Power of Payments Ep. 11: ‘There’s a lot of heart in our business when you really understand our customers’ – Remitly’s Matt Oppenheimer

Welcome back to the Power of Payments podcast. I’m your host Ismail Umar, and before we get into today’s episode, I’d like to make a quick announcement. I’m happy to share that after two long years of Covid, we’re finally out of Zoom and back into the real world. We’re holding Tearsheet’s Power of Payments Conference on September 15^th this year at Current, Chelsea Piers, New York City.

We're bringing together the top professionals and brands in the payments space to discuss the challenges and opportunities presented by the need to stay ahead of the curve in a rapidly changing industry. You can apply now to join the conference by clicking here.

On today's episode, I’m speaking with Matt Oppenheimer, co-founder and CEO of Remitly, an online remittance service based in Seattle that offers international money transfers to over 135 countries.

Remitly says its vision is to improve the lives of millions of immigrants and their families back home by making international money transfers quicker, easier, more affordable, and more transparent than traditional money transfer processes.

Matt talks about how the remittance industry has evolved over the last decade, the changing needs of Remitly's customers, the potential role of crypto in remittances, and what he sees as the future of global money movement.

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The following excerpts were edited for clarity.

The need for Remitly

I’m Matt Oppenheimer, co-founder and CEO of Remitly. I’m from Boise, Idaho in the United States, but I’ve traveled to close to a hundred countries throughout my life, and lived and worked on three continents. I saw how painful and difficult it was to send money internationally, and how our financial services ecosystem is just not designed for people that move abroad. I had a few jobs along the way, and did my MBA at Harvard, but ultimately started Remitly a little over 10 years ago, with a vision to transform the lives of immigrants and their families by providing the most trusted financial services on the planet.

After business school, I knew I wanted to start a business – I come from a family of entrepreneurs. But I also knew I wanted to start a business that would have a positive impact on the world, that would solve a meaningful problem. And so, I was patient to find the problem that I wanted to solve. I also knew, because of my travels, that I wanted to live and work abroad. And so, I joined Barclays Bank with all those things in mind, and it was not the investment bank. It was the retail and commercial bank, which means larger-scale people management, and just a very different job. So I was in the UK corporate bank in London, but the former dean of HBS, he was one of my professors – before I took the job at Barclays, he gave me some very astute advice. He said, when you take that job at Barclays, just make sure that you have a truly international experience. And London obviously is a very international city. But he knew me well, he knew I had traveled to various parts of Africa. And one of the reasons I joined Barclays was that they had a presence at the time in 10 African countries. And he also said, you will get to the headquarters of Barclays in London, and there will be a lot of inertia to stay there. No one will understand why you will want to take a job outside of where the power center is. And so, sure enough, I spent some time in London, and then an opportunity in Kenya came up, where I would be the head of mobile and internet banking initiatives for Barclays Bank, Kenya. Everyone in London was like, why would you go to Kenya like this? You’re working your way up the corporate banking ladder. But I took the road less traveled. I was getting paid in British pounds, I was spending in Kenyan shillings, and I eventually had to get money back in US dollars. And that led me to see firsthand how hard that was. It also gave me the visibility into mobile wallets in emerging markets – like in Peso, which was growing tremendously at the time, and has really transformed domestic financial services in Kenya. And that’s where I found that problem that I mentioned, which was, you know, broader financial services for immigrants, but that starts with remittances, and fundamentally making it easier, giving our customers more peace of mind.

I took a bunch of pivots and changes in the early days around Remitly to get to product-market fit, to get to the scale and size that we're at now. We’ve served more than 5 million customers now, we have over 2000 employees worldwide. And we’re really proud of what we’ve done. But the idea came from making decisions from a professional standpoint that were the road less traveled, that were not what all of my colleagues were advising me to do. But I’m very much glad I did, because it’s led us to here today.

How has the remittance industry evolved over the last decade?

I think that the industry has evolved in that more and more people, as you can imagine, are looking towards digital devices for sending money internationally. Surprisingly, the majority of money, even now, is still sent via physical cash locations, by somebody going to a physical Western Union or MoneyGram-like location. And what has changed over the last 10 years is, while that’s still the majority, people are rapidly shifting to use digital channels to send money back home. So what that means for our product is, customers link their bank account or their debit card, and then they can send money within minutes to billions of bank accounts, hundreds of millions of mobile wallets, hundreds of thousands of cash pickup locations, door-to-door delivery – it really depends on the country our customers are sending money to – but we get funds the way that recipients want to receive them on behalf of our customers. And so, I’d say the first thing that’s changed is, more customers are using digital, and that trend I would expect to continue.

