Professional Documents
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Part I: Market Overview
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Part II: Anthemis Talks 7. Google Wallet: Pretender to a Revolution or the Real Thing? p18
8. Recent M&A: Featuring the Network International TimesofMoney Transaction p19 10. Anthemis News: What have we been up to? p22
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the anthemis newsletter 01//1. Looking to the Future: Trends, Challenges and Opportunities
//Editors Note
Like a hibernating bear shaking off a decades long slumber, traditional remittance players are finally attempting to respond to the increasingly digital world a growing number of their legacy customers live in. To accelerate their growth, they have to rethink the scope of their industry and redefine their customer beyond the historical stereotype of migrants and labourers sending money back home to support their families. A new breed of agile, disruptive startups with technology-driven solutions are the competition, offering user experience, lower prices and value-added services like cross-border direct payments for airtime top-up, utilities and white goods. With the industry becoming increasingly mobile, the key questions become how do wallets and cash interact and how do physical agents, post offices and bank branches evolve to serve this new mobile world? Or if, indeed, they can. In this newsletter, we review the emerging trends and the MNO model that is driving disruption, especially in the developing world. Then we take a snapshot of how the local Indian remittance market is witnessing exciting developments by extending services to the unbanked and under-banked population. On the other side of the world, Google announced that email attachments will now be able to carry money with just a simple click. From the flurry of partnerships over the past year, we highlight some of the M&A activity and take a closer look at Network Internationals acquisition of TimesofMoney. This acquisition has enabled Network International to transition from a regional utility processor to a dominant emerging markets player while expanding its customer base to include a lucrative new geography and product set. Next up is an interview with Michael Kent, the founder of Azimo, a UK-based digital remittances player. His keen perception of the industry is an exciting glimpse of things to come. We continue with profiles of other players to watch in this rapidly evolving industry, followed by a visual representation of the journey of money from the sender to the receiver and all the adventures it has along the way. We wrap up with all that we have been up to at Anthemis and some highlights from our portfolio companies. We wish you profitable reading.
change direction as global fortunes shift. As evidence, the population of US migrants increased by 30%despite the US recessionover the past decade in the US. The remittance market is very resilient, especially when compared to other global financial fund flows such as Foreign Direct Investment, private debt and portfolio equity, because even though immigrants are affected faster by an economic crisis, they also recover faster than the nonforeign population.
//The Senders
The US continues to be the top remittance-sending country, with an estimated $52bn of outbound remittance in 2011. Recently, the weak economy in Europe led to a drop in remittance flows into Eastern Europe and CIS as well as Africa and Latin America. On the other hand, high growth in remittances inflow was recorded in South Asia and the MENA region as well as East Asia and the Pacific region, based on strong economic activities and continued migration of workers into the GCC markets. Thanks to the high commodity prices, Russias strong economy is continuing to attract migrants from the surrounding CIS countries, while the recovering US economy drove some growth primarily into Latin America, Africa and Asia.
23 22 21 21 18 18
9 7
Vietnam Lebanon Tajikistan Liberia Kyrgyz Rep. Lesotho Moldova Nepal Samoa Haiti Lebanon Kosovo
Philippines
India
China
Mexico
Nigeria
Egypt
In US$billion, 2012e
as % of GDP , 2011
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the anthemis newsletter 01//1. Looking to the Future: Trends, Challenges and Opportunities
Cash remittances are growing 3 to 4% while electronic channels are growing at 28% y-o-y.
regional players, traditional banks and informal personto-person providers make up the global moneytransfer market. The large players such as Western Union and MoneyGram, which together make up about 20% of the global market, primarily service cash-to-cash customers. This requires maintaining an extensive agent network and infrastructure, as well as meeting evergrowing regulatory and compliance requirements. Typically, then, adding more agent locations across the globe and slashing prices have driven growth in transactions. But the disadvantages loom large: slow transaction processing, higher exchange rates, limited store hours, long wait times, complicated manual forms and sometimes unpleasant locations. Other niche players specialise in specific corridors such as US to Mexico split between cash and electronic channels (i.e., North America to the Caribbean, Central or South America, e.g., Dolex). Entrants are focusing on electronic commerce and allowing consumers to send and receive money using the Internet, for example, PayPal, ikobo and Xoom. But the lions share of the market is still processed through banks, which usually provide wire services and card-based services as an incentive to purchase other services and products, e.g., ICICI Bank from the US, UK and Germany to India. The last, but not least, player in the remittance marketplace is the informal network, accounting for a large share of the market, sometimes estimated to be nearly 40% of recorded transactions. These networks enable the transfer of funds outside formal mechanisms such as receipts and often do not comply with government reporting requirements, leaving
senders and receivers at risk of fraud. The main reason why remittance players have not evolved is that the optimal system needs interoperability at the customer-account levelthe ability to transfer money from one bank account to another even if the accounts sit in different banksand to be quick and simple. Without the core competence to handle international money transfers, a lot of the players still want to leverage money transfers to cross-sell other services and reduce attrition.
such as Western Union all the more formidable as an entry barrier to competitors. Physical locations remain a necessity and a very expensive onein the remittance market. Even if part of the transfer is accountbased or electronic, the corresponding one needs to be in cash. The rule we have is never ask Mom to change her behaviour. (John Kunze CEO, Xoom). Cash may still be king, but the heir apparent is technology. Even the cashto-cash remittance leader, Western Union, has set aggressive targets for its online branch WU.com. For digital remittances to take off, the source of funds needs to become digital. This can be done either through cash digitization networks like Ukash and PaysafeCard, or by the senders having an account of sorts. So while digital has been increasingly adopted in the West where populations are banked, alternative models have emerged in low-GDP economies. In developing economies that
//The Incumbents
Western Union leads the market with a revenue of $5.5bn 2011, driven by 510,000 agent locations and very strong brand recognition. MoneyGram comes in at second with $1.2bn revenue in 2011, with 284,000 agent locations and with strong brand recognition. Ria, a subsidiary of Euronet and the third largest money-transfer provider, generated revenues of $244.7 million in 2010, with 107,000 agent locations across 132 countries. 21% of transactions processed in 2010 went to Mexico. Next up is Dolex and Europhil with $1.6 billion revenue in FY09, 730 retail branch locations in U.S. and 96 in Europe. It also offers merchant services, including debit and credit card processing, and cheque-related services. Global Payments sold Dolex and Europhil to Palladium Equity Partners for $85m in 2010.
