included investment from Mastercard, following an established partnership between the two companies.
2023 has been a year of significant headwinds, however the money transfers space has responded with strength and resilience. We’ll be watching closely to see what 2024 brings.