the anthemis newsletter: trends in remittances
Part I: Market Overview

issue 01 | june 2013

Looking to the Future: Trends, Challenges and Opportunities
The international remittance market has a long, profitable history and a lucrative future as the industry grows ever bigger. The World Bank estimates that the global officially recorded remittance flow has grown at an 11% CAGR from $234bn in 2004 to $534bn in 2012 and is expected to grow to $685bn by 2015. However, the market’s true size is believed to be significantly larger because of informal remittances, with estimates placing it at 30% to 40% of the entire market, if not more. The industry, however, has experienced little transformation over the past 100 years. Most remittance players do not offer a ‘perfect solution’ because most processes //Contents still require queuing at a Part I: Market money-transfer agent and 1% 1% filling in lengthy forms. 2% 5% It also remains opaque and expensive with fees 15% averaging 9% or higher of the transferred amount. 36% These inherent weaknesses of the traditional remittance …formal informal model, coupled with a remittance remittance channels... highly fragmented business landscape, have made the industry ripe for disruption. Cash Although cash remains Courier Carrier the dominant form of (Possible) Doorstep Service remitting funds, a strong move towards adopting technologically driven solutions is emerging—and the most prominent trend has been the move to digital.
DolEx Ria Envia MoneyGram Western Union Others

click to go to page


Overview 1. Looking to the Future: Trends, Challenges and Opportunities p1

193 million adults

49% Central Asia & Eastern Europe

2. Mobile Money: Deep Dive into Telcos’ Strategies p5

136 million adults

67% Middle East

80% Sub-Saharan Africa


3. Case Study: Transferring Money in India p8

Western Union
25 20 15 10 5 0 Jun-12

4. Standing their Ground: The Incumbents p10



5. Emerging Players: Moving the Needle p11

6. Follow the Money: Infographic p16

//Continuing sector volume growth ($bn)
Global remittance market
700 600 500 400 300 200 100 0

685 534 128 570 132 623 141 151

435 119

462 121

513 132

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















9. Lending a Hand: Michael Kent, Founder of Azimo p20

Developing Markets

Developed Markets

Source: World Bank


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 International’s 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.

//Remittance market is relatively consistent in growth
600 500 US$ billion 400 300 200 100 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012e 2013f 2014f 2015f FDI Source: World Bank Remittances Private debt & portfolio equity ODA

Moving with the money
The remittance market is directly correlated to cross-border migration, which, in turn, is directly influenced by immigrants’ economic health in their destination country. Over 200 million people seek their livelihood outside their country of birth, with Asia and Latin America making up the largest migrant source pools, and the US continuing to be the top destination for immigrants: More than 40 million immigrants were recorded in 2010, accounting for 13% of the population (up from 11% in 2000). And immigration movements are not expected to slow down anytime soon, only perhaps

change direction as global fortunes shift. As evidence, the population of US migrants increased by 30%—despite the US recession—over 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.

Shifting the monolith
Because the remittance market is large and dispersed, it is highly fragmented: A few large global players, many small

//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, Russia’s 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.

//Top receiving developing countries
70 66 47 24 24 21 18 31 29 27 14 14
Pakistan Bangladesh

23 22 21 21 18 18

9 7
Vietnam Lebanon Tajikistan Liberia Kyrgyz Rep. Lesotho Moldova Nepal Samoa Haiti Lebanon Kosovo







Source: World Bank

In US$billion, 2012e

as % of GDP , 2011

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 lion’s 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 level—the ability to transfer money from one bank account to another even if the accounts sit in different banks—and 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.

Comparing cash vs digital
Cash is still a dominant component of the global remittance market, which means successful remittance programs require widely dispersed, physical pay-in and pay-out networks. Unlike developed markets, banks do not have optimal pay-out networks in developing economies, especially in rural areas. This makes the distribution assets of non-bank players

such as Western Union all the more formidable as an entry barrier to competitors. Physical locations remain a necessity— and a very expensive one—in 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 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

//Money transfer market share
1% 1%

//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.



