The $280m raised by UK-based cross-border financial transfer platform TransferWise last week, combined with the $115m series D round announced by US-based financial remittance platform Remitly, indicates one way in which the fintech sector is evolving.
TransferWise has built an online platform that provides a more affordable option for businesses that want to make financial transfers to other countries. It intends to expand in 2018 by launching a consumer-focused service that will involve a dedicated debit card.
The funding was secured in a series E round co-led by asset manager Old Mutual Global Investors and venture firm Institutional Venture Partners that included conglomerate Mitsui & Co, Andreessen Horowitz, Baillie Gifford, Sapphire Ventures, World Innovation Lab and entrepreneur Richard Branson.
The round valued the company at $1.6bn and took its overall funding to almost $400m. In addition to its consumer features, TransferWise will use the capital to expand geographically, particularly in the Asia Pacific region.
Remitly is meanwhile in the process of raising $115m in a round that will be led by PayU, the payment services subsidiary of e-commerce and media company Naspers, and which also features existing investors Stripes Group, DFJ and DN Capital.
The company, which had previously raised $99m in debt and equity financing, runs an online remittance platform that users in developed nations utilise to send some $4bn of funds to recipients in developing countries each year. Like TransferWise, it looks to make the transfer process easier and more affordable.
The deals are timely; Brexit and the election of Donald Trump as US president have helped to set a media narrative that citizens in TransferWise and Remitly’s home countries are increasingly straining against globalisation by favouring political solutions that reinforce hard borders, but the truth as ever is more complicated.
The internet more than anything has made international borders, if not obsolete, then more porous. Companies source goods from some nations to sell in others, while smaller operators are finding they are able to compete with larger rivals by developing specialist services they can provide globally.
On the consumer side meanwhile, international e-commerce platforms such as eBay, Amazon and Alibaba, together with the developments in online and mobile payment, and optimised logistics, have cut down the barriers that would prevent people buying directly from international sellers.
All that is without the increasing work-based migration in the world. Even if countries such as the US and UK manage to cut unskilled migration – and it is highly questionable they can – skilled professionals will always be in demand and will require services that make transferring funds or assets easier. Foreign investment, too, appears to be as welcome as ever.
TransferWise and Remitly are far from the only participants in the sector to raise money this year. Currencycloud, Instarem and Meixin Global have all closed corporate-backed rounds in 2017, and as mobile payment becomes more popular while national currencies remain separate, the demand for such services is likely to grow.
In turn, larger businesses will be expected to invest directly in the sector, but perhaps significantly, of the five companies above only Instarem is backed by a financial services firm (SBI Holdings).
Perhaps the big question is whether banks have been slow to enter the cross-border transfer sector because they have been slow to react, or whether they already have the means to enter it themselves once disruption reaches a certain point and are simply waiting for it to become sufficiently profitable to do so. The answer will probably become more clear in 2018.