Fintech: Azimo aims to win in remittances

By:
Peter Lee
Published on:

Money transfers to emerging markets is a huge business. By taking the process digital, the UK fintech start-up aims to slash the cost of remittances.

In few areas of financial technology is the battle between new disruptors and the incumbents more antagonistic than in money transfers. Anyone travelling on the London Underground will have seen the large posters from TransferWise lambasting the banks for huge hidden charges to customers sending money abroad while promising to do for 0.5% what the banks charge 5% for and encouraging customers to outsmart their banks.


Azimo has drawn less attention but is every bit as much a disruptor. While TransferWise enables customers to transfer money peer to peer, mainly between the developed markets of Europe, UK and the US, Azimo serves the vast $50 billion market for remittances from migrant workers in the UK and Europe sending money back to their families in Asia, Africa, Latin America and eastern Europe.

Michael-Kent0160
  To me, our customers are heroes. These are the people who’ve got off their arses to build a better life for themselves. When someone charges them 10% to transfer their money… well, technology must and will improve that

Michael Kent, Azimo

"We are building relationships with multiple banks, and they are very much part of the pipes in our network. Where we compete is against Western Union and to an extent MoneyGram: traditional businesses built for the high street from the days when people used to come in and talk to a travel agent," says Michael Kent, founder and chief executive of Azimo. "They typically charge 8% to 10%, most of which goes to the agent and the money transfer firm rather than actually paying for the transfer."

He adds: "There’s an argument that those charges start to look like super-normal profits. By contrast, with no high-street costs and better online technology we’ll charge just 1% on a transfer of £500 from the UK to say Nigeria."

He cites that number because the typical pattern for an Azimo user is to send about £500 maybe eight or 10 times a year from the developed to the developing world. Most of Azimo’s payments flow from the UK and western Europe to the Philippines, Poland, Nigeria, Turkey and countries where there is limited banking infrastructure at the far end and where most final recipients don’t have bank accounts.

Azimo has had to build two networks, one linking to physical locations, which could be post offices or banks in developing countries where recipients can come, present themselves with identification and pick up cash. The second is with paying customers in developed markets and this requires customer liaison, language skills and the ability to take payments in multiple formats. Kent can get quite passionate about his customers.

"To me, our customers are heroes. These are the people who’ve got off their arses to build a better life for themselves and support their families back home. They’re often living 10 people to an apartment, doing menial jobs – delivery drivers, cleaners – sometimes three, four or five jobs to get by. To me, they’re the brightest and the best, so when someone charges them 10% to transfer their money… well, technology must and will improve that.

"We’re quite mission driven," he adds, just in case Euromoney hasn't picked that up.

It’s not surprising. Most of the senior management of Azimo originate from or have lived and worked in countries outside the UK, several coming from Poland and Brazil, and have felt the high cost of remitting money home from the sharp end.

Kent says: "We want to build a true leader in digital money transfer in Europe. It’s a large and disparate market with a heterogeneous mix of migrants. A lack of competition means that costs are super high. And yes, we’ll certainly be raising more capital as we continue to scale."

Marketing

Kent has learned a lot about media and advertising in seeking to win customers among migrant workers and spread the word about Azimo’s customer service and low costs. "We run events in local communities, advertise across ethnic TV channels and radio; radio is brilliant. When your customers are doing jobs like delivery drivers and cleaners, they can’t be glued to a screen when they’re working but they’ll often be listening to radio. And then there’s Facebook. Facebook is where diasporas hang out. And we’re looking to use it because it’s a centre for remitters and recipients of cash to discuss those payments."

Mention of Facebook leads to discussion of the eventual exit for Azimo’s backers and where a digital remittance network might one day fit in the global financial architecture between the incumbent banks and other newcomers. Rumour has it that Azimo turned down an approach from Facebook last year.