Ria Envia




Western Union


Informal networks




Source: Company reports and Raymond James research.


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.

Comparing control vs flow
The money-transfer industry is highly regulated, mainly because of concerns about laundering money and financing terrorist or illegal activities. New rules also seek to support the customer. For example, the Dodd-Frank Reform and Consumer Protection Act in the US requires the money-transfer company to notify the sender of the exchange rates, taxes and fees both before and at payment. As well, senders need to be informed about the total amount collected by the receiver, and they can cancel a transaction and get a refund up to 30 minutes after making the payment. Although these regulations are expected to increase transparency in pricing and help the customer in case of error

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.

//Remittance costs declining slowly , Xoom* well positioned
12% 10% 8% 6% 4% 2% 0%

10.5% 10.4% 10.3% 10.6% 10.7% 10.1% 10.2%

9.8% 9.5% 9.8% 9.7% 9.4% 8.7% 8.9% 9.1% 9.3% 9.1% 9.0%


2.9% 2.6% 2.6%



2010 Global Ave.

2011 Int’l MTO Ave.

2012 Xoom

Source: Company Reports, World Bank *Xoom’s 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 G8’s 5x5 Objective—a 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, Xoom’s competitive pricing means it is still operating at a loss (e.g., $4.99 for a regular $200 transaction vs ~$8.00 for Western

//Mobile is accelerating internet penetration (in billions)
3.00 B 1.00 B

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

Internet Users Source: Company Reports, ITU

iOS/Android Smartphone Users

the anthemis newsletter 01//1. Looking to the Future: Trends, Challenges and Opportunities


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. That’s why they are willing to pay a premium for a wellknown name that inspires safety and guarantees the transaction. Successful branding—built over years with time, effort and money—allows 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.

Pursuing the prize
Customers want safe, reliable, fast, affordable,

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 PayPal’s online capabilities with MoneyGram’s 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 settles—if there is interoperability between the various players, supported by balanced regulation that enables omni-channel, audience-agnostic solutions with customer needs at the core—pursuing the digital prize will all have been worth it.

Mobile Money: Deep Dive into Telcos’ Strategies
A prevalent trend in the growing international remittance industry is a push towards mobile and it is easy to see why. Even though a large portion of consumers in developing economies lack access to traditional financial services—an estimated 5.3 billion people are unbanked—the mobile penetration is very high. In the West, 89% of the adult population are banked and at least 50% have credit cards, compared to only 41% using banking services and a meagre 7% using credit cards in developing countries. The success of mobile payments can, therefore, be attributed to and estimated by the size of mobile phone operators’ distribution networks and the exponential growth of handset sales. With little access to bank branches and ATMs, consumers in developing economies are more likely to adopt mobile payments. With their key advantages of ubiquity, convenience and costeffectiveness, online and mobile moneytransfer services have gained an estimated 10% market share in

//A large portion of the world is still unbanked

Emerging markets remain highly under banked, with the cost of establishing a bank network pretty significant due to small deposit amounts.

60 million adults

8% High-income OECD* countries

193 million adults

49% Central Asia & Eastern Europe

876 million adults

59% East Asia, Southeast Asia

250 million adults

65% Latin America

136 million adults

67% Middle East

326 million adults

80% Sub-Saharan Africa

612 million adults

58% South Asia

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


the anthemis newsletter 01//2. Mobile Money: Deep Diving into the Telcos’ Strategies

//Mobile money transfer
Mobile Phone Shipment and Smartphone Share ($m) Mobile Money Transfer Payment Volume ($bn)




1,800 1,190 1,200

40% 30% 20% 10% 0%

250 200 150 100 50 0 32 2010
1 20 20 015 E

28% 29%


6 =4


22% 20%



113 78

600 15% 0


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.

Partnerships with local players
One of the strategies adopted to achieve a strong cash-out distribution model, which is vital to succeeding in mobile money remittance, is forming partnerships with established moneytransfer players, banks or retail agents and business correspondents. For example, Bangalink’s partnership with Western Union allows the MNO to reach foreign remittance senders in more than 200 countries and territories without investing in the required infrastructure.