MoneyGram
5%
Ria Envia
2%
Dolex
Xoom
Western Union
15%
Informal networks
40%
Others
36%
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the anthemis newsletter 01//1. Looking to the Future: Trends, Challenges and Opportunities
support more than threequarters of the worldwide mobile phones and have large unbanked and underbanked populations, mobile money-transfer services are adopted much quicker, e.g., G-Cash and Smart in the Philippines, and M-Pesa in Kenya. Players are finding ways to work around the financial inclusion challenge, be it a prepaid cash-in and cashout capability, a partnership with telcos, or a grassroots marketing and education campaign.
investigation and remedy, the customer may suffer slower service because of more bureaucracy. And implementing such regulations will require considerable money and effort from the remittance companies, scaring away entrants and forcing many of them out of business. Not only are regulations getting tighter, but also they differ considerably from country to country and even from corridor to corridor. Add to this the central banks, often not allowing non-bank entities cash-in or cashout transactions, and you have global compliance becoming a bureaucratic nightmare. Knowledge and risk control will be the major challenge that promises to loom large as more transactions move online.
9.8% 9.5% 9.8% 9.7% 9.4% 8.7% 8.9% 9.1% 9.3% 9.1% 9.0%
3.3%
2008
2009
2012 Xoom
Source: Company Reports, World Bank *Xooms transaction costs reflect costs for total GSV amounts
Playing on price
The advent of electronic remittances and emergence of innovative, agile players have seen the industry moderately decrease prices and FX spreads. Companies like The Currency Cloud (an Anthemis portfolio company) are taking care of the complexities of accessing foreign exchange liquidity and payment networks. They deliver efficiency via straight-through processing (STP) of the payments workflow, making
international payments simple and highly competitive, even for the smallest niche remittance companies. Regulation is also playing a role in reducing prices with initiatives such as G8s 5x5 Objectivea commitment in 2009 to reduce remittance fees by half in 5 years, from nearly 10% in 2009 to 5% in 2015. Current pricing trends, however, do not reflect these reductions being realized, with legacy agent commissions being the major contributor to bloating costs. The good
news is that this makes it easier for the emerging agentless, branchless, low-cost/low-price online players to enter the remittance market. But a low pricing strategy without hefty capital to lean on can be a double-edged sword. Even though it may help expand market share faster than peers, it can generate a significant operating loss from day one. For example, Xooms competitive pricing means it is still operating at a loss (e.g., $4.99 for a regular $200 transaction vs ~$8.00 for Western
2.25 B
0.75 B
1.50 B
1.50 B
0.75 B
0.25 B
Knowledge and risk control will be the major challenge that promises to loom large as more transactions move online.
0.00 B 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
0.00 B
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the anthemis newsletter 01//1. Looking to the Future: Trends, Challenges and Opportunities
//Pricing
A CGAP study comparing pricing of 16 leading branchless banking services against 10 formal banks found that the former was 19% cheaper (2009 FDIC survey, eMarketer McKay and Pickens, 2010).
Union and $9.99 for MoneyGram). What is clear is that this environment positions money-transfer players to compete on a low-cost model, and the winner will be the one that successfully leverages technology to improve efficiency and lower prices without sacrificing margins. The customer will be the ultimate judge and will decide based on ease of transfer and how their evergrowing needs beyond just sending money are met.
Making a name
Branding is just as important as compliance and pricing: Customers
need to see a trustworthy face that reassures them that their hard-earned money will reach its destination. Thats why they are willing to pay a premium for a wellknown name that inspires safety and guarantees the transaction. Successful brandingbuilt over years with time, effort and moneyallows Western Union, for example, to charge more than some of its competitors. Like everything else, branding presents an opportunity and a challenge for the entrants.
convenient and transparent local and international payments. But banks and most of the key moneytransfer players fail to deliver on one or more of these attributes. This leaves the playing field wide open to disruptive entrants embodying key characteristics shared with successful disruptive Internet companies beneficial consumer network effects, a trusted brand, high retention rates, and long-term monetization potential. Given the barriers inherent in the industry, a company that has achieved the perfect balance of growing both transaction volume and profitability has yet to emerge. But a process already in the works is that many of the new entrants are looking for alliances
and partnerships rather than trying to disrupt the market alone. For example, M-Pesa has teamed up with Western Union to let people in 45 countries send money directly to its users in Kenya, and PayPal has allied with MoneyGram to combine PayPals online capabilities with MoneyGrams physical presence. In a market controlled by deep-rooted, offline competitors, transition to the online model will be challenging and potentially costly. But once the dust settlesif there is interoperability between the various players, supported by balanced regulation that enables omni-channel, audience-agnostic solutions with customer needs at the corepursuing the digital prize will all have been worth it.
Emerging markets remain highly under banked, with the cost of establishing a bank network pretty significant due to small deposit amounts.
60 million adults
Percentage of total adult population who do not use formal or semiformal financial services (Estimates used to calculate regional averages) 0-25% 26-50% 51-75% 76-100% *Members of Organization for Economic Co-operation and Development
Source: McKinsey
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the anthemis newsletter 01//2. Mobile Money: Deep Diving into the Telcos Strategies
1,447
1,304
1,399
28% 29%
GP CA
6 =4
22% 20%
159
26%
113 78
600 15% 0
52
built for roaming, that can be multipurposed for remittances. The three main requirements for operators to offer mMoney services are technology, regulations and a financial institution partner. To offer a mobile remittance product, an additional player, a remittance service provider (RSP), is required.
