Inside LemFi’s play to be fintech to the Global South diaspora

African technology The ecosystem, shaken by enormous potential but also by numerous economic, political and social instabilities, is no stranger to major tragedies that strike even its most promising startups. But recently, LemFi, the Nigeria-based fintech that provides money transfer services to African migrants, has emerged as an example of rebound and growth. After being shut down by Ghanaian regulators in November due to what was described as “illegal” activities, LemFi is back in the country and is now preparing for a big expansion in Asia.

These events highlight the company’s growing influence in the African remittance market, fueled by a $33 million Series A funding round and the launch of services in the US corridor, both announced last August.

Backed by Left Lane Capital and Y Combinator (where it was part of the Summer 21 cohort under the name Lemonade Finance), LemFi initially targeted Nigerian migrants in Canada, offering multi-currency accounts that allowed them to send money. money with them. country.

LemFi later expanded to serve other African diaspora communities in the country before entering the UK market in 2021 by acquiring RightCard for $2.5 million. By the end of 2023, immigrants from these three countries could send money to 10 African destinations, including Nigeria, Kenya, Ghana, Senegal, Ivory Coast, Benin Republic, Cameroon, Tanzania, Rwanda and Uganda.

From serving immigrants from Africa to Asia

In a further expansion last month, the money transfer service expanded its options and customer base to include migrants from Asian countries residing in the US, UK and Canada.

“Since founding the company three years ago, we have realized that remittances in many regions are more similar than we think,” said Ridwan Olalere, co-founder and CEO of LemFi, to TechCrunch in an interview. “The issues that Africans face in terms of difficulties in sending money and compliance issues are very similar to those that people in different emerging markets also face. »

Although developing economies do what their name suggests – grow – remittances remain an important cornerstone of how residents of these countries survive financially. Global remittances exceeded $669 billion in 2023, according to a World Bank study, and many low- and middle-income countries rely heavily on these funds to fill their budget deficits. For some countries, these flows continue to represent a significant share of their gross domestic product (GDP).

Despite concerns about declining migrant incomes due to global economic challenges, remittances to their countries of origin, particularly in Africa and Asia, are expected to continue to increase. According to the World Bank, remittances to these regions increased by 3.8% last year.

All of this has long been a prime opportunity for new fintech players. Navigating unfamiliar banking systems in their new countries, dealing with the complexity, costs and unreliability of sending money home using traditional options like incumbent banks, Moneygram and informal operators, are common challenges for immigrants. This has created an opportunity for more modern remittance startups, which have gained traction by offering better fees and more convenient sending options, leveraging mobile phone technology and other innovations .

LemFi said that since its inception, it has acquired more than 1 million customers. But its more recent expansion into the United States, the world’s largest source of remittances, allows it to attract many more customers and revenue. And its expansion into serving Asian communities will likely be the other main factor: while Nigeria, one of LemFi’s main “receiving” markets, is among the top 10 recipient countries in the world, India and China receive two to five times more remittances. (India received $125 billion in remittances in 2023, while Nigeria received only $20 billion.)

Hiring to manage product localization

This data has clearly influenced LemFi’s expansion strategy in Asia, which will initially focus on transfers from the United States to India, China and Pakistan. It will also open the door to other challenges, the founders say.

“The most challenging aspect for a money transfer company is not only adding new corridors, but also managing compliance and fraud. Once resolved, especially on the sending side, expansion into multiple regions on the receiving side becomes feasible,” explained Olalere, who co-founded the company with Rian Cochran. Both founders were former colleagues at China-backed African fintech unicorn OPay.

Olalere notes that while it is crucial to address compliance issues on the sending side (US, UK and Canada), it is equally important not to neglect compliance challenges on the receiving side. These questions revolve around different countries’ regulatory requirements for inbound remittances, often requiring specific licenses and local partnerships.

To expand its money transfer services in India, LemFi has tapped the expertise of Philip Daniel, former director of TerraPay, one of the world’s best-known remittance infrastructure companies. Additionally, Daiyaan Alam, who previously led partnerships at Delivery Hero’s Pakistan subsidiary Foodpanda, is leading LemFi’s expansion efforts in Pakistan and South Asia. They join Allen Qu, former COO of China-backed African fintech OPay, who is leading the growth of fintech within the Chinese diaspora.

LemFi will rely on its regional hires and local expertise to attract users as it enters the Asian diaspora market, competing with established players like Zepz, Wise, Remitly and Sendwave. The executives, in a conversation with TechCrunch, affirmed that LemFi nevertheless had a good chance of capturing a significant market share. Not only do they believe LemFi better understands local customers and their preferences, but the addressable market as a whole remains largely untouched by any of them: many immigrants still turn to incumbent banks and private agents to send money. ‘money.

Still a long way to go

In addition to setting up dedicated teams in each Asian market, LemFi, with over 250 employees in over 10 countries, has localized its apps and website in different languages, including Chinese, Hindi and Urdu . Similarly, LemFi has opened new corridors in parts of Europe so that its migrant users in the US, UK and Canada can send money to family and friends who are in France , in Belgium, Spain, the Netherlands, Italy and Belgium. “We are set to make a second acquisition in the region soon, which will enable us to expand further and bring us operational efficiencies,” Olalere remarked.

LemFi users can now transfer money to more than 20 countries, although its reach is still lower than some competitors whose users have access to more than 80 countries. Nonetheless, LemFi has made significant progress in providing its services to sub-Saharan Africans in the diaspora. Last year, LemFi, which makes money through transaction fees and exchange spreads, recorded an annual trading volume of more than $2 billion. Olalere also claims that the startup is profitable and that 60% of its users are active monthly.

“The markets we serve will continue to need millions of immigrants every year, which is why we want to be one of the first products introduced to the African, Indian, Chinese or Pakistani communities,” remarked Daniel, head of the company’s global expansion. “There are still many growth opportunities for us. »