Source: Card Hub, IDC, Gartner

the last 10 years. Their main victims have been banks and incumbents: banks because of an unsuitable product offering for today’s 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, prepaid—in under-penetrated markets are an entry pathway for disruptive competitors, that’s 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 user—an 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

Educating the customer
An issue around adopting mobile money remittance is the level of customers’ awareness of how to use mMoney. Being the first mover in a country like Banglalink has its advantages, but also has the disadvantage of users potentially being unfamiliar with its product thus requiring hand-holdingtype marketing. That’s why telcos typically drive cashout distribution through education, marketing, expanded product offerings and value-added services. Globe GCash, another first mover launched in 2004, has actively educated both

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.

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

The transfer process includes:

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

Recipients receive access to funds for cashing out through their:

Sending • MTO branch or agent network countries

• Bank branch • ATM/terminals

• 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 company’s 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 country’s GDP via mobile.

Which factors will determine the winners?
With cross-border money transfer being outside MNOs’ core expertise, challenges and delays during the learning process are bound to occur. One of the biggest delays—establishing the relationships required for a typical remittance partnership—is directly connected to technological interoperability. MTN is an obvious example that, admittedly, finds itself outside of its core services zone, with such issues arising as managing

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.

//What makes up the money-transfer value chain?


Sending agent

Global hub
• Aggregation • Interoperability • Compliance • Infrastructure

Recipient agent


Mobile network operators Financial institutions Mobile wallet
Source: Company filings, Wall Street research


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.

$ € ¥ £
• Initiates remittances

• Providers enable interaction between operators and banks •  mWallet is the consumer facing technology piece

• Enable consumer to initiate remittance through their networks • Carry the relevant data and provide the technology (mWallet) on one or both ends

• Settlement • Regulatory compliance

• Calculate charges • Comply with regulations • Connect cross-border markets through messaging

•  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 requirements—and the

most difficult to come by—are: (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.

Case Study: Transferring Money in India
Dispersing cash in a country as large as India has always been difficult because of the way the financial services framework has developed. India’s payment system infrastructure, in terms of the instruments and clearing and settlement system, is more or less at par with developed countries’ systems. But it has a long way to go to equal advanced countries’ cash movement as merchants and customers at the lowest rungs of the economic ladder are unable to access it. Using any electronic payment instrument is not easy for the consumers without bank accounts. With up to 100 million internal or domestic migrant workers, who contribute as much as 10% to India’s GDP1, achieving financial inclusion for remittances in India is a daunting, yet fundamentally important task. The two sides to expanding financial inclusion are demand and supply. Demand involves financial literacy: providing adequate information about formal financial services and helping those with bank accounts to use them effectively. Supply— our focus—involves the financial structure: providing the necessary infrastructure in both urban and rural areas for easier access to financial services, namely, money transfer. industry, chiefly driven by regulation and staff unions, which oppose measures to increase efficiency2, including ATM coverage. The result is an urban-centric model for financial services distribution, making distribution of payment services in rural areas difficult and beset by corruption and inefficiencies. In reaction, an informal remittance channel has developed that is pervasive and serves multiple functions. Within the existing financial system and guidelines on payments,

Supply–side: 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

the anthemis newsletter 01//3. Case Study: Transferring Money in India


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-Pesa’s 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 Nokia’s 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 cooperatives—to 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

//Formal and informal financial service providers
…formal remittance channels
India Post
Microfinance Institution

informal remittance channels...

