Remittances have increasingly become a vital source of income for many emerging economies. As per the data from World Bank, these inflows crossed the $669 billion mark in 2023, thereby becoming a significant segment of GDP in such countries. In some instances, remittances have even surpassed foreign direct investment as the primary source of foreign exchange.
The conventional banking sector and its agents continue to dominate the remittance market, holding more than 60% of the market regardless of the stiff competition from tech-based newcomers. Some of these tech challengers, such as Remitly, have made their public debut, while others like Zepz and Taptap Send are still privately held, each contending for the remaining market share.
One of the new entrants is LemFi, a London-based financial services platform designed for immigrants. It has recently secured $53 million in funding, which it plans to use to increase its customer base and expand into additional countries.
Since its inception in 2020, LemFi has experienced exponential growth by assisting diaspora communities in North America and more recently in Europe, to remit money to emerging markets in Africa, Asia, and Latin America. The fintech startup, just four years old, has over a million active users who utilize its multi-currency accounts to send money back home to countries like Nigeria, Kenya, India, China, Pakistan, and 15 others.
Just last week, LemFi expanded its services to Europe by partnering with the embedded finance provider, Modulr. This alliance will help LemFi commence operations until it obtains its license next month after acquiring a Republic of Ireland-based firm. This development allows LemFi, which earns its revenue from transaction fees and foreign exchange spreads, to operate in 27 send-from markets and 20 send-to countries.
The company has achieved growth through robust fraud detection mechanisms. A recent study suggests that individuals sending money abroad are almost four times more prone to financial fraud than those who don’t.
In an interview with TechCrunch, LemFi co-founder and CEO, Ridwan Olalere, pointed out that fraud could significantly increase costs, which are often passed on to customers through additional fees. However, LemFi has managed to keep its fraud rate extremely low, enabling it to offer customers the best possible prices.
Moreover, Olalere shared that the company had seen a twofold increase in users, revenue, and transactions over the past two years, which played a role in attracting investor interest and confidence. This growth momentum led to a Series B funding round led by Highland Europe, a London-based growth-stage investment firm that supports startups with more than €10 million in annualized revenues.
The funding round, which, according to Olalere, was completed in just four months, also saw participation from existing investors Endeavor Catalyst, Left Lane Capital, Palm Drive Capital, and Y Combinator, taking LemFi’s total funding to $85 million.
LemFi intends to utilize these funds to broaden its services, increase its payment network licenses and partnerships for a more localized service, and recruit talent for its next phase of growth. The firm currently employs more than 300 people across Europe, North America, Africa, and Asia.
Olalere, who founded LemFi with CFO Rian Cochran, noted that despite the complex regulations across different markets, scaling has become easier for them due to their adaptable technology which can easily be integrated with different payment methods and schemes.
