Hi guys. Welcome to the Fintech Coffee Break. I’m your host Isabelle Castro.
Today, my coffee break with Matt Oppenheimer, CEO and co-founder of Remitly.
Remitly has been a leader in the disruption of the remittance market, an area integral to reaching the UN Sustainable Development Goals, with at least 80 countries relying on remittance flows to provide 4% of their GDP.
The sector has been considered an area ripe for fintech disruption, but it’s still full of sticking points. Remitly addresses these issues.
I spoke with Matt about the market, how it’s been affected by the recent macroeconomic climate, and why there are still a lot of areas fintech can make a difference.
Isabelle Castro – Hi, Matt. Good to have you on the show.
Matt Oppenheimer – Thanks. Great to see you as well. Thanks for having me.
Isabelle – Happy to have you on. So what gets you up in the morning?
Matt – What gets me up in the morning other than my kid?( Which is the true answer), I would say, for me, I am a morning person. I get up and exercise. I’m excited to start the day. Purpose and impact may sound cliche, but that is what literally gets me up in the morning and also keeps my energy high throughout the day. Making an impact on our customers with our team with our investors. And that’s what keeps me going.
Isabelle – Good. I like that. When did you decide that you wanted to start a business like Remitly? And what led to that decision?
Matt – Oh, good question. I come from a family of entrepreneurs. So I always knew that I wanted to start something. I actually thought, earlier in life, I would start with a nonprofit. When you look at business schools, some of the essays that talk about what you want to do with your career. But I’ve always been drawn to the purpose point of solving problems that make a positive impact in the world. And so I knew I wanted to start something. I didn’t know if it’d be for-profit or nonprofit. And I took the road less traveled like I’ve traveled to literally, you know, close to 100 countries. I’ve lived and worked on three continents. I made the contrarian or non-traditional decision to move from One, Churchill place, in London, where I was working with Barclays Bank, to Nairobi, Kenya, where I was head of mobile and Internet banking initiatives for Barclays Bank, Kenya – that was a non-traditional career path.
But I had been to Africa a few times before I was drawn to working there. And so I joined Barclays. And so it was the road less traveled in Nairobi that, you know, I saw how difficult it was for me to send money out internationally. I was getting paid in pounds, living in Kenyan shillings eventually had to give money back in US dollars. But I saw how a lot how much more important and how it is equally if not more difficult for a lot of my Kenyan friends who relied on their loved ones for basic living expenses. That, combined with M PESA, which was transforming domestic financial services, this was 10-12 years ago, felt like the right time.
And if you look at just the impact of remittances. $1.6 trillion that is sent every year, like, if it takes us back at about $1.6 trillion, every year, it’s easy to throw out those numbers. I’m gonna say one more time- $1.6 trillion that’s sent every year. And it solves some big global problems in terms of poverty and inequality. And then you lay around who our customers ultimately are the senders of remittances, the sacrifices they make to be able to send money back home to their families. And I was like, this is a problem. And in terms of how that money is spent, how much it costs, how inconvenient it is, it’s a problem that I wanted to work on solving for a big portion of my life. And the rest is history, so to speak.
Isabelle – Yeah. So okay. It was a problem then. Give me an overview of now. Where are we now with the remittance market?
Matt – So if you look at the trend not to be too jargony, but the total addressable market, that is the $1.6 trillion that I mentioned. That includes both formal and informal. Formal remittances are like what the World Bank measures in formal though a lot of folks because it’s been so expensive and inconvenient. They just take money back over the holidays when they’re visiting their family and want to deal with the hassle of a physical remittance location and the fees and inconvenience and trust elements that go with that.
So we think that as we build more digital solutions, some of that informal will shift into formal.
Then if you also look at the serviceable addressable market, which is where we’ve been focused initially, which is, as the World Bank calls it, remittances to low and middle-income countries, that just in the formal space is 600 over $600 billion. Again, that’s sent every year, and so huge opportunity to improve the world to build a meaningful business. And just to put in perspective, Remitly is a larger player in the market. As you, as your listeners have seen, we went public the year before last -I guess we’re in 2023. And we’ve got some exciting scale and size yet; we’re only 2% of the overall market. Two percent of that $1.6 trillion, which is amazing.