BC BC** Courier Cash Carrier


Post Office


No Doorstep Service

(Possible) Doorstep Service
*Microfinance institutions **Business correspondent

Source: Remittance Needs and Opportunities in India

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

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 government’s recent victory in a controversial vote in Parliament to open up the country’s 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 India’s 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 India—a 12-digit individual identification number issued by the Unique Identification Authority


the anthemis newsletter 01//3. Case Study: Transferring Money in India

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

//Commonly used methods for remitting money
100% 80% 60% 40%





20% 0% UP-Mumbai


14% 10%

2% 0%


14% 0%
Odisha-AP (without Nuapada) Bank Transfer






Cash Carrying Source: Remittance Needs and Opportunities in India

Post Office Transfer

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— interoperability—has been breached. A retail affiliate network of agent shops—supporting

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 people’s lives. References
1 Deshingkar et al. (2010) 2 3 4

Standing their Ground: The Incumbents
Western Union has been the grand old man of money-transfer operators, commanding a hefty 15% of the global remittance market. Established in 1851, the company’s sole purpose was speedy communication by telegram, a service it discontinued only recently in 2006. The 160-yearold company that started money transfer in 1871 now operates in 200 countries with 510,000 physical locations and has become synonymous with sending money across the world—a resounding branding success despite the high fees charged per transaction—and the company seems to be taking it slowly when it comes to innovation. Western Union’s closest competitor, MoneyGram, commands about a 5% market share and has been replaced somewhat by the new digital companies that provide online and mobile money-transfer channels. With their promise of convenience, lower prices and speed, these companies, including Xoom and Transferwise, are nipping at the heels of Western Union and MoneyGram. This has prompted the incumbents to shake off their complacency and invest in technologically driven money transfers and lower prices. Western Union’s online service offering is healthy: Westernunion. com ( grew over 40% in 2012 with revenue exceeding $150 million. To achieve its $500-million digital goal for 2015, it has changed its pricing strategy and invested in creating Western Union Digital Ventures (costing $35m and WU Digital for short) to enhance’s volumes and market share. MoneyGram International (MGI), on the other hand, has been enthusiastically partnering with established digital service providers to increase its reach, capability and market share. In February 2013, MGI launched a mobile service through its website in the US and has followed a countryspecific approach to increase its market presence through mobile channels. One example of this is its partnership with Philippines-based money remittance service Smart Padala, which allows users to send money to the Philippines using MGI agents. In January, it partnered with WorldPay to provide direct-toaccount money-transfer services. In October 2012, MGI partnered with

the anthemis newsletter 01//4. Standing their Ground: The Incumbents


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. Today’s 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

//Incumbents’ online service offering is healthy
Western Union
25 20 15 10 5 0 Jun-12 70 60 50 Price 40 30 20 10 0 Sep-12 Dec-12 Mar-13

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


Source: capital IQ


digitally native customers, they need to improve their value proposition and tweak their strategies. What’s guaranteed is that we’re 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

Emerging Players: Moving the Needle
• Based in the US, ATMCASH was founded in 2005. • It enables consumers to send money using a credit card, debit card or bank account. The sender’s recipient receives a reloadable ATMCASH Card that enables both senders and recipients to send and receive money on their own schedules, without having to fill out forms or be restricted to any agent’s locations hours. • With ATMCASH, consumers can easily send money 24 hours a day, 7 days a week, and the money can be withdrawn at more than 1.5 million ATMs in over 150 countries and in all 50 states in the US.

• Based in the UK, Azimo’s 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.


the anthemis newsletter 01//5. Emerging Players: Moving the Needle

• 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, and individual investors. • Boom Financial, formerly known as m-Via, Inc., changed its name to Boom Financial on July 18, 2012.

• 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.

• Based in London and founded in 2010, GlobalWebPay’s 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.

//The Currency Cloud
• Based in London, The Currency Cloud was established in 2009, and launched to market in 2012. • The Currency Cloud is a costeffective, transparent, end-to-end currency FX payments automation service that enables corporations, financial institutions, transactionbased web companies, moneytransfer businesses, ERP and business application providers, and a myriad of other business, financial and consumer service businesses to make international payments for themselves or to provide services to their customers. • It converts amounts from as little as $1 and has over 300 currency pair combinations; it secured $4million in March 2012. • The Currency Cloud successfully services more than 100 large and small customers, including remittance, corporate services, financial services and e-wallet firms.

//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 • 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.

the anthemis newsletter 01//5. Emerging Players: Moving the Needle


channels’ percentage of money-transfer revenue


• 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.















