Remitly Stock: a challenger for Western Union?



Sundays in Hong Kong are a sight to see. Public spaces like Victoria Park are overwhelmed with tens of thousands of domestic helpers, mostly women from Indonesia and the Philippines. They arrive en masse in Hong Kong to work as domestics for the rich. After paying for their accommodation and meals, most of the money they earn is sent home to their families.

It’s not just Filipino women who send money home to support dozens of loved ones. About 20% of the world’s seafarers are Filipinos who also send money home, making the Philippines one of the top five countries in the world for remittances – nearly $ 35 billion in 2020.

Credit: Statista

The most popular way for people to send money has always been Western Union (WU). Many sunburned western men have gone the way of shame at Western Union to send a few Benjamins to his future ex-wife because another calamity has befallen his family. Today we are going to talk about a company that offers an alternative to Western Union – Remitly.

About Remitly Stock

Founded in 2011, Seattle’s own Remitly has received $ 505 million in funding from a number of investors, including names like Barclays, Visa, Prudential and Goldman Sachs. The S-1 repository immediately begins the path “we are here to improve the lives of immigrants”, as well as the obligatory images of smiling multiracial people kissing each other. There is the story of the co-founder of how his time abroad in Kenya opened his eyes to poverty, and from that point on he made it his mission to contribute to a lifetime. joyful and abundant for every deserving individual. Once you get past all of those kumbaya facades, there is a suitable case to look into.

The cross-border remittance market has been valued at around $ 1.5 trillion in total remittance flows for 2020. From there, around $ 40 billion in transaction fees are levied, or roughly 2.66%. It’s the ttotal aaddressable mMarlet (TAM) for Remitly, but it’s not really a blue ocean.

The remittance market

While Medium is largely a trash fire of intellectually empty political reflections like I lost my mother to Fox News, there is the occasional diamond to be found in the rough. One of those diamonds is an article by venture capitalist Chris McCann titled, Remittances Market – Introduction and Landscape. Even though the article was written in 2019, it is full of interesting facts and figures, like this one:

Let’s ignore the transfer volume numbers (they are already obsoleted) and focus on the three main categories of actors. The first point to remember is that money transfer operators (to the left) dominate the remittance market, the largest being Western Union. On the right, you will see emerging fintech companies. The company formerly known as Transferwise has changed its name to Wise (SAGE.L) and had a Iinitial ppublic ooffering (Initial Public Offering) on the London Stock Exchange where he lives today with a market capitalization of around $ 14.6 billion. Here’s how Remitly stacks up against Wise based on their latest released Quarterly Earnings Reports (Wise numbers have been converted from GBP).

Remitly Wise
Volume (billions) 4.976 22.4
Revenue (billions) 0.111 0.168
Catch rate (Turnover / Volume) 2.23% 0.75%

Wise is currently about 4 times the volume that Remitly sees and seems to charge a lot less. Here’s how the two companies stack up using our simple valuation ratio (we use Remitly’s expected valuation of up to $ 6.8 billion).

  • Remitly – (6.8 / 0.444) = 15
  • Sage – (14.6 / 0.672) = 22

Of course, we’ll have to see what Remitly stocks start trading at, as the trendy train might take them for a ride. Anyway, if we wanted to play on a money transfer tech company, we had to go for Wise since their market share is 4 times that of Remitly. If these companies plan to compete with Western Union on a cost basis, then Wise will have a greater value proposition than Remitly given their much lower participation rate. The problem these two companies face is that stealing market share from Western Union will become more and more difficult over time.

The world against Western Union

We recently traveled to El Salvador to see all the bitcoin bulls jerk off in a large group about adopting bitcoin as legal tender. On several occasions, we’ve heard the country’s President, Nayib Bukele, explain how Bitcoin would stick it to humans by moving the $ 400 million in fees Salvadorians pay Western Union every year for remittances. While this seems more of a pipe dream than anything, it does highlight the number of people after Western Union’s bacon. In Mr McCann’s Medium article, he explains why Western Union is more formidable than Bukele would lead us to believe.

One of the reasons Mr Bukele focused his message on Western Union is that it is one of the most powerful brands in the world – in 75th position according to the CoreBrand index. Over 80% of remittances are made in cash, which means having physical locations is a necessity. Western Union has more than 500,000 branches in every country on the planet except the DPRK. Most people who use Western Union don’t see it as something that needs to be fixed. As fintechs do obvious damage to Western Union’s slowing revenue growth, they will find it increasingly difficult to steal customers from entrenched money market operators.

Should you buy Remitly shares?

Each individual’s investment decisions should be the result of their own conviction. Maybe the wellbeing aspects of Remitly’s business appeal to some, but where we’re sitting is not our business. This is mainly because there is no ocean blue TAM here. Any fintech that tries to challenge money transfer operators will have to fight for every customer they get, which gets harder and harder over time. They might have been good companies to invest in as a venture capitalist, but retail investors are late.


When evaluating a given stock, it is helpful to take a step back and consider the larger thesis. In the case of remittances, this is a market that does not need to be fixed. About $ 1.5 trillion in remittances flows successfully from workers to families. While it is possible to save money on fees, not everyone will jump at this chance. We will avoid the remittance thesis in favor of growth opportunities where there is a lot of blue ocean with fewer sharks swimming.

If Remitly’s IPO goes as planned, the shares will trade under the symbol RELY.

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