High walls on the border
Being a fragmented world, the international remittance industry still has a high barrier that seems impossible to disrupt. According to the Sending Money Home study, “the market share is increasingly concentrated, currently 35%, in three global money transfer operators (MoneyGram, RIA and Western Union).
For example, Western Union dominates a little more than 10% of all global remittances and in the largest remittance corridor in the world –between the United States and Mexico– it has almost 20% of the market. In addition, its digital remittance service is growing rapidly. According to its report for the last quarter of 2020, income from digital services increased 45% compared to the same period of 2019 and accounted for 21% of the business of its retail segment.
On the other hand, important digital companies have emerged, such as WorldRemit, Wise (ex TransferWise) and PayPal’s Xoom, but they are not considered as threats to Western Union. As Odilon Almeida, Western Union’s president of global money transfer, said in 2019, “these fintech companies cannot be considered ‘long-term players’, due to the challenges they face in scaling their businesses and in forming relationships with financial institutions and the ecosystem. of payments. Venture investors have limited patience too. “
In the case of cryptocurrencies, although there are large startups – such as the Mexican Bitso, which recently raised US $ 62 million in its series B and was responsible for transacting US $ 1 billion of the US $ 36 billion of the flow of remittances from The United States to Mexico, according to Finnovista’s Blockchain 2021 report – el blockchain it continues to be a fairly unpopular method of payments, let alone remittances.
According to BID LAB, still only 20% of Latin Americans prefer online services or mobile applications to send remittances and their explanation is not the lack of access or ignorance of digital technology, but, to a certain extent, inertia. “If the person is comfortable in their current method, they will probably not consider or learn new ways to send money.”
On the other hand, the 2020 LATAM Fintech Report by KoreFusion concludes that remittance and foreign exchange companies were the penultimate segment favored by investors, while the blockchain it was the last one. According to the study, there is still low investment. In 2020, both categories raised approximately US $ 10 million, respectively, compared to the US $ 4.02 billion of the payment vertical and US $ 1.95 billion of loans.
But, like all areas that have seen an acceleration of their digital processes, the digital remittance industry has gained a new group of clients. Like Vita Wallet, Valiu also experienced exponential growth, from 3,000 users in January 2020 to 30,000 by the end of the year, and is preparing to arrive in the United States in the coming months and offer services to the main destination of the Venezuelan diaspora.
And there is not only the opportunity to offer services to a growing number of migrants, but also to companies with cross-border employees. In fact, Vita Wallet started out as a QR code payment provider, but quickly changed its business model towards remittances, realizing that its own need to pay its employees scattered around the world was shared by colleagues in the Magical portfolio. Startups (the Chilean accelerator to which the startup is part) and also other companies. It currently has more than 100 corporate clients.
In addition, according to Statista, Latin American countries are among those that view cryptocurrencies most favorably, while a Visa survey states that 78% of consumers will use new payment technologies in the future, including cryptocurrencies.
“The biggest challenge is trust, both in the origin of the shipment and in the reception, and it is acquired through the strengthening of a brand, the introduction of a regulation that can give certainty to users and the offer at a competitive price”, says Andrés Fontao. “The maturity of the fintech ecosystem is reaching a point where the adoption of solutions is going to be exponential and will force traditional players to reinvent themselves or stay out,” he adds.
According to Antonio Linares, this fourth year as a migrant in Colombia is already a stable year. They got a permanent residence, he has a job that he likes and his wife feels comfortable working as a psychologist, treating patients from home. At least now they have no plans to return, “because it is hard” and they already dream of buying a house in the country in the short or medium term.
Among his plans, sending money to his family has always been an important part and Linares affirms that he prefers the application to carry it out. He has already sent US $ 500, up to US $ 1,000, which is roughly three Colombian minimum wages. “You really need confidence to send that amount of money,” he says.