Source: Anthemis research

• 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 remitter’s 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.

• 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 MGI’s 284,000 global locations.

• 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.


the anthemis newsletter 01//5. Emerging Players: Moving the Needle

• 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).

• 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.

• Based in the US, REMITLY was founded in 2011. • It enables international money transfers from a customer’s 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 product—changing an industry where $325 billion is transferred globally each year.

• 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.

• 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.

the anthemis newsletter 01//5. Emerging Players: Moving the Needle


• 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.

• 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.

• 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 and 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 market’s 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.

• 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.


the anthemis newsletter 01//7. Google Wallet: Pretender to a Revolution or the Real Thing?

Part II: Anthemis Talks

Google Wallet: Pretender to a Revolution or the Real Thing?
fee, which is what Google pays to fund the account. A valid argument can be made that P2P payments do not drive behaviour changes, especially if a fee is involved. But perhaps just out of curiosity , it’s not hard to imagine a large number of the 425-million Gmail users giving the dollar sign on their emails a try . Although currently only available in the US and with a comparatively tighter limit on the amounts one can transfer, it’s a safe bet that Google has its eye on the lucrative remittance corridors of the world, even though those will be much harder to crack with security and regulation concerns taking priority . By creating this functionality and successfully scaling it internationally , one could argue that, theoretically , it has the capability to kill the banks’ wire-transfer business and any business model around P2P payments initially at a domestic level. It also calls into question the ability of the likes of PayPal to charge money for these kinds of transactions. The other major announcement on the blog was about Google Instant Buy . It works on the existing credit card rails and leverages Android to help with adoption and predictably . Google Instant Buy will face strong competition from other devices’ platforms, and cross-device platforms (e.g., Amazon, Ebay). In addition, Google is losing money on every commercial

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 Google’s 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 Google’s blog—you 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 Google’s rate of 160 basis points. What this demonstrates is that Google—and it’s been quite open about this—is less interested in the ability to make money on payments and more interested in the ability to capture the data around the payments. It’s 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 service—the 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.

the anthemis newsletter 01//8. Recent M&A


Recent M&A: Featuring the Network InternationalTimesofMoney Transaction
A superb start for global remittance market in 2013
This year has started superbly for the global remittance market with international online moneytransfer company Xoom debuting on the NASDAQ stock market to a warm welcome. Xoom had priced its IPO offering of 6,325 shares at $16 each (above the previous price-talk estimates of $13 to $15), but the first day of trading took the share price up by 60% to more than $25 per share—a clear indication of the market’s confidence in the company and of remittances going digital. Last year also saw quite a few noteworthy acquisitions and partnerships with established companies making moves towards mobile and P2P lending. These companies were increasing their geographical reach, while trying to consolidate their market share and bring into their purview the unbanked and under-banked. A notable M&A in 2012 was Network International’s acquisition of a majority stake in TimesofMoney in November to empower the GCC-India corridor because India is the largest receiver of inbound remittances. We have profiled the deal in depth alongside. The focus on India, however, started with FINO’s acquisition of Nokia’s mobile payment services business in June 2012. FINO in India has the country’s largest network of business correspondents (BCs) with 31,000 transaction points. These are small retailers who seek to boost their revenues by acting as cash dispersal units in their localities. With this acquisition, the BCs can use mobile payments to include the unbanked customers and offer them money transfer, utility bill payments, mobile and direct-to-home (DTH) cable recharges. In a move with similar focus, Skrill, an eWallet provider based in the UK, acquired Austrian prepaid eVoucher provider paysafecard in June 2012. This acquisition enabled it to explore opportunities in the remittance space by capturing healthy volumes of the unbanked and under-banked paysafecard customers and at the same time bolstering financial inclusion. Another key acquisition was Visa Europe’s purchase of a 15% stake of Mobile Money Network, a UK-based mobile payment specialist, in March 2012. In an estimate some may consider conservative, Visa Europe has predicted that, by 2020, more than half of all its transactions will be carried out on mobile devices. So this investment supports Visa Europe’s strategy to deliver a wide range of secure and reliable multichannel services and help its members tap into the potential of eCommerce. PayPal sought to expand out of its digital realm into the physical world with a new partnership with MoneyGram. The partnership will allow PayPal’s 115+million users to deposit and withdraw funds at any of MoneyGram’s 284,000 worldwide locations by providing their email or mobile number. The partnership also allows the unbanked to have access to online P2P money-transfer services and eCommerce because this method bypasses the banks. And, significantly, Western Union partnered with Chinapay, the online and mobile-payment subsidiary of Union Pay, the bankcard association in China. The deal allows universities around the world to accept international tuition fees in Chinese Renminbi, and enables Western Union to increase its money-transfer volume considerably, given that over a million Chinese students are currently studying in universities outside China.