I think there’s also been an explosion of fintech more broadly over the last 10 years. But the third thing that has changed over the last 10 years is, the world is just so much more interconnected than it was 10 years ago. It was already pretty connected, but keep in mind, the iPhone was invented in 2007. We were founded in 2011. And while the iPhone was invented in 2007, the amount of adoption and trust for our customer base, and for financial services, was kind of in the early innings of that. And so, I think that with the advent and growth of the iPhone, and just globalization broadly, the world has become so much more interconnected. So, I think customers are a lot more connected to home in a digital fashion, via digital means. And I also think that the world on the backend is so much more connected as well. And what I mean by that is, take a cash pickup partner in the Philippines. What used to happen was that an old legacy money transmitter would fax the details to their Philippine disbursement partner, and then they’d fax it to the headquarters, and then the headquarters would fax it to one of the thousands of cash pickup locations. And it was this manual, analog, slow process, fraught with friction, delays, and issues. And so, this backend global connectivity, partially also driven by the growth of smartphones and data access globally, has enabled us to not only reach the customer quicker, but also reinvent global payment rails such that we can digitize end-to-end, improve risk systems, improve our integrations with our disbursement partners, to where it cuts through a lot of that complexity. And what it means for the customer is peace of mind, instant transactions, and more affordability. And we’re really grateful that some of those macro trends have enabled us to do that.

What does Remitly’s typical customer look like?

Our customers are amazingly diverse. They send money across 2000 corridors. And when we say corridor, that could be like US-Mexico, or Canada-Mexico – it’s a pairing of two countries. But it also means that our customers send money from about 22 markets they’ve moved to, mostly in North America, Europe, and a few APAC countries like Australia and Singapore, and they send money to 150 receive markets in Asia, Africa, and Latin America. And so, you can kind of get a sense when you imagine that geographic diversity, but our customers come from countries like India, the Philippines, Mexico, El Salvador, Guatemala, Pakistan, Kenya, South Africa, you name it. There’s a huge amount of diversity, which is one of the things I absolutely love about our business. And with that diversity, there's a range of professions, there's a range of income – our customers tend to skew slightly lower-income from most countries that we serve, and that means that the average transaction size is a few hundred dollars. But the common thread amongst all of our customers is the aspiration to move to a new country and build a better life for themselves and their families back home, make huge sacrifices to do that, oftentimes leaving close family members, kids, parents, aunts, uncles, loved ones, and then by doing that, have this commitment – our customers call it a sense of duty, a sense of obligation – to send money back to their families. And we see them doing that very regularly. So, after they’ve paid for their own rent, groceries, etc., they’re paying for their family members – maybe it’s tuition, emergency medical expenses, etc. So there’s a lot of heart in our business when you really understand our customers and who they are. And that’s why the 2000 Remitlians across the globe get up every day and do what we do. We’ve been fortunate to build a strong business, but it’s grounded in the fact that we serve these amazing customers that have just been underserved by traditional financial services providers.

Why are traditional financial players slower than fintechs in meeting the changing needs of the remittance industry?

I think there’s two things that come to mind. One is the fact that it’s just really hard to innovate within a larger financial services institution, which is something I learned during my time at Barclays. It’s just harder for bigger companies to innovate. Some companies do it a lot better than others, though. And I think the second thing is that the complexity of remittances is often misunderstood. And I think that’s why firms like Western Union and MoneyGram have been kind of separate from companies like US Bank. I don't know if they still do, but I know they used to partner with Western Union in US bank branches, because of the fact that it’s just a very different business. And so, I think that the large banks know this, but people looking from the outside don't necessarily recognize the specificity and complexity of building out the risk systems, the user experience, and the disbursement network of billions of bank accounts, hundreds of millions of mobile wallets, all the disbursement methods I mentioned earlier. And that's actually why we launched Remitly for Developers, which gives other companies access to our network to disburse funds, because it is so complex. We’ve got 100+ integrations with emerging markets, banks, and financial services institutions. And so, we believe that in a market where we have 1% of the total addressable market, there’s both opportunities to expand to offer businesses that need to disburse money for the small businesses they serve etc., or for their consumers, because it is such a specialty. And we’re excited about Remitly for Developers. We’re also excited about being able to do what we do better than others in the market, because it’s our specialty, and we've proven that we can do it very well.