(P2P) transfers.
2012
1,591
1,653
2009
2010
2012
2013
2014
2013
2011
2011
2014
the last 10 years. Their main victims have been banks and incumbents: banks because of an unsuitable product offering for todays agile, digital customer, and incumbents because of a lag in developing new channels and products for fear of cannibalising their existing business models. But the continuous refinement of mobile technology is expected to increase competition, lower prices and discourage the flow of money through informal channels, thereby expanding the size of the formal remittance market. However, no noteworthy disruption has yet happened, mostly because of its highly defensible nature and high entry barriers. Established players have slowly started to restructure and move towards digitally enhanced services, expanding to include partnerships with a variety of players. The most prominent of these players are (i) telcos as digital agents, (ii) card associations as POS/retail distribution partners, and (iii) prepaid as physical
extensions of the product with a POS capability and the availability of reload at agent locations. Because these trends mobile, online, prepaidin under-penetrated markets are an entry pathway for disruptive competitors, thats where the bulk of transformation has taken place. Because different levels of competing alternatives, regulations and cultural requirements characterise different markets, entrants have crafted different approaches for each market. This approach by entrants to capitalise on this large mobile opportunity by offering tailored product substitutes has further fragmented an already divided market landscape. One of the most promising money-transfer players are telcos. They are the perfect digital agent partners to penetrate markets where no remittance network infrastructure exists, while in penetrated markets, telcos can be used as product distribution partners. The main advantage of telcos is their clearing and settlement infrastructures,
Who are the players & what are the strategies in the mobile money remittances?
To analyse this subsector trend, we examine Banglalink Mobile Remittance, Digicel Mobile Money, Globe GCASH, MTN Mobile Money and Safaricom M-Pesa. First and foremost among the key success criteria for mobile money remittance would be the critical mass of the mWallet useran essential ingredient for mobile remittances to be profitable. Although part of the transaction can be mobile-based, the second leg would still require physical locations of agent infrastructure. The final ingredient for mobile remittances would be a range of complementary services for downstream transactions with remitted funds, e.g., bill paying and domestic peer-to-peer
With their key advantages of ubiquity, convenience and cost-effectiveness, online and mobile money-transfer services have gained an estimated 10% market share in the last 10 years.
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the anthemis newsletter 01//2. Mobile Money: Deep Diving into the Telcos Strategies
//Where does mobile fit into the international remittance ecosystem value chain?
Senders cash in by using:
Bank branch MTO branch, using credit/debit card or cash Other physical access point (e.g., retail store) Online account Mobile phone, to do a mobile cash in
Sending countries
Money transfer
Foreign currency exchange Settlement accounts for sending and receiving remittance service providers Banks to run the debiting and crediting of the settlement accounts
mWallet to do a mobile cash out through an agent network Agents or merchants who support other cash-out channels, such as for prepaid cards
is Dhaka Bank) and P2P transfers are not yet allowed, Banglalink has grown a cash-out distribution model through partnerships with local Bangladeshi vendors and Western Union. On the other hand, MTN has experienced significant delays in countries like Uganda where planned deployments have faced regulatory hurdles; its partnering with other MTOs (vs Western Union) has led to delays in funds transfer in Ghana, which has hurt the MTN brand. For M-Pesa, the effect of regulation has been to limit the size of allowed fund transfers.
partner with BICS rather than Western Union due to pricing. Still, a few players unwilling to cut prices remain. M-Pesa has a fee structure equivalent to incumbents (quoted same fee $8.50-$11 for sending $100 to Kenya either through mobile or traditional form from the US); the companys efficiency, security and ease of service have led to M-Pesa being widely adopted in Kenya, where the company processes more than a quarter of the countrys GDP via mobile.
customers and senders. It offers cash cards and mWallet as cash-out options for recipients, allowing users more familiar with cash cards to have a viable alternative. Simultaneously, the company is pursuing payroll payments from employers and short-term health insurance to attract mWallet users. In contrast, M-Pesa has concentrated on a simple messaging marketing campaign and has steered clear of a complicated suite of offerings.
Digicel uses a unique partnership with a lowercost P2P FX company, KlickEx (a P2P currency exchange), to eliminate challenges of FX issues, allowing the company to focus on simply growing the user base. And different players address regulation differently. For example, in Bangladesh where Banglalink operates, because all international remittances must be bank led (e.g., large partner
Competing on price
Pricing is another strong driver of adopting mobile money remittance. With incumbents charging fees of up to 9%, entrants are sacrificing margins to gain market share. For example, Digicel Mobile Money and KlickEx have created an offering significantly cheaper than their competitors, contributing to a dramatic cut in prices across providers in the Pacific. Another example is MTN, which opted to
Regulation rules
Regulation, often informal and inconsistent, directly affects the viability of mMoney. Regulators use a case-by-case method, often barring non-bank entities from foreign transfers. And countries with exchange controls can be difficult to penetrate because currency rationing and uncertainty in the regulations around bankled models can often be a major impediment to entry.
Sender
Sending agent
(physical/digital)
Global hub
Aggregation Interoperability Compliance Infrastructure
Recipient agent
(physical/digital)
Recipient
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the anthemis newsletter 01//2. Mobile Money: Deep Diving into the Telcos Strategies
//To offer a mobile remittance product an additional player, a remittance service provider (RSP), is required
The diagram below shows the ecosystem and roles associated with each player.
