Editorial: A closer look at Instarem

The money remittance service recently secured $5m in a series A round backed by two Temasek investment vehicles as it sets its sights on Europe.

Instarem, a Singapore-based money transfer service, attracted $5m in series A capital last week from a consortium of investors led by Vertex Ventures, a venture capