Building a Money Transfer Business That’s Both Profitable and Sustainable Proves Rewarding

Interview with Jeremy De Smet, Chief Executive Officer, Moneytrans

Jeremy De Smet, Chief Executive Officer, Moneytrans

Europe-based money transfer company Moneytrans has zigged while the industry has zagged, and Chief Executive Officer Jeremy De Smet couldn’t be more pleased about it.

While fintech companies have garnered much media attention for their digitising of the front end user experience, the reality is that the back end hasn’t changed at all, Jeremy says. And in fact, many fintech companies often rely on legacy players on the back end to deliver funds to recipients, he says, citing the partnership between Remitly and Ria as an example.

One of the businesses with legacy systems is Moneytrans, the company that Jeremy joined in 2005, some 18 months after its launch. Jeremy had been working for an American bank in Brussels “dealing with a lot of boring stuff,” he laughs. Then he met the founder of Moneytrans, Francisco Sánchez-Apellaniz. Francisco had been in the Forex industry and, with the rise of the eurozone, business was slowing down. He needed to find an alternative, and had begun offering money transfer as a complement to his currency exchange business. Jeremy had a legal background, something that Francisco recognised as key to succeeding in what was quickly becoming a complex regulatory environment. Jeremy joined the company, and from there, a professional relationship and great friendship was born between him and Francisco.

Between 2005 and 2010, the two fellows began expanding the company’s reach across Europe. From Brussels, Moneytrans moved into the Netherlands, Italy, Spain, Romania, the U.K., France and D.R. Congo. The company’s largest corridors today are Europe to Morocco, Romania and Congo.

In 2011, Moneytrans obtained its PSD licence, meaning it no longer needed to maintain multiple licences with the complexities which that brings.

The company kept growing organically, says Jeremy, “using our own financial means.” Jeremy emphasises that Moneytrans has never had a venture capital or other financial backer, and that it grew using only its own revenues.

“That makes us very special in this industry because, when I look at the big players in the industry, everyone is VC-backed or publicly owned,” Jeremy says. “All new fintech players have massive venture capital funds behind them. We grew with the money we could generate from the activity. It’s nearly a miracle considering the fierce competition.”

Jeremy credits the company’s combination of price and quality for its success, adding that big players like Western Union and Ria do well as they keep serving their clients, while new digital players grow because of the very cheap fee schedule they offer to clients.

“We are profitable with a big customer base,” Jeremy says. “You can now find other services for a cheaper price; it’s the quality and proximity of the service that matters to our customers. We do have a long record of offering quality at an affordable price and this is why people trust us.”

Pure digital players have yet to fulfill the high hopes that people had for them, according to Jeremy. “Five years ago when I was attending conferences with other fintech companies, many were saying the old model would be replaced with technology by 2020,” he says. “Five years later, this has not happened. Online has taken market share, but it’s still limited with less than 15% of the global remittance market size and Europe is far behind.”

“The digital players greatly contributed to improve the user experience for those looking for a digital process,” Jeremy says, adding, “But when McDonald’s decided to offer a drive-through experience, you eat the same burger. Nothing is different in the back office, the only thing that changes is the front end experience.” Today, in addition to his hybrid offering both offline and online, Moneytrans is making its longstanding distribution network available to many fintechs. “Pure players have no time and they must grow as fast as they can so they need to focus on user experience and client acquisition on send side,” Jeremy notes.

Looking ahead, Jeremy finds much to be excited about. In Europe, the market continues to see changes in the form of tightening regulations. Continuing additions to AML (anti-money laundering) and KYC (know your customer) regulations make compliance a more and more significant part of the business. As a result of regulation and compliance demands, Jeremy believes the market will continue to consolidate and small- and medium-sized players will disappear.

“It’s a trend that will never reverse and will be stricter every year,” according to Jeremy. “The biggest challenge in Europe, be it retail or digital, is the regulation. The biggest obstacle to success is being compliant with the legal requirements that are more complex every year.”

Moneytrans has a significant portion, more than 15 percent of its back office employees working in compliance, an investment that he says will continue to grow.

“Everyone will have to invest massively in compliance,” he says. “And you will have to internalise that function. Yes, technology and automation will help with screening. But to have people who are trained and also to ensure that everyone in the value chain in your company is aware of compliance, you need an in-house team.”

Jeremy feels that another crucial component to future success will be maintaining close relationships with banking partners. “We need banks to make it happen, or we cannot settle with correspondents around the world. There is a reluctance in the banking industry when it comes to MTOs, especially when you handle cash. And, there are small niche players who were not complying. Because of the trend toward de-risking, we need to fight to keep our bank relationships. Bank de-risking led directly to the rise of the fintechs.”

The second challenge that Jeremy sees ahead is that Moneytrans’ competitors are “extremely funded”. “Our competitors are big incumbents with deep pockets or fintech players who do not look for profitability. They look for customer growth and acquisition and offer aggressive pricing.”

Jeremy says he was concerned a few years ago when giant investments were being made in new digital initiatives, as he knew Moneytrans could not win a price war. But what happened was that the digital uptake was way lower than announced and a lot of small retail players disappeared owing to the regulatory wave, so Moneytrans was able to pick up that market share.

“Digital players could not take the in-person market and we naturally grew,” he says. “Now we have massive growth. Our growth used to be 7-10 percent year-on-year and now we are experiencing 20 percent organic growth.”

Jeremy is very excited about the prospect of launching more value-added s