$
Consumer
Initiates remittances
mWallet
Providers enable interaction between operators and banks mWallet is the consumer facing technology piece
Operator
Enable consumer to initiate remittance through their networks Carry the relevant data and provide the technology (mWallet) on one or both ends
Bank
Settlement Regulatory compliance
RSP
Calculate charges Comply with regulations Connect cross-border markets through messaging
Distribution
Enable cashin and cashout
service reliability with its MTO partner and allocating sufficient internal resources. The MNOs different strategies show how each adapted its strategy to
clear the hurdles it faced to enter the remittance market. The key success factors are customer acquisition and merchant adoption. To own the customer, acquisition
must lead to customer retention. To drive demand to merchants, adoption must meet their needs. For these to become manifest, the most important requirementsand the
most difficult to come byare: (i) ubiquitous physical locations convenience, (ii) a cash-in and cashout capability, and (iii) a strong brand awareness because people need a provider they can trust. With these hurdles to overcome, it is not surprising that traditional remittance providers, such as Western Union and MoneyGram, still have a huge advantage over entrants. Although there have been some innovative strategies by MNOs, there have been no major success stories so far, and it is too early to pick the winners and losers. What is clear is that MNOs need to refine their strategy to overcome the hurdles and gain both customer acquisition and merchant adoption.
Supplyside: developing urban hubs while rural infrastructure remains nearly nonexistent
The main cause of the inability to service low-value customers is a systemic cost problem with the Indian
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the options to improve this situation are limited. One solution is using mobile payments to transfer money from one account to another, as demonstrated by M-Pesas mobile-based remittance system. Since its 2007 launch, its subscribers have grown to 17 million (as of December 2012), with more than 7 in every 10 adults in Kenya using M-Pesa3. Another solution would be a Western Uniontype facility for money transfer within the country, which could eliminate the need for opening bank accounts and KYC-related reasons for denying service. An international example is the German payment system, which provides an e-payment facility even where the payer or payee does not have a bank account; instead, the transaction is based on identification and authorisation using a national ID. South Africa has tried to address the issue in partnership with private enterprise by using biometrically enabled stored value card technology (Net1). India has tried to replicate such initiatives with companies such as Fino, which acquired Nokias mobile payments business in June 2012. But in a country with
such a large population and diverse geography, such methods are difficult to scale without quickly becoming uneconomical. We are in favour of using all available institutions and schemes that are capable of facilitating the provision of financial services including cooperativesto be part of the moneytransfer infrastructure. The inherent weaknesses of the Indian financial system must be successfully addressed, where even though commercial banks have the necessary technical framework they lack convenient and effective delivery channels, whereas regional rural banks and cooperatives have the reverse attributes and challenges. Limiting financial provision to the banking sector would be an enormous mistake, given the enormous reach of institutions such as the post office, which opened over 78 million accounts; PACS (Primary Agricultural Credit Society), which has a membership of over 132 million in the rural hinterland; and microfinance institutions, which had a clientele of just over 29 million by end of March 20104. The problem of including these nonbanking service providers
Bank
Post Office
MFI*
No Doorstep Service
The main cause of the inability to service low-value customers is a systemic cost problem with the Indian industry, chiefly driven by regulation and staff unions, which oppose measures to increase efficiency
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arises, however, because most of them have not made remittances a business proposition, despite the significant potential for remittances to be linked to other financial services. Furthermore, Indian retail has been going through difficult times, with property rental costs rising significantly. And the Indian governments recent victory in a controversial vote in Parliament to open up the countrys highly protected retail industry to foreign chains has been criticised as the death knell for the already declining profitability of the domestic Indian retail industry. With Indias next national elections in 2014, the government has a major incentive to boost small industry. One of the ways it has done this is to leverage the BC (business correspondent) framework, giving the retail sector a potential source of additional revenue by effectively becoming an extension of traditional branch banking. The legislation allows retailers to explore cash dispersal as a way to remain profitable. The
catch is that the current system covers only basic bill payment, simple domestic remittance and mobile top-up, which currently are not leading to a large enough revenue stream to cover the costs of becoming a BC, particularly the cost of funding the cash float. To solve this problem, Anthemis has been working for the last 18 months to see how the BC framework can be remodelled so that retailers can offer remittance services and welfare payments, and generally act as the last mile of payment for consumers. By broadening the products available to retailers and allowing them to reuse their cash float (for which prefunding is required to minimise risk) for multiple cash-in and cash-out products, we think it possible to build a business model that creates a reasonable, sustainable revenue stream for retailers. To support our position, the implementation of the Aadhar scheme in Indiaa 12-digit individual identification number issued by the Unique Identification Authority
10
of India on behalf of the government, linked to three biometric characteristics ensures that BCs will be able to function without some of the other cashrelated KYC issues seen in other markets. The key to a successful business model, in the Anthemis philosophy, is not just the product set itself, but also the underlying processes implemented at the retailer level. Maintaining certain standards among the BCs ensures sponsor banks (each BC needs a sponsor bank) are comfortable that a bankgrade retail network is operating as an extension of their own network. With the Reserve Bank of India (RBI) creating regulations that enable any payment
91%
90%
59%
59%
27%
20% 0% UP-Mumbai
17%
14% 10%
2% 0%
7%
14% 0%
Odisha-AP (without Nuapada) Bank Transfer
8%
2%
0%
Courier
Rajasthan-Gujarat
Maharashtra
to be made with any BC regardless of which bank they work for and where the recipient banks, a major barrier to creating a sustainable network interoperabilityhas been breached. A retail affiliate network of agent shopssupporting
the disbursement of benefits and providing an array of services around cash acceptance and disbursement allows the wider populace to get access to electronic money. These developments will have significant ramifications for
the financial inclusion and remittances in India and real, positive effects on peoples lives. References
1 Deshingkar et al. (2010) 2 http://bit.ly/ZPNZjF 3 http://on.ft.com/ZPO1bc 4 http://bit.ly/13GkPRs
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PayPal, allowing PayPal users to use MGI agents to access their funds and send money. The incumbents lag in transforming with the times has been borne out by the markets, with MGI faring relatively better than Western Union, but still lacking in absolute terms. Todays ideal remittance player will need to provide both digital and physical services. Even though they are more physically focused, the incumbents still have the advantage as long as cash dominates the market. But if they are to capture a new demographic of
MGI
25 1.8 1.6 Volume (in millions) 1.4 1.2 Price 15 1 0.8 0.6 5 0.4 0.2 0 Jun-12 Sep-12 Dec-12 Mar-13 Volume 0 Volume (in millions) Volume (in millions) 20
10
Source: capital IQ
Price
digitally native customers, they need to improve their value proposition and tweak their strategies. Whats guaranteed is that were likely to see lots
of action in the money remittance world as the Davids clash with Goliaths to get a bigger slice of the ever-growing global remittance pie.
