Azimo is similar to TransferWise and WorldRemit, but focusses on an often overlooked demographic: migrants with very low incomes
Five years ago at the G20 Summit, Microsoft co-founder and philanthropist Bill Gates made a rallying call to reduce the transaction costs associated with sending money across borders. “We must continue lowering the transaction costs of remittances, so that this growing pool of money has as big an impact as possible on the poorest,” he said.
These words inspired Michael Kent and Marta Krupinska to found Azimo, a London-based fintech startup that provides a cheap and simple way for people to send money abroad via a website or app. At the time, remittance fees charged by banksand bricks-and-mortar services such as Western Union averaged at around ten per cent. By contrast, Azimo’s transfer fees start at £1.
“Our aim is to offer lower cost, better quality remittances. We want to streamline the process as much as possible, so you can send money on your phone and carry on with your life rather than having to go into a physical shop,” explains Marta Krupinska, a Polish expat and the co-founder of Azimo.
Azimo is similar to TransferWise and WorldRemit, but focusses on an often overlooked demographic: migrants who may earn less than the average income and who regularly send a portion of that income back home to family — typically in Africa, Latin America, Asia or Eastern Europe.
Krupinska, who is speaking at WIRED Money 2016 on June 23, sees remittances as a powerful but under-appreciated flow of money from richer countries to poorer ones. According to the World Bank, a total of $432 billion in remittances were sent to developing countries in 2015, up from a total of $582 billion in 2015. Foreign aid during that time period totalled $131.6 billion. “Total remittances account for three times the size of total development aid globally. It’s quite instrumental for the communities to thrive and countries to grow and develop,” she says.
Krupinska says she frequently comes up against the misconception that economic migrants from poorer countries are not tech savvy. “All these guys will have a smartphone with a big screen. They’ll be communicating with people at home using Facebook, WhatsApp, Viber and Skype. This is how migrants communicate with each other,” she says.
It makes sense, therefore, to offer remittances on smartphonesand even directly within messaging apps. Azimo has already integrated its transfer capabilities into Facebook Messenger and is working to do something similar with Viber following a round of investment from the messaging app’s parent company, Rakuten. “It’s a no brainer,” explains Krupinska. “It’s about making it as easy as possible, so the user doesn’t have to switch between apps.”
Despite the emergence of remittance startups, 90 per cent of transactions are still carried out offline through providers like Western Union. Why? It comes down to inertia, awareness and trust. “The whole family may be throwing money together so that one person can make it to the western world. They are working a 60-hour week in a shared flat and making barely enough to pay rent and send money home,” explains Krupinska.
“When you know your whole family is relying on the money, you become much more cautious. People who use Western Union know it will screw them over in the deal but they trust it to deliver the money,” she adds.
But things are changing. Slowly. A combination of cheaper rates offered by startups and a response from the incumbents to drop their own rates means the average transaction cost has fallen from around ten per cent when Gates spoke at G20 to around 7.5 per cent today. The Bill and Melinda Gates Foundation estimates that a drop from ten per cent to five per cent would unlock an additional $15 billion in the developing world.
Krupinska says Azimo now has more than half a million people on the platform, with mobile transactions – which make up half of its remittances – increasing by 300 per cent in 2015. Raising awareness of the product remains tough, particularly since Azimo is trying to reach an extremely diverse group of people.
“We have Poles in the UK, Filipinos in Italy, Romanians in Germany. They all care about their family back home and want to send money,” says Krupinska. “Getting to those communities is challenging.”
Nevertheless, a combination of word of mouth and media exposure is helping to build the brand. Meanwhile the rise in the number of migrants globally from 232 million in 2014 to 244 million in 2015 is creating a larger target market. “Remittance increases with migration. Hopefully migrants are becoming a little bit more affluent, with better access to education, and more opportunities – not just low paid, low scale jobs.”