High walls at the border

Being a fragmented world, the international remittance industry always has a high barrier that seems impossible to disrupt. According to the Sending Money Home study, “the market share is increasingly concentrated, currently 35%, in three global money transfer operators (MoneyGram, RIA and Western Union).

For example, Western Union dominates just over 10% of all global remittances and in the world’s largest remittance corridor – between the United States and Mexico – it has almost 20% of the market. In addition, its digital transfer service is growing rapidly. According to its report for the last quarter of 2020, digital services revenues increased by 45% compared to the same period of 2019 and represented 21% of the activity of its retail segment.

On the other hand, major digital companies have emerged such as WorldRemit, Wise (ex TransferWise) and PayPal’s Xoom, but they are not seen as threats to Western Union. As Odilon Almeida, President of Global Money Transfer at Western Union, said in 2019, “These FinTech companies cannot be considered ‘long-term players’, due to the challenges they face. to grow their businesses and build relationships with financial institutions and the payments ecosystem. Venture capitalists also have limited patience. “

In the case of cryptocurrencies, although there are large startups – such as Mexico’s Bitso, which recently raised US $ 62 million in its Series B and was responsible for the US $ 1 billion transaction on the US $ 36 billion in remittance flows from the United States to Mexico, according to Finnovista’s Blockchain 2021 report – el blockchain it continues to be a fairly unpopular payment method, let alone remittances.

According to BID LAB, still only 20% of Latin Americans prefer online services or mobile applications to send funds and their explanation is not lack of access or ignorance of digital, but, to some extent, inertia. “If the person is comfortable with their current method, they probably won’t consider or learn new ways to send money.”

On the other hand, KoreFusion’s 2020 LATAM Fintech report concludes that money transfer and foreign exchange companies were the penultimate segment favored by investors, while the blockchain it was the last. According to the study, investments are still low. In 2020, the two categories raised around US $ 10 million, respectively, compared to US $ 4.02 billion from the vertical payment and US $ 1.95 billion in loans.

But, like all areas that have experienced an acceleration in their digital processes, the digital remittance industry has gained a new set of customers. Like Vita Wallet, Valiu has also grown exponentially, from 3,000 users in January 2020 to 30,000 by year-end, and is set to arrive in the United States in the coming months and offer services. to the main destination of the Venezuelan diaspora.

And there is not only the possibility of offering services to an increasing number of migrants, but also to companies with cross-border employees. In fact, Vita Wallet started out as a QR code payment provider, but quickly shifted its business model in favor of remittances, realizing that its own need to pay its globally dispersed employees was shared by colleagues across the globe. Magical wallet. Startups (the Chilean accelerator of which the startup is part) and also other companies. It currently has over 100 corporate clients.

In addition, according to Statista, countries in Latin America are among those who view cryptocurrencies the most favorably, while a Visa survey indicates that 78% of consumers will use new payment technologies in the future, including cryptocurrencies.

“The biggest challenge is trust, both in the origin of the shipment and in the receipt, and this is acquired by strengthening a brand, introducing regulations that can give certainty to users and offer it at a competitive price, ”says Andrés Fontao. “The maturity of the fintech ecosystem is reaching a point where the adoption of solutions will be exponential and will force traditional players to reinvent themselves or to stay outside,” he adds.

According to Antonio Linares, this fourth year as a migrant in Colombia is already a stable year. They got permanent residency, he has a job he loves, and his wife feels comfortable working as a psychologist, treating patients from home. At least now they don’t intend to come back, “because it’s hard” and they are already dreaming of buying a house in the country in the short to medium term.

Among his projects, sending money to his family has always been an important part and Linares says he prefers the app to make it happen. He has already sent US $ 500, up to US $ 1,000, or about three Colombian minimum wages. “You really need confidence to send this amount of money,” he says.