Is the success of incumbents and entrants mutually exclusive? Please share your thoughts with us at editor@anthemis. com
//Azimo
Based in the UK, Azimos service lets users transfer money online to more than 125 countries around the world for a minimal charge, usually around 1 to 2% of the transaction, with termination to any bank account or to one of 150,000 payout locations. Money can be transferred via the Azimo website or via an iOS or Android app. The social element to Azimo allows users to log in using their Facebook account. On January 18, 2013, Azimo announced angel investment of 300k to expand its operations.
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//Boom
Based in Sunnyvale, California, with offices in Los Angeles, California, and Mexico City, Mexico Boom Financial provides an online financial platform for customers to share and spend money from their cellphones, allowing users to transfer money to various accounts from their cellphones. Boom aims to be a fully mobile banking service, providing a mobilebased alternative to traditional wire payments. Users who sign-up for a $25 yearly account pay $2 every time they make a deposit but pay nothing for individual transfers. Currently operating in the US, Mexico, the Dominican Republic, Jamaica and Haiti, it raised $17 million in series C funding in July 2012, bringing the total funding to over US$30 million in venture financing from RRE Ventures, Digicel Group, Matt.org and individual investors. Boom Financial, formerly known as m-Via, Inc., changed its name to Boom Financial on July 18, 2012.
//CurrencyFair
Based in Dublin, Ireland, CurrencyFair operates an Internetbased marketplace. It allows individuals and businesses to exchange currencies and send funds to bank accounts worldwide, using a unique person-to-person online marketplace to facilitate currency exchange between users, in a simple and anonymous fashion.
//GlobalWebPay
Based in London and founded in 2010, GlobalWebPays money-transfer website has no signup costs or ongoing maintenance fees. Once their account is activated, clients can send money internationally (up to 500 or, once the account is upgraded to a Standard account, 10,000 per month). It teamed up with Envoy to bring the benefits of their network of global banking relationships and local payment methods to the online consumer. Together, they access a global banking network of more than 200 banks. Money can be sent to 32 countries across 5 continents.
//Google Wallet
Founded in the summer of 2011 in the US, when Google, Citi, MasterCard, First Data and Sprint jointly launched an app that turns NFC-enabled handsets to mobile wallets, Google Wallet enables customers to buy in stores, buy online and send money with Google Wallet or gmail.com. Google Wallet enables customers to send money from your bank account or Wallet Balance for free but charges a per-transaction fee for sending money using a credit or debit card. Google Wallet also works on getting value-added services, such as offers, loyalty and gift cards.
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//Alternative
//PayNearMe
Headquartered in Mountain View, California, and founded in 2009, PayNearMe operates a cash transaction network that enables consumers to pay for a range of goods and services in e-commerce, direct response & catalog marketing, consumer finance and moneytransfer companies. It allows consumers go to a local store, beginning with any of the 6,500 7-Eleven stores across the US, and pay cash at the register for an online purchase, a loan repayment, a bus ticket or other transaction. It has agreements with over 100 companies to accept payments, with customers including Amazon, Bigpoint, Infosend, Lexicon marketing, MoneyOnline, Offgamers, Progreso Financiero, RIA Financial, Sochiteland, Steel Series and Super Rewards. PayNearMe, formerly known as Kwedit Inc., changed its name to PayNearMe Inc. on September 15, 2010.
2007
0.5%
2011
4.2%
0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
//IREMIT
Based in the Philippines and listed on the stock exchange in the Philippines since 2008, IREMIT was founded in 2001. It serves Filipinos everywhere in the world via its remittance facilities. It ensures fast, reliable delivery of remittances to remitters beneficiaries in the Philippines; its network continues to grow through its offices and partners in different parts of the globe. Currently, IREMIT maintains its presence in 27 countries and territories throughout the world via a network of more than 1,200 remittance outlets, consisting of subsidiaries, joint ventures, strategic partnerships and tie-ups.
//PayPal
Based in San Jose, California, and founded in 1998, PayPal provides online payment solutions for individuals and businesses worldwide. It enables users to send and receive payments online across various locations, currencies and languages via credit cards, bank accounts, promotional financing and stored balances. Its products and services include an integration centre, recurring payments, request money, multiuser access, reports and invoicing. As of October 3, 2002, PayPal, Inc. operates as a subsidiary of eBay Inc.; Paypal partnered with MoneyGram to give PayPal users offline access to their cash via many of MGIs 284,000 global locations.
//HiFX
Based in the UK, HiFX was founded in 1998. It is the FX rate provider to companies and individuals. It has more than 2,000 corporate clients, representing over 100 different industry sectors worldwide with over 2 billion placed on the money markets on behalf of commercial customers.
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//Pingit
Based in London, Pingit was founded in 2012 by Barclays Bank. Its mobile app allows users (no need to be Barclays account holders) to transfer money through smartphones, with recipients not needing to have a smartphone, only a mobile phone that accepts text messages. It is free to download and use with no need to set up payees, and sending money is secure and instant. International payments can be made to Kenya, Botswana, Ghana, Mauritius and Zambia (minimum of 25 and maximum of 750).
