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Azimo Q&A: ‘In Five Years There Won’t Be Any Western Union Agents’

Azimo Q&A: ‘In Five Years There Won’t Be Any Western Union Agents’

This is a post by regular contributor Roy Malkin with additional reporting by Lam Nguyen

Sending money overseas is big business, and it’s just the latest industry to grab the attention of startups looking to make it leaner, more efficient and cheaper for users. Azimo is one of those startups, and the UK-based company has set its sights on Germany. Some 11 million German migrants send home €16 billion Euros in remittance every year, but Germany has the highest fees for money transfer in all of Europe.

Azimo is taking on the giants of the industry like Western Union and MoneyGram in a market whch is worth an estimated €101 billion in Europe alone. It recently announced its expansion into Germany at rates which it claims will be 85 percent cheaper than the established players. Azimo alredy had a German connection in the form of seed funding from E.Ventures.

Silicon Allee sat down with Michael Kent, CEO and co-founder of Azimo, at the recent NOAH conference in London.

SILICON ALLEE: You say you are 85 percent cheaper than the likes of Western Union and MoneyGram – how are you able to achieve this?

MICHAEL KENT: If you think about the way these companies traditionally work, they have stores on every corner. They have master agents who manage the network of stores and companies in the middle. They’re making a lot of money. Western Union made a billion dollars in free cash flow last year. These are enormous businesses. We take out about half of that value chain. We don’t have any agents; we don’t have anyone to share commission with. We just go direct to the customer and we take out a lot of cost. Everything on our platform is automated from the compliance to the payout on the far end to the status updates to texts that we send to people so that they know where their money has gone. It’s a much more manual process in the offline world. We’re not telling people to do things they don’t already do. What we’re enabling them to do with Azimo is to do it cheaper, faster and easier.

SA: You started off in the UK; how important is the rest of Europe to you?

MK: We’ve been quite clear that Europe in aggregate is a big opportunity. We’re fully licensed to trade in Europe now. We’re a regulated business. We’re ready to go in the rest of Europe. We’re very focused on the European market and we think of Europe as very heterogeneous in terms of its migrant population. We don’t have an average customer – we service Turkish shop owners in Germany, Nigerian taxi drivers in London, Poles working in agriculture. There’s no one stereotype but they are all born outside of Europe and they are all here to make a better life for themselves. They are all taking a proportion of their earnings on a regular basis and sending that money back home. That’s the common trait.

SA: What makes the German remittance market in particular so attractive?

MK: Some 11 million people in Germany, more than 14 percent of the population, were born outside the country. These German migrants send €15 billion home as consumer remittance payments. The average payment is about €500. So it’s a huge population. If you think about where these people are coming from, they come from all over – everyone knows about Turkish migrants but there are big Vietnamese, Serbian, Croatian and Albanians populations too. There are also lots of Ghanians in certain parts of Germany. We’ve got very good demographics from my previous companies. The average price in Germany is between 10 and 11 percent for remittance compared to the average price across Europe which is just about 7 percent. People in Germany are overpaying and they are overpaying for two reasons. One is that the market has traditionally been highly uncompetitive with Western Union, MoneyGram and a couple of other guys basking in it. They have managed to achieve a temporary monopoly. With our license, we can go into that market and tear it apart.

SA: Do most of your customers not have bank accounts?

MK: That’s the wrong assumption. In the US, about 8 percent of the population are banked. In Europe, that figure is over 98 percent. It’s a misconception that we’re trying to address. Just because you’re a recently arrived migrant doesn’t mean you don’t have a bank account.

SA: As you build your customer base, what added services are you planning to introduce beyond basic money transfer?

MK: It’s got to be customer driven. We don’t want to push stuff on people that they don’t actually want. If they’re sending money every month and we know they have a good credit score, we may be able to lend them money. That’s traditionally quite a hard thing to get if you’re a recently arrived migrant. If I know that you’re sending money regularly then I know you’re probably a reasonable credit risk. So we do have some good information on our customers to think about expanding our financial services to them.

SA: How do you run your business?

MK: We have two mantras: The first is think to scale. That’s about building a business that can do 100 to 1,000 times the volume that we do at the moment because that’s the size of the market. The secondmantra is to keep the cost low for our customers. This is not a difficult thing to do if you fully automate it. I’m not about building a 150 to 200 person business. This will always be a technology-heavy company. We’ll invest in the automation side of things.

SA: What sort of insight do you have personally into this industry?

MK: This is my second time around in money transfer. I set up something Small World Financial Services which was a buy and build in the offline money transfer world. I built that company up from inception into a $4.5 billion turnover company. It’s still Europe’s largest independent money transfer company. So I kind of know the market but I had a digital epiphany a couple of years ago. I was waiting for a plane in Madrid and I watched people come off a plane from Chile, one of the big migrant markets in Spain. Every single person turned on a smart phone the moment they walked off the plane. I was thinking to myself, this market is going to be totally disrupted by digital and it’s going to happen very fast. So we think of those money transfer agents, those Western Union agents, in the same way that people think about travel agents 15 years ago. You couldn’t imagine a world without them but in five years time, there won’t be any Western Union agents. They’ll go the same way.

About Silicon Allee

Silicon Allee
Silicon Allee is an independent English-language news website which has been covering the startup scene in Berlin and across Germany since June 2011. It is foremost international news source for the exploding startup scene in the German capital.

2 comments

  1. So I checked the Azimo website as I recently had to transfer a very modest USD 92 to China and ended up going with Western Union, which I wasn’t fully comfortable doing given Western Union’s reputation. But where Western Union charged EUR 4.90 and offers pickup in cash from any of their stations, Azimo calls up a fee of EUR 15 for the same amount transferred to a bank account – it may be revolutionary for some scenarios like recurring transfers to relatives, but I sure see Western Union staying around for a while.

  2. Looking at duedil small world financial lost millions evey year since inception, not a great starting point. Remember turnover is vanity, profit is sanity.

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