UK-based online money transfer company, WorldRemit has agreed to acquire Sendwave, a remittance firm with a primary focus on Africa, for $500 million. According to WorldRemit, this is because of the rise in demand for digital banking owing to the global COVID-19 pandemic.
The deal will be closed in the Q4 2020 provided that the necessary licensing and regulatory approvals are obtained before then. Bloomberg reports that the value of the cash and stock is above $500 million while both companies combined will be valued at more than $1.5 billion.
The annual report for the last 12 months ended June 30 has seen both companies sending about $7.5 billion in transfers for their customers and generating a revenue of $280 million in the process. This represents a 50% year on year growth compared to previous revenues, according to the companies.
Sendwave’s operations focuses on transfers from Europe and North America into African countries including Nigeria, Ghana, Senegal and east African countries. It recently added Bangladesh to its list of receiving countries, marking its entry into Asia’s remittance market.
WorldRemit expanded its operations to Nigeria in 2019 with 1,800 cash pick-up locations for international money transfers. This was after a partnership with Paga in April of the same year to make its transfer service available in the country.
Sendwave was founded in 2011 and is backed by Y combinator, while WorldRemit was founded in 2010 and is backed by investors which include Accel, TCV and Leapfrog. Accel and TCV are early investors in Facebook Inc, and have backed other brands including AirBnB, Spotify and Expedia.
WorldRemit predicts permanent rise in digital banking
WordRemit projects that both companies combined will have more than 100 send licences including the ones for every US state. Its network of countries from where money can be sent will increase to over 50, while the countries where money can be sent to will correspondingly increase to more than 150.
The increasing rate at which people are engaging in digital banking and activating new accounts is one reason why WorldRemit is certain that the demands will continue to rise.
According to CEO, Breon Corcoran in an interview, “what we saw immediately after lockdown orders is a real acceleration toward digital. This is a fast-growing part of the broader payments space and, increasingly our businesses will be viewed as more akin to Venmo or Paypal.”
As the pandemic has driven a rise in digital banking, it has also resulted in a decrease in the amount being transferred as a result of pay cuts, job losses and other economic hardships which have come with the COVID-19.
The World Bank predicts that global remittances will see a general decline of about 20%. Remittance to low and middle-income countries will reduce to $445 billion in 2020 but increase to $470 billion next year, according to the organization.
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