//Skrill
Based in London and founded in 2001, Skrill provides online payment solutions to consumers and businesses in the UK and internationally. It offers digital-wallet solutions that enable customers to make online payments, as well as send and receive money online; it offers prepaid cards; and direct payment processing, money transfer, risk and fraud management, and currency services. The company provides a payment network for businesses to access direct payment processing for various payments, such as auction, leisure and entertainment, retail, and digital media and micropayments; shop systems, corporate and affiliate payouts, and risk and fraud management solutions; and the Quick Checkout Enterprise payment suite for merchants to process payments on mobile devices. The company, formerly known as Moneybookers, changed its name to Skrill Holdings Limited in November 2010.
//REMITLY
Based in the US, REMITLY was founded in 2011. It enables international money transfers from a customers mobile phone in the US to a mobile phone abroad. It disrupts the international remittance business (e.g., Western Union and MoneyGram) by leveraging mobile wallets to provide a simple, low-cost, more accessible productchanging an industry where $325 billion is transferred globally each year.
//WorldRemit
Based in the UK, WorldRemit is an award-winning, online money-transfer platform offering its online moneytransfer services to over 30 countries. The company also provides crossborder, real-time airtime to 73 countries, a complementary offering to money transfers, reaching some 4 billion consumers. It enables the use of various payment options, including cards, bank transfers and local alternative and emerging payment methods.
//TimesofMoney
Based in India, TimesofMoney is a leading digital remittance and payment service provider catering to retail and institutional clients in India and internationally. India is the largest inbound money transfer country in the world, worth US$58 billion. TimesofMoney is also an emerging player in the online remittance market to South Asia countries like the Philippines and Bangladesh under the Remit2Home brand. Recently acquired by Network International, a leading paymentsolution provider in the MEA region.
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//xend>pay
Headquartered in the UK and authorised by the FSA, xend>pay was founded in 2005 and is owned and operated by the leading foreign exchange provider RationalFX. Its money-transfer website has transferred over $2bn worldwide since its inception. It has a global presence, offering money-tranfer services and support in multiple languages to more than 70 countries on 5 continents. Transactions cost $5 for cheques and $8 for debit cards.
//Yandex
Based in Moscow, Russian Federation, and founded in 2002, Yandex operates as a provider of Yandex.Money payment system, which allows users to make purchases online and transfer money to other users. It operates through Yandex.Wallet and Internet.Wallet, and enables money transfer through debit card, Yandex. Money prepaid cards, cash payment, ATM and bank transfers. Its partners include banks, Internet & telecom service providers, online stores, game publishers and postal & municipal services; it has over 10m registered users and processes over 100,000 payments daily. It operates as a subsidiary of Yandex NV; as of December 19, 2012, PS Yandex.Money, LLC operates as a subsidiary of Sberbank.
//Xoom
Based in the US, Xoom provides money-transfer services, focusing on small Internet money transfers for immigrants in the US. Its services are offered via xoom.com and walmart.com over the Internet, or via a mobile device. On February 15th, Xoom priced an IPO offering of 6,325m shares at $16 each ($101.2m raised), above the previous price-talk range of $13 to $15; on the first day of trading, the stock price soared by almost 60% to more than $25 per share, demonstrating the markets confidence in the company. Xoom has recently partnered with Skype to offer Skype Credits to new Xoom customers; it has partnerships with money-transfer companies to provide a secure way of sending money abroad.
//ZipZap
Based in Santa Clara, California, and founded in 2006, ZipZap operates as an alternative payments provider, serving as a global cash transaction network of over 700,000 payment centres around the world. It offers cash payment solutions that enable consumers to use cash to make online purchases, pay bills and top up eWallets, prepaid cards and mobile accounts. It caters to over 1 billion cashpreferred consumers worldwide. Its partners include MoneyGram International, SafetyPay, Softgate and Xsolla.
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the anthemis newsletter 01//7. Google Wallet: Pretender to a Revolution or the Real Thing?
The revolution will not be televised. The revolution will not be brought to you by Xerox in 4 parts without commercial interruptions. The revolution will not show you pictures of Nixon blowing a bugle and leading a charge by John Mitchell, General Abrams and Spiro Agnew to eat hog maws confiscated from a Harlem sanctuary . The revolution will not be televised. - Gil Scott-Heron So you ask: What does this seminal song have to do with Googles announcement at its megaconference in May? Like many things in life, it is often the things happening behind the scenes that have the greatest impact. Google spent pretty much the whole day talking about everything from Google Maps to its new musicstreaming service. But the announcement that was the most revolutionary of all was made behind the scenes on Googles blogyou can now email money to your friends, just like you would email a photo or document. Once you have registered for a Goggle Wallet account and linked it to your bank account, sending money is as simple as attaching any other form of digital data. Sending money from one Google Wallet to another is free, although there is a small fee for the cashout side of the transaction. In fact, you can even link your wallet to a debit or credit card for a 2.9%
Google wants to know what you are actually spending money on, so it can create even more targeted advertising.
transaction, on the difference between the cost of the customer card and Googles rate of 160 basis points. What this demonstrates is that Googleand its been quite open about thisis less interested in the ability to make money on payments and more interested in the ability to capture the data around the payments. Its no surprise that Google requests the details of fullline items in the Instant Buy implementation. (Conversely , a strong merchant would want to drive customers through its payment system while not disclosing additional data to Google.) This data is seemingly invaluable: Google wants to know what you are actually spending money on, so it can create even more targeted advertising. Ask retailers what they are willing to pay to increase conversion rates and you will be surprised how high they are willing to go. If you think Google adwords are expensive, think about adwords where Google takes a revenue share on a successful sale of a product or servicethe opportunity becomes enormous. In terms of the wider industry impact, we think that incumbents will have to completely rethink how they make money around payments. The revolution is already happening: Innovative companies such as LevelUp are already giving away the payment leg of a transaction and charging for geolocated offers and loyalty applications; merchants are happy to pay for this and Merchant Customer Exchange (MCX) is capturing data and creating a free, closed-loop ecosystem amongst retailers.
