Remittances — specifically when people in developed countries send money to family or friends in emerging markets — continue to be a huge lever to help those in more challenging economies survive and improve their lot. Today, a startup that has built a remittance platform that it believes is the most economically sympathetic and useful to the people who use those services the most is announcing some funding to continue growing.
Taptap Send, which provides a “free” mobile money transfer service from eight countries to 15 others, has raised $13.4 million, money that it will be using to continue expanding its scope and the services that it provides to its customers.
The 15 receiver countries include some of the poorest countries in the world that are the hardest to service, plus emerging markets with some of the poorest populations — DR Congo, Mali and Madagascar among them — while the eight originator countries include some of the most common places to which people from these countries emigrate — United Kingdom, Belgium, Canada, France and Italy among them.
The Series A was co-led by Canaan Partners and Reid Hoffman, with other unnamed investors also participating.
There is a reason that a lot of companies launch and build services in countries like the U.S. or regions like Western Europe: There is a lot of money there, and specifically consumers and businesses with the kind of income that allows them to invest in new technologies and simply to do more. Of course, that doesn’t mean that other, less wealthy demographics don’t exist, or don’t also need new technology; but building for them is usually less lucrative and more risky.
Taptap Send is among the startups that is trying to approach the promise of tech with this in mind, and with a view to bucking that trend. The company’s business model works by way of charging no commission or any other fees for transfers, instead making a cut on foreign exchange. It has built its whole tech stack from the ground up and says that this lets it pass on lower exchange rates to its customers, typically lower than others that might be serving the same markets. On top of this, there is an economy of scale principle at play here: Having better rates will drive more users, which in turn might not mean better margins but a higher volume of transacting and more returns overall.
The startup is the third entrepreneurial outing for Michael Faye, a development economist who previously worked for the United Nations. Before Taptap Send, Fay founded GiveDirectly and Segovia. In each business, he’s tried to take the same approach: building financial technology to improve the lot of people living in emerging markets. GiveDirectly (still going strong) did this for philanthropic donations — it’s an NGO that sets up donation campaigns where individuals and big businesses can contribute, and people in receiving countries can directly get the funding via mobile money transfers. Segovia (acquired by Crown Agents Bank) did this for B2B use cases — it built a mobile money transfer as a service, which other money transfer companies could use to power their businesses, by way of an API.
Taptap Send can be thought of as Faye’s hat trick in the space, taking the bigger concept of remittances used to help people, and building it as a C2C business: aimed at individuals who are sending people “back home” money to live on.
“Taptap Send is taking advantage of this structural change in mobile money and other distribution networks to offer what we hope is the fastest and best price service to customers,” he told TechCrunch in an interview.
Taken together, cross-border remittances is a massive market, worth some $540 billion annually when you consider the established channels, with more “informal” methods (which can be as analogue as passing money via a person making a trip from one country to the other) estimated to be of nearly the same size. They are also, in fact, more valuable even than foreign direct investment: The World Bank has tracked that remittances overtook the money donated by states in 2019.
Mobile technology has played a big part in that, making it easier both to send and receive money, but it’s also opened the door to a lot of potential exploitation by bad actors, preying on people who might use a service for convenience and not be fully clear on how the actual pricing breaks down.
For that reason, the UN has set a goal for remittance pricing and commissions to be no higher for any company than 3% of the total sent — one way to ensure that players focus more on volume and less on margins. Taptap Send says that it’s the only company in the space that has publicly committed to that goal (it has yet to hit it, it seems).
The company is not yet disclosing many numbers on its size or customers served but Faye tells me business overall grew 5x in the last year and is posting a gross profit. “Even with everything happening you did see this massive increase in digitization,” he said of COVID-19 and its impact on business. He’s also undeterred by the vast amounts of competition in the space, which includes not just companies like Western Union and MoneyGram but lots and lots of smaller remittance startups like Remitly, World Remit and many more without the word “remit” in their names. “It’s easy to look at remittance and say it’s crowded, but so was video conferencing before Zoom or social networking before Facebook,” he said.
This is also why investors are interested.
“The company has a nuanced, yet powerful strategy that Michael has put into place to allow [it] to be the lowest-cost provider in every market they enter. As the world rapidly shifts toward digital wallets and e-money, it creates an opportunity for remittance companies to create an even more magical experience by sending funds directly to those wallets,” noted Brendan Dickinson, a general partner at Canaan. “Taptap Send gives as much cost savings as possible to the customer, and as a result, is almost always the cheapest player in the market. All of that makes it economically viable to send smaller remittances — and in doing so, expands the total market and volume of remittances sent. This approach is strongly resonating with customers, as Taptap Send’s massive growth has been 90+% organic.”