The Network InternationalTimesofMoney transaction: expanding and enhancing the customer base
On November 26th—in what has been billed as one of 2012’s 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


the anthemis newsletter 01//8. Recent M&A

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 ToM’s 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 ToM’s 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 Bangladesh—both in the top 10 remittance inbound countries globally, worth

US$23 billion and US$12 billion, respectively—are also now being catered to by ToM’s 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 ToM’s 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. NI’s acquisition of ToM marks the company’s entry into the high-volume/highmargin product space with strong margins: The acquisition expands NI’s market distribution channels across an enhanced geographic and customer base, and enables the combined entity to generate significant synergies across all product groups.

Lending a Hand: Michael Kent, Founder of Azimo
Azimo hit the headlines in February when it launched a service that would enable Facebook users to send money to friends in more than 100 countries via the social networking website— an innovative service in the world of consumer money transfer. The hype was justified, especially with Azimo’s fee structure of charging a flat fee of £5 to transfer money up to £500 and a 1% commission (up to £15) on any larger sums, a refreshing, pro-customer change in a market where fees average 9%. Azimo is challenging the incumbents with a much lower fee structure by virtue of its online model with reduced overheads, commissions and number of players in the value chain. We spoke with Michael Kent about his journey so far.

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, it’s 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.

What’s your background? How did you come up with the idea?
I’ve worked in money transfer for nearly 10 years, founding and growing Europe’s largest offline remittance company, Small World Financial Services.

the anthemis newsletter 01//9. Lending a Hand: Michael Kent, Founder of Azimo


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. It’s 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 don’t store payment details so even if an account is compromised, no money can be sent.

Why do you think Facebook didn’t launch a wallet-type solution?
I know it’s been part of their thinking and they’ve played around with credits, but I think they would acquire rather than build inhouse. Maybe that may change with some of the Skrill hires they’ve recently made.

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.

Do you see any partnerships in the future?
Absolutely! We have a fully functioning API and our service would be useful to lots of people. We are open for more partnerships to expand our pay-in and pay-out offering.

Describe the competition between incumbents and entrants. Is the pie not big enough?
The pie is huge—it’s 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 do you think regulation is shaping the future of the industry?
There’s a rising tide of regulation, which will lead to a reduction in the number of players in the market. However, regulatory commitment to lower prices is great news for customers and helps financial inclusion. 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. It’s entirely possible to deliver high-quality, low-cost service.

What are the main opportunities and challenges for Azimo?
The opportunity is that this market is vast, growing and poorly served. Our chief challenge is of scale— managing our explosive growth as we expand geographically and grow our customer base, while keeping the team focused on doing what we do best: offering outstanding value. I’ve seen too many companies in payments get sidetracked into offering other services.

What do you think of all the telcos entering the market?
Their biggest advantage is the data they can leverage to understand their target market, but the problem is that remittance is a very different value chain to telephony. Major telcos have entered the industry with no real success story apart from M-Pesa. I would expect a big acquisition of an established remittance player by a telco in the next few years.

What were the barriers to entry that you faced?
Generating trust is big for us, and I think we’ve managed to do that successfully. Of course, there’s regulatory pressure, but online is less anonymous than physical. A lot of data gets recorded and we leverage that to tweak and improve the model constantly.