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The Network InternationalTimesofMoney transaction: expanding and enhancing the customer base
On November 26thin what has been billed as one of 2012s most significant deals in the remittance industry Network International, the leading independent payment solution provider in the GCC region, acquired a majority stake in TimesofMoney for an undisclosed amount. TimesofMoney (ToM), a leading digital payments and remittances service provider catering to retail and institutional clients in India and across the globe, is an ideal strategic fit for Network International (NI). The transaction allowed NI to move up the payment value chain: NI accelerated its transition from a
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regional processing utility to a strategic and dominant emerging markets player, offering a wide range of payments solutions. The deal has also enabled NI to cross-sell its new product set to existing customer bases and to customer bases the deal has given it access to through an expanded channel-offering online capability. The addition of ToMs product and service offering to its own suite also means that NI can diversify and move its revenue split from a purely corporate segment toward the consumer and retail segments. With ToMs flagship brand, Remit2India, a pioneer in the online remittances to India, NI can open up a muchneeded online remittance
service on the key GCCIndia corridor, as well as introduce a number of new value-added, retailbased services (under the existing Window2India brand). India is the largest inbound remittance country in the world, worth US$58 billion in 2011 (ahead of China), and the value of the GCC-India remittance corridor is valued at some US$25 billion annually. This corridor is ever growing; even during the financial crisis, inbound remittances to India grew by about 16% and are expected to continue growing in the short- to medium-term by about 8%. Countries like the Philippines and Bangladeshboth in the top 10 remittance inbound countries globally, worth
US$23 billion and US$12 billion, respectivelyare also now being catered to by ToMs Remit2Home brand. Because a significant proportion of these flows originate from GCC countries, NI stands to benefit greatly by capturing additional flows and increasing its market share on these corridors. But the icing on the cake is that ToM offers a state-of-the-art, white-label remittance platform for banks, MTOs and telecos. This presents substantial revenue opportunities for NI because the service can be immediately introduced to the GCC region, where NI has an extensive customer base (over 60 financial institutions). Finally, the cherry on the icing on the cake is
the significant long-term revenue opportunity for NI from ToMs gateway business (offered under the DirecPay brand). Only 3 years old, it has grown exponentially and will continue to do so, fuelled by increasing penetration of the Internet in India coupled with regulatory financial inclusion initiatives. NIs acquisition of ToM marks the companys entry into the high-volume/highmargin product space with strong margins: The acquisition expands NIs market distribution channels across an enhanced geographic and customer base, and enables the combined entity to generate significant synergies across all product groups.
What is Azimo?
Azimo is a digital remittance company, an online competitor to Western Union. Customers send money from a mobile phone or PC, paying in by card or bank transfer and paying out using our partners, Small World Financial Services, The Currency Cloud and other partners. Our payout depends on the available local financial infrastructure. For example, its mainly banks and ATM withdrawal in Poland, while in Kenya we partner with M-Pesa and microfinance
institutions in Ghana. After the initial marketing push, our customer acquisition has been driven largely by word of mouth1, both social and offline. We are platform agnostic, but we see mobile as the future and are actively pushing this avenue.
Whats your background? How did you come up with the idea?
Ive worked in money transfer for nearly 10 years, founding and growing Europes largest offline remittance company, Small World Financial Services.
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the anthemis newsletter 01//9. Lending a Hand: Michael Kent, Founder of Azimo
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Pricing: We charge between 1% and 3%already 50% less than the target market average for 2014. We see the inexplicably high prices as a social injustice. Its entirely possible to deliver high-quality, low-cost service.
Before that, I worked in M&A, NewsCorp and WPP , got an MBA from INSEAD and started my career as a fintech consultant at Accenture. The eureka moment for our digital service came waiting in a Madrid airport: The minute inbound passengers from the developing world left the gate, every single one switched on a smartphone, and I knew that traditional money-transfer stores were going to go the way of high-street travel agents. databases and have a complex set of algorithms running for unusual activity. We also dont store payment details so even if an account is compromised, no money can be sent.
experience. By being agile, we believe we can build a top-five remittance player in 5 years. We are becoming active in 28 EU states this year, which is momentous. We will be adding additional pullout countries and embedding more social services in everything we do.
Describe the competition between incumbents and entrants. Is the pie not big enough?
The pie is hugeits perfectly possible to build a sustainable business with a 1% market share. Look at Xoom, which recently IPOed and is valued at nearly $1bn.
How are you dealing with regulation, compliance and security concerns?
Absolute security for our customers is key. We are regulated by the FSA and HMRC, and are at the forefront of emerging digital compliance methods. We reference a huge range of external law enforcement
Where do you see Azimo in 10 years time? Who are your chief competitors?
