{"id":18077,"date":"2016-11-18T14:22:11","date_gmt":"2016-11-18T19:22:11","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/remitly-making-remittances-available-for-everyone\/"},"modified":"2016-11-18T14:22:11","modified_gmt":"2016-11-18T19:22:11","slug":"remitly-making-remittances-available-to-everyone","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/remitly-making-remittances-available-to-everyone\/","title":{"rendered":"Remitly: Making Remittances Available to Everyone"},"content":{"rendered":"

The burdensome process of sending money abroad to families has historically left low-income migrants vulnerable to the high fees and transaction costs required for cross-border money transfers. Banks, the oldest players in the industry, continue to charge the highest fees for remittances, approximately 11% per transaction made from the United States, and have not yet shown significant improvements in the time it takes to complete such processes (the time lag from when the money is sent to when it is received takes several business days) [1]. This means that a family of a Mexican immigrant who hypothetically earns minimum wage in Texas of US$7.25 per hour will ultimately receive US$6.45, or MX$129.05, once the money is transferred to Mexico. Further impacting the overall cost of the transaction is the time that these people have to set aside during the week to travel to their respective banks. This leads to a loss of hourly income for both parties, an opportunity cost that while difficult to quantify, cannot be left unnoticed.<\/p>\n

The lack of transparency in the process, the high costs for the end consumer, and the size of the market (approximately $588B in 2015) have brought newcomers to the industry that are using technology to improve inefficiencies [2]. Among these new players is Remitly, a company founded in 2011, that like banks, provides money transfer services to consumers. However, unlike its competitors, Remitly allows consumers to make person-to-person transfers from the US to over ten countries through mobile devices, reducing the friction on both ends of the transaction. The software allows consumers to choose between making a bank deposit or a cash pickup. Through partnerships with both banks and retail stores in developing countries (12,000+ locations in Mexico alone), Remitly makes it easier for the end recipient to pick up the cash at a convenient time and location, reducing their opportunity cost. The only documentation required to pick up the cash is a government-issued ID and nothing else, which is crucial in a country where the majority of the population does not have a bank account [3].<\/p>\n

So how does Remitly make money? <\/em><\/p>\n

Remitly receives revenues from two sources, transaction fees and foreign exchange rate spreads. On average, the total amount paid by the consumer ends up being approximately two percent per transaction [4].<\/p>\n