Who is your typical customer?
It’s incredibly varied. We send to 100-plus countries so there is no typical customer, but they do share certain traits. Amounts are generally small—sub £1,000—and are sent regularly (10 to 15 times per year). As you’d expect from the UK, we get lots of Eastern European, West African and Southeast Asian customers.

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

How did you come up with the name Azimo?
Azimo means to assist or to lend a hand in Swahili. We know how important remittances are to people’s lives, and we wanted to capture the concept in a word that was easy to remember. It also works in multiple languages. References


the anthemis newsletter 01//10. Anthemis News

Anthemis News

What have we been up to?
services are run. Matthias Kröner, CEO & Founder of Fidor, picked up the thread of conversation and transported the audience to the world of Hamlet, delivering some solid, simple commandments for building a 21st century firm. Brilliant, thought-out, intuitive design and user experience are essential for any company with a digital presence, so Sean Park, Founder of Anthemis Group, took up ‘innovation through design in the physical and digital world’ with the young design guns from IDEO and Moving Brands. The conversation focused on when a company should start thinking about design and what a difference a great design makes—it’s the difference between a bad customer experience and winning customer loyalty! JP Rangaswami, Chief Scientist at Salesforce and a Venture Partner at Anthemis, rounded off the evening with a keynote on the future of creativity.

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 who’s 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


‘amazing turnout’ ‘brilliant buzz’ ‘distinguished audience’

‘most thoroughly enjoyable and thought-provoking dinner’ ‘not expecting to attend a better event in 2013’

Have a look at the videos and photos. They’re worth it!

We’ve three additions to the Anthemis family: • Gavin Holland joins us as Director , and comes from Heidrick and Struggles where he led the firm’s 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 Israel’s 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 world’s 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.

the anthemis newsletter 01//10. Anthemis News


//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 what’s hot, what’s 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,, FS Tech and Huffington Post.

We’ve 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

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

What have our portfolio companies been up to?
1 Moven has had a busy few months. In November last year, Moven completed an initial raise of US$2.41m seed round funding, led by Anthemis Group, following it up quickly with the launch of the CRED credibility score, a way for customers to measure their financial health in real-time everyday, while making their experience with Moven transparent, frictionless and superresponsive. Moven then sailed on to win Best

of the Show at Finovate 2013 in February. Read Brett King’s 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 engine’s 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


the anthemis newsletter 01//10. Anthemis News

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’s 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.








//What is the Anthemis Group?
The Anthemis Group is a young, dynamic growth company focused on reinventing financial services for the 21st century. Our aim is to: • build one of the world’s leading diversified financial services firms over the next 10 to 20 years, reinventing finance for the information age by bringing together on one innovative platform many of the most talented entrepreneurs, executives and engineers in the world of finance
 • create a remarkable ecosystem of companies with disruptive, technology-enabled business models, providing innovative products and services across the spectrum of retail banking, corporate banking, payments, markets, wealth management and insurance
 • focus on leveraging design, user experience and data, fulfilling the demands of 21st century consumers and businesses Our activities are organised into two complementary business lines: • principal investments Anthemis has a portfolio of 22 high-growth private companies located across the globe. Investment areas include wealth and asset management, retail banking and consumer finance, capital markets and trading and data technology and infrastructure. For more information, please visit our website. • advisory Anthemis Edge is a business advisory group combining elements of a strategic consultancy, expert network, design firm and talent collective to provide deep industry knowledge and expertise in financial services. FT advisors a specialist M&A advisory boutique with a focus on financial technology including payments, exchanges and financial software.
With special thanks to: Editor: Editor:

The Anthemis Group contributors to the newsletter are:

AJ Hanna

Evelyn Kolintza

Iason Nikolakis

Ravi Bhatt

Udayan Goyal

Yann Ranchere

Sylvia Ehgartner

Alexia Yannopoulos

Simrat Ghuman

We’d love your feedback and suggestions. Please contact us at