What’s exciting, though, is- I mentioned trust, there’s a pivot that’s happening in the industry around digital devices being trusted for our customers to send money back to their loved ones. And so the rate and pace of not only remittances overall, which have historically been very, very resilient, to economic, you know, challenges, hardships, recessions, they’ve been more resilient for reasons I can talk about later if it’s helpful. But in addition to that, there’s the element that this industry is at a tipping point where customers are saying, okay, you know, what, I actually do trust a digital device to be able to send my hard-earned money back home. And so we’re grateful for this industry shift and be leading the way in a lot of ways.
Isabelle – I’m gonna come up, I’m gonna come back to that. But for now, have the recent macroeconomic factors kind of affected what’s going on, like, inflation and all that kind of stuff?
Matt – Yeah, well, I think historically, remittances, as I mentioned, have been very resilient for two reasons.
One, because unlike whether it’s luxury goods, or whether it is like the housing market, things like that, when interest rates rise, unlike those areas that I think there’s a lot of shifts. remittances are sent for like basic living expenses for emergency medical expenses. And so it’s high on the use of funds for our customers, which means it’s more resilient, even if customers are cutting back. And we’ve shared some in previous earnings in terms of our customers surveying their propensity to send money in the future is very high.
The second is that our customers, in addition to that, are incredibly resilient. And when I say that, I think it’s part of what defines the immigrant journey is the grit, tenacity, resilience, and commitment that our customers have with their families back home. So even take like when COVID-19 happened, a lot of our customers or blue-collar workers might have worked in a restaurant that shut down. And yet, what our customers did, and this is partially the countries we serve right now, it’d be different. If we were in the Middle East where like, job flexibility is, is much harder if someone’s working in an oil field in Saudi Arabia. But in the markets that we predominantly serve, there’s more flexibility there when it comes to employment.
And so a lot of our customers went from working in that restaurant to again, I mean, the grit resilience determination, given the importance of those funds to become a DoorDash delivery driver, you name it. And so it’s our customers that have this amazing grit resilience and the importance of our service that creates a lot more resilience than a lot of other industries. And I wake up right now, every day, literally grateful for our customers because of that dynamic.
Isabelle – So there hasn’t been too much of a kind of fluctuation in the amounts that they’re sending, the kind of frequency that they’re sending, regardless of what’s going on. Correct. Okay. And so, fintech in this, what role do you think it has to play in this kind of time?
Matt – I think that fintech is broad. It’s so broad, right? So what I’m processing is like, you’ve got everything from neobanks to remittances to lending to, like, so many different things within the borough, and you’ve got B2B, you’ve got B2C. And so it’s hard to speak about all of those in combination.
What I will say is I think there is a shift to digital that is happening. I think that there are a bunch of costs that can be taken out of the system with a digital approach. There’s an ease of use that is unparalleled, like you think about a Filipino American customer using our service and is sending money back on, you know, maybe already communicating with their loved ones on Friday night, which is Saturday morning in the Philippines. And being able to send that money instantly from the comfort of their own home as opposed to going to a physical location like that should happen.
What is held back, at least in the consumer space, which is where we operate, is trust, right? Like, it’s easy to say that, and it’s rational that customers should do that. But it’s also rational for customers to take a step back and say, ‘Well, I know that person with that physical location if anything happened with like, you know, our customers, a big percentage of their hard-earned money.
And so I think that it’s trust that has historically held a lot of customers back from making the right rational decision because they think about their identity and what that’s going to be used for it’s we have to collect to verify do KYC, which is Know your customer, we have to collect their payment information. And unlike lending or other fintech businesses that are giving out money, we’re asking customers to give us their money fundamentally and trust us to deliver it back home, oftentimes to be picked up in cash, oftentimes hundreds of or 1000s of miles away. And it’s also rational that that takes like a leap of faith and trust that this company online is going to, like do what’s right, from an integrity, security, compliance perspective. And so long-winded way of saying I think the industry is going through a shift right now, whereas more and more customers are using digital devices, that they’re then you know, word of mouth brand awareness, referrals, things like that, it starts to become a flywheel.
I think that there’s an exciting time, at least within consumer remittances, for customers for our business. It will vary though, depending on the like slice of fintech, in terms of, like, overall industry trends on fintech, so I’m hesitant to ramble about other areas that I that I know last, but that’s what I can say for sure. And in our space.
Isabelle – Okay, that’s perfect. You said that it’s going through a shift. How long is this shift been going on? Because for example, there was an IMF report in December last year that concluded that the hyped disruption of the remittance market hasn’t yet happened. So how long? I assume that digital, the shift to digital, is a big part of that. Where do you see this? What’s your opinion on that report?
