The venture capital is is seeing an opportunity to investment in startups developing new technologies for international money transfers that help to eliminate some of the forms, costs and timescales of traditional systems. In the last 2 years they have inverted $104M in 39 transactions according to cbinsights sources.
Traditionally, international remittance customers have relied on physical-based companies for their transactions. The dominant player in this market has so far been Western Union, which today has a market capitalisation of more than $ 9.5B.
Looking at year-on-year developments, business activity in the international money transfer space has increased by 60%. The successful IPO of money transfer services company Xoom Corp (backed by NEA and Sequoia Capital) in February may be one reason for the notable increase in business activity.
The 79% of the early stage operations
Over the past two years, early stage deals (seed and Series A) have accounted for 79% of deal activity in the money transfer market. In fact, M&A activity in seed stage startups has accelerated by 160% on a year-over-year basis with new companies recently receiving investment as TechStars grad Moni Technologies and Azimo funded by e.ventures. Of note in the growth of activity in seed stage companies is the decrease in the average and median deal size in recent quarters. From 4Q'11 which included a $ 25M round to Xoom, the average transaction size has been reduced by 70% and the median by 88%.
"This effect has also been generalised in start-up investment, which has seen a reduction in the amount of operations on both sides of the Atlantic. In Spain, too, there have been deals in Fintech. The startup Kantox is the most relevant for the international transfers segment, it allows hedging the exchange rate risk at an adjusted price without requiring any type of guarantee to execute the operation" analyses Diego Gutiérrez, corporate finance expert at Abra Invest.
50% of the operations have been born outside the major US technology hubs.
Interestingly, most of the technology companies present in the international remittance sector are outside Silicon Valley, in fact, 50% is outside the North American technology hubs with a prominent presence from London with startups like TransferWise, The Currency Cloud and Azimo.
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