We think this industry is rapidly going online with existing players being lazy, greedy and lacking customer focus and technical skills to leverage this shift. In comparison to our competitors, we are cheaper, easier to use with a much better customer
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Anthemis News
//Events
The year started with the Anthemis Senior Executive Roundtable, our exclusive dinner event that buzzed with energy and ideas about how all aspects of the financial industry are changing and how Anthemis could catalyse that transformation. It was held on 12th February, in partnership with Vocalink, Heidrick & Struggles, and Moving Brands. The date was chosen to coincide with Finovate Europe so we could leverage the presence, in London, of all the movers and shakers from both the new emerging world of digitally native financial service startups and the existing traditional incumbent players, and bring them together to foster better understanding and communication within our industry. Originally for 70 people, the evening quickly grew to a gathering of 90 of the whos who of the financial services, including 37 C-level financial executives, 28 fintech startups from Europe, the US, India and Israel, and 10 investment and design firms. Brett King, CEO & Founder of Moven, kick-started the evening with a keynote conversation about how technology was changing customer behaviour and how that, in turn, was forcing a change in the way traditional financial
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most thoroughly enjoyable and thought-provoking dinner not expecting to attend a better event in 2013
Weve three additions to the Anthemis family: Gavin Holland joins us as Director , and comes from Heidrick and Struggles where he led the firms financial services practice across Europe and Africa. He has deep specialist knowledge of the COO, IT and operations functions within the global financial services sector . Moshe Tamir, who currently sits on the Anthemis board, has also taken on the role of Venture Partner . Moshe is well known in the financial services innovation world, having spearheaded the development and deployment of multiple award-winning web platforms at Israels largest insurance company , Migdal. Moshe said, I have known Sean for the past 5 years and been part of Anthemis exciting journey for the past 2, right from inception to now when they have a healthy and growing portfolio of high-growth fintech companies and have advised major financial institutions on M&A and innovation. They have a bold mission of creating a reformed financial services landscape and in my role
as a venture partner , I look forward to stepping up my interaction with the team at Anthemis. He is getting ready to move to Italy to take up his position as head of innovation and sales at Generali, one of the worlds leading insurance and financial institutions managing assets worth more than EUR400bn. Deanna Oppenheimer , who serves as the non-executive director at Tesco PLC, AXA and NCR Corporation also joins us as Venture Partner . Recognized globally as one of the most influential leaders in financial services, Deanna Oppenheimer is an acclaimed turnaround strategist known for her ability to transform entrenched institutions into customer-centric champions. Deanna said, We have similar aims of connecting large corporations with agile and innovative start-ups so teaming up with Anthemis, who are passionate about this space and sharing our network and know-how will be a fantastic opportunity to accelerate that. She is also a frequent speaker at national and international forums.
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//Jury report
In March, we launched The Payments Innovation Jury Report 2013. Collated and curated by Anthemis director John Chaplin, these are the thoughts and opinions of a panel of 25 leaders in the payments sector from 14 countries and 5 continents, the Global Innovation Jury. Members of the jury consider whats hot, whats hype and everything in between, within payments. This includes where the innovation comes from, the impact of technology, mobile payments and the need for integrated payments programs along with a host of other issues. The participants have all held executive roles at major payments organisations, and many have had significant commercial success with their own payments companies. All are still actively involved in the payments industry. The report received an enthusiastic response from the media and was featured in Venturebeat, Rudebaguette, PaymentsSource, PYMNTS.com, FS Tech and Huffington Post.
//Conferences
Weve been busy on the conference circuit, with: Anthemis directors Samantha Ghiotti and Michael Rolph conducting a workshop on payments innovation at Lift 2013 in Geneva in February Michael quickly following it up with a talk on innovative payments solutions at the SPOT in Bratislava Sean Park participating in the panel titled Hi-Growth Mobile Tech Investment: From StartUps to IPOs, along with John Malloy, founder of BlueRun Ventures, Tracy Isaacke, director of Investments and Business Development of Telefonica Digital, and Barak Ben-Avinoam of Fast Lane Ventures, at the Mobile World Congress in Barcelona Udayan Goyal delivering an exceptionally wellreceived keynote address about the future of banks crucially depending on their engagement with customers at the International Payments Summit in London
//Pipeline
We are now working on a number of white papers, including one on mobile money/commerce/payments. Planning is also underway for Anthemis strategic retreat in July, where we take our portfolio founders up to the mountains of Meribel to think some big thoughts and foster collaboration!
Anthemis News
of the Show at Finovate 2013 in February. Read Brett Kings vision as he presented it to the Finovate crowd. 2 Fidor Bank was one of the four winners of the 2013 Bank Innovation Awards, set up by the Bank Innovation blog. Fidor won for Like-Zins, a user-generated, interestrate program. For every 2,000 Facebook likes that Fidor receives, it raises the interest rate on FidorPay chequing accounts by 10 basis
points per year (with a cap of 15% per year). So far, the Facebook community has increased the accounts by 50 to 70 basis points. 3 Automatic launched Automatic Link, a hardware device + mobile app + cloud combination that helps customers save money by enabling them drive in a more fuel-efficient way. It also monitors the car engines health, has an automatic call feature to contact local authorities/911 in
case of a car crash, and remembers where the car was parked. Only available in the US market for now and garnering rave reviews, the company has CNBC saying, Automatic could do for driving what the iPod did for music. 4 Metamarkets partnered with DataSift, the leading social data platform company, to leverage the combined power of social data and big data analysis for large-scale transaction
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streams to help with planning products, gauging reactions and uncovering new revenue opportunities. Metamarkets also launched its brand spanking new website. 5 eToro is in the final stages of opening a UK-regulated subsidiary, and executed the 50-millionth transaction on its platform in March. 6 Betterment raised $10 million in October 2012, with Anthemis participating in this fund raise, that will be used to develop an improved mobile experience and add better options for shorter-term goals. 6 Payperks also had
a fund raise of Series A $2.6 million announced earlier this year, with Anthemis participating in the fund raise. The company won silver in PYMNTS.coms innovator awards in the category of Best Newcomer in Payments. More importantly, Payperks beat 10 finalists by a live vote of hundreds of under-banked experts and fellow innovators at the 8th Annual Underbanked Financial Services Forum to take top honours as winners at the 3rd Annual Core Innovators Mega Challenge and the most promising idea serving the emerging middle class.
AJ Hanna
Evelyn Kolintza
Iason Nikolakis
Ravi Bhatt
Udayan Goyal
Yann Ranchere
Sylvia Ehgartner
Alexia Yannopoulos
Simrat Ghuman
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