Matt – Yeah, I think I think that the report that I think you’re referring to, I think it talked, it talked quite a bit about, first and foremost, how crypto and some of those disruptive technologies, I’ll come back to the word disruption, but some of those disruptive technologies. I think there was some hype, and I think the report is actually absolutely right, as it pertains to some of the hype and in those areas.
And when I say hype, I mean, what is the actual customer impact. From a cost perspective, but also from like a customer experience, reliability, trust standpoint, peace of mind, we talk a lot about for our customers. And so I agreed with the report’s conclusions on some of the hype related to some of the crypto and blockchain solutions, although we still, you know, pay a lot of attention to that to make sure we see around corners.
I think that as it pertains to remittances that are non-crypto or blockchain-based, I think that the industry is at a tipping point. It’s taken longer than I think some folks would have imagined. Because again, that trust element, even if something was, like, rationally good for a customer to do, it’s also rational to have that fear that I mentioned.
And so it takes time, it takes a little bit longer than like a Blockbuster vs Netflix type, you know, story. But I think that Netflix disrupting blockbuster, obviously, but I think that the future, in some ways is inevitable, like, why would a customer not do what I was talking about with, you know, that Philippine customer on Friday night, sending money back. Especially when you start to think through the structural costs were taken out of the system in terms of not having to pay that physical agent, especially when you think about the reliability that we can give our customers and peace of mind by perfect, what we call our perfect delivery promised the exact day and font day and time that funds will be available, and then updating them every step of the way to give them that peace of mind to ease any sort of anxiety, it’s easier to do that, as a digital player, it’s easier to do that as a digital-first player that has more scale that can invest in a lot of the things that cause delays. And so I think that future is inevitable. And I think that it’s at an exciting tipping point.
I just think that it takes a little longer because of the trust element and fintech and financial services. And so we’re on that journey, and we’re excited to be leading the way.
Isabelle – Yeah, no, I mean, you’re doing amazingly with what you’re doing. So if anyone’s going to tip the trustee, you guys are. The report was looking at it, and some of the focus is on there is a reliance on these kind of physical points because a lot is kind of dealt in cash. This is I’m just quoting the report. How do you think we can get around this kind of cash element using fintech?
Matt – Yeah, great point. Great question. Great point. So I think when we talk about cash, we talked about our business, it’s important to talk about the sender of the romance and the receiver. And what we’re talking about is digitizing first, the sender of that remittance, right, who used to go to like a physical cash location in like the US, Canada, a lot of countries across Europe, Australia, Singapore, you name it. That is the first I think that is at that tipping point that I mentioned. And that is our initial focus.
When it comes to, and that does take cost out of the system, all the peace of mind that I mentioned all those things, right? I think there were the report is accurate is, is I think it’s been a little while since I’ve read it. But I think that regardless of what the report says, I think on the receive side, it’s on a different adoption curve, not only then if you compare develop to developing markets, but it’s also on a different adoption curve. When it comes to the specific country we’re talking about, right. And I think oftentimes, it’s easier to sit in like Europe or the US and be like, you know, bucket the whole world together. But like, China, when it comes to Alipay, and WeChat wallets is as transformed China, you know, in terms of consumer financial services, in very different ways than what the Mexico or Dominican Republic or Philippine market is like.
What we have done well, I think, is meet customers where they’re at of saying it’s fine, we can send money to billions of bank accounts to hundreds of 1000s of cash pickup locations where that is still popular, we can send money to hundreds of millions of mobile wallets, we can even do door to door delivery in some countries, whether that’s popular is just a handful of countries. But that’s how we want to receive money in that country. And so we offer that, and I think that over time, I would expect it to shift, but I’d expect it to shift and have seen a shift on a country-by-country basis, as opposed to, like, some global phenomenon. And will be there for our customers as that transition occurs. And if they want to get money into like a digital disbursement option, that’s great, because that does also bring down the cost for us, which we can pass along to customers, because we’re not then paying that disbursement agent who’s going to distribute cash. And I think that the IMF report and our philosophy are very much aligned. It’s just got to be looked at on a country-by-country basis.
Isabelle – It’s a good point. What are the developing technologies you’re most excited about impacting the remittance market?
