Remitly IPO: 5 things to know about the transfer company
Remitly Global Inc. sees many opportunities to transform a huge category of money movements that still take place in expensive and low-tech ways.
The fintech company is looking to simplify the process of sending money so that people can send money back more easily, securely and cheaply to loved ones. The company calculates that it currently only captures 1% of the estimated $ 1.5 trillion in migrant remittance flows that occur through formal and informal channels, and it specifically targets some roughly $ 540 billion in remittances. these flows going to low- and middle-income countries through formal means.
which is becoming public, sees itself as helping to tackle a facet of global income inequality. Remittances are often a major source of income for people in developing countries who receive money from family members abroad, but it can be difficult and expensive to send and manage remittances. currency conversions.
The company is also aiming beyond the core remittance market, following the launch last year of a digital banking service called Passbook, tailored for immigrants.
Remitly plans to sell 7 million shares as part of the offering, which is expected to be priced between $ 38 and $ 42 per share. The company could raise as much as $ 217 million and reach a valuation of $ 6.8 billion at the high end of that range. The selling shareholders plan to offer an additional 5.16 million shares over and above what Remitly sells.
The company intends to trade on the Nasdaq under the symbol RELY. Here are five things to know about the upcoming IPO.
Modernize money transfers
Remitly sees himself as a disruptor in an archaic market where there has been a “lack of innovation and financial inclusiveness”.
The traditional remittance market is “dominated by banks, physical location operators and informal channels” which use existing systems, resulting in “a poor customer experience and additional operating costs which are passed on to the customer, ”Remitly says in his prospectus. The technology that major players are using in their offerings often does not scale well or may not meet the “cultural and local market demands of various immigrant communities,” Remitly explained.
A competitive market
While Remitly plans to challenge incumbent transfer operators with its offer, the company is not alone in taking on the task.
“The remittance market is global, highly competitive and fragmented, and includes a mix of traditional and digital players, including traditional banks, digitally-focused cross-border payment providers, online-only banks, and vendors. cryptocurrency, ”Remitly noted in his prospectus. . One risk is that Remitly’s competitors could bundle various services together, potentially forcing the company to change its pricing strategy.
Among Remitly’s competitors in the remittance market is Revolut, which provides the ability for users to send money to their families abroad, as well as other financial tools such as direct advance deposits. , budgeting help and shopping rewards. Revolut reached a valuation of $ 33 billion in the private market this summer.
The question of cryptos
Neobanks have grown in popularity and some of them have taken advantage of cryptocurrency-related services in order to attract customers, according to Remitly.
“The advancement of cryptocurrency development has led to new entrants into the remittance and financial services market in general, including companies that have traditionally focused on social media,” the company warns among its supporters. risk factors. “Although still in its infancy, the use of cryptocurrency is growing and, if we are not able to integrate cryptocurrency or other new financial technologies into our services, we will not may not be able to compete successfully. “
Income growth, loss reduction
The company generated $ 202.1 million in revenue in the first six months of 2021, up from $ 105.1 million in the first six months of 2020. Remitly is still not profitable, though. net losses have narrowed to $ 9.2 million in the first six months of 2021, from $ 21.1 million in 2021. the first six months of 2020.
Remitly generates transfer income from transaction fees as well as exchange differences applied to a customer’s principal.
Remitly plans to grow its business by expanding to “thousands” of additional corridors beyond the 1,700 it already supports, while also adding more financial services partners. The company intends to increase its marketing efforts to increase brand awareness. In addition, he expects that by adding new features, he can generate more frequent use among existing customers.
Remitly sees an opportunity to expand beyond the remittance industry to broader financial services for its immigrant clients. There has been “encouraging early adoption” of the Passbook digital banking service since its launch in February 2020, and Remitly expects it to be able to use “the data and insights” gleaned from the fund transfer product to shape its financial offers, in accordance with the prospectus.
“We anticipate this will expand our clients’ options to access financial services while diversifying our revenue base across multiple products serving the same primary clients,” continued Remitly.
Passbook has a deposit function and the company plans to add more functionality.
Remitly also anticipates that it will be able to recognize the marketing synergies between its transfer and financial services offering that will make the customer acquisition process more efficient.