How does Remitly look at crypto and its potential role in the remittance space?

I’d say at a principal level, we watch crypto very closely. I think we’re more proactive about partnering with some of the most innovative and large crypto companies out there, so we can learn more. Two partners that we’ve worked with are Meta for their Novi product, and Coinbase. I think what we've learned, somewhat via those partnerships, and somewhat via our own research with our customers and seeing customer behavior, is that since our business comes down to trust, there hasn't been the interest – at least from a direct-to-consumer standpoint – of trusting crypto, for any sort of direct-to-consumer international remittance product. Obviously, we'll continue to watch that very closely, but we haven't seen it yet.

The second thing is that there's oftentimes the narrative that crypto will make remittances free, or somehow structurally change the entire system. And when you really get to know the business, onramping funds and offramping funds are the two biggest variable costs, let alone all the fixed costs of compliance, infrastructure, disbursement network, all that – but let's put that aside for a second. If you look at just the variable costs of onramping and offramping funds, meaning collecting funds from customers via debit card or bank account, offramping funds, the billions of bank accounts, mobile wallets, etc., that I mentioned. And so, how would crypto disrupt that is the question, when you get into the details as opposed to the headline, and the only way that would happen is if there were one global currency that everybody used, to where there was no need to onramp or offramp funds. And I think that as consumer-facing crypto has evolved, what we've seen is that there are regulatory hurdles and barriers, we’ve seen that a lot. I would argue that getting to a global interconnected financial services system with one cryptocurrency is more of a regulatory problem than a technology problem. That’s why one global currency has not existed, in my view. And I think there's a bunch of other trust and other barriers that prevent that as well.

I’m actually quite bullish on some countries adopting crypto more broadly, and in those countries, just like we send to a bank account or a mobile wallet, if there's a country with hyperinflation, and there's a stablecoin, or even a more volatile cryptocurrency like Bitcoin, we can disburse into that, to the extent that there's customer demand. There hasn’t been yet. But what we're good at fundamentally is doing the onramping and offramping of fiat to fiat currencies, but it could be fiat to crypto, it could be crypto to crypto, etc. So that's one. And then two, I think there could be interesting backend applicability in terms of improving global payment rails with blockchain technology. Again, we haven't seen anything that's been transformative yet, which is why we haven't announced anything, but we keep our hand very closely on the pulse there. And we're monitoring and seeing as technology evolves, what could be useful to us as a B2B solution on the backend.

What does the future of remittances look like?

I think that the trend of more customers using digital devices to send money internationally will continue. It was accelerated by COVID, as you can imagine, but once customers have made that shift from a physical cash location to a digital device, and they’ve built that trust, which is what usually holds them back from switching, and they have a great experience with us, what we're seeing is really strong repeat usage, and I think that also creates an inflection point, where in the communities we serve, oftentimes there’s word of mouth, or a brand effect. And so, I think in the industry, whether it's Remitly or other financial services or remittance companies, there will be a continued shift to digital providers. And more broadly, while there has been some nationalism and protectionism, I think that globalization, if you look at the way the world is headed, the interconnectivity that we talked about, will continue to occur in a very positive way. There are currently 250 million immigrants that live and work outside the country they’re born. Some countries these days are much more welcoming to immigrants – I think those will be the countries that will continue to thrive and be successful in the long run. And I think that as our customers continue to move abroad, as the 250 million immigrants that have already moved abroad and have built lives for themselves in the countries they've moved to, need financial services and need remittances, we're incredibly excited about providing that to them, and I think those macro trends are very much in our favor.

There’s often a misunderstanding or lack of education around who immigrants are, how diverse they are, how remarkable they are, the sacrifices they make, how much they contribute to the economies they move to, the taxes they pay, the contributions they make in the communities and countries that they move to. And that’s why we do what we do. And especially for folks that are less close to immigrants, I encourage them to really try to understand what the immigrant journey is like, both as it pertains to better understanding Remitly and the industry, but also as it pertains to understanding what makes the world go round in so many ways, because the impact that immigrants have on the planet is unbelievably remarkable. And I think it’s often underappreciated. So, I’ll end with that.