Matt – Yeah, I think it ties to that previous. You know, question, I think that there’s the digitization of financial services is happening, whether that’s crypto or blockchain. A lot of people talk more about that a couple of years ago. I think it does have a place. But if you look at digitization more broadly, that’s the trend that I’m excited about. If you look at it on a global basis, when I say digitization, when we started this business 12 years ago, like I’m looking with audio and video, but like, not everybody around the globe, or a small percentage, I should say around the globe actually had a smartphone.
We started the business in 2011. iPhones. First iPhone was invented in 2007, first iPhone 2007. And so now you look, you know, 1215 years later, two things, digitization, specifically smartphones around the globe. And people forget, again, when I was living in Kenya, I saw this affordable and reliable data accessed is something that also has been in the last like five or 10-year phenomenon. It hasn’t been around for 20 or 30 years. And so I think you’ve seen with digitization, and smartphone penetration and reliable data access a lot of industries that have, you know, already been transformed. And the trend I’m excited about is what it means for financial services over the next five or 10 years because, again, it takes that trust element. And so, the transition can be a little bit slower, but it feels inevitable that digitization and specifically smartphones and reliable access on a global scale, will help improve a lot of customers’ lives when it comes to financial services. And we’re excited about, you know, the role that will play in that, but that’s the trend I’m excited about.
Isabelle – Okay, cool. What’s your favorite quote?
Matt – Ah, favorite quote, You know what my grandmother, who was an amazing woman, and my dad interviewed before she passed away and put this into a book that, like, I think there’s like 20 copies in circulation, but the title of the book is called “It will all work out”, which my grandmother Jane Oppenheimer said and sounds like a basic quote, in some ways.
But you know, she had polio when she was in high school, at the time, they thought putting her in a full-body cast was the right thing to do. She served in the Red Cross in World War Two, she just had a lot of like, and she grew up Jewish and served in the world in the Red Cross in World War Two. So she just had these amazing, like, some beautiful, I’ve covered the like beautiful, amazing parts of her life and what she was a role model. When I think about her quote or law workout, I think about some of the challenges that she faced throughout her life. And it actually bucket my other grandmother. She has another amazing, amazing story. Her name was Ruth.
But it’ll all work out I think, has a different meaning. And I think that’s an important phrase for an entrepreneur because there are times where during the last 12 years where it’s like, against all odds, we figured it out, but it takes that faith and hope amongst challenges that we all face, whether it’s their entrepreneurial journey or whether it’s life challenges that we face. And I think having that faith or that phrase, “it’ll all work out” is something I come back to.
Isabelle – Well, I like that quote. I’m gonna take that quote. If you could, okay, your curveball question, right? The random one. If you could turn into another person for the day, who would you choose to be?
Matt – Wow, does it have to be somebody living?
Isabelle – Could be dead. I guess they could come back to life.
Matt – Well that opens up the opportunities to, like, hit the like, what period in time, I’d want to, at one point, go back to if I could be a person if I could be in something. It’s a great question.
Isabelle – You’re on the spot.
Matt – No, it’s great. I mean, at first, what comes to mind for me is famous folks. Because I think it would be fascinating to like, be like, you know, in the shoes of like a lot of famous folks going through my mind, but actually, if I think about authentically, what I’ve been drawn to, I’ve always been drawn to like difference and, and a different, dramatically different perspective on the world. Then what my day-to-day life is, and I won’t bore you with a bunch of stories that go range from Peru to you name it. But it would probably be to really understand the life in a different country in a different language in a different culture. What their lived experiences, because when I’ve done that, there’s been more similarities than differences. But there are also differences that are just fascinating to really like, understand, so I won’t pick a specific country and specific individual, but that is who I ultimately want to be in their shoes for a day to understand their life, their values, their family, from their eyes.
Isabelle – I wish I could go into that more that; that’s really interesting. I’d love to know more. But I can’t because it’s the end of the podcast. How can people get a hold of you?
Matt – You can email me. I get a lot of customer emails as well. At just [email protected]
Isabelle – Okay, cool. Thank you so much. You’ve been a wonderful guest
Matt – Amazing, thanks for having me as well.
Isabelle – So as always, you can reach out and chat with me on my personal LinkedIn or Twitter at @IZYCastrowrites. But for access to great daily content, check out Fintech Nexus on LinkedIn, Twitter, Facebook, or Instagram. You can also sign up for our daily newsletter, bringing news straight to your inbox.
For more Fintech podcast fun, check out the website podcast, where you can find more fascinating conversations hosted by Peter Renton and Todd Anderson.
That’s it from me. Until next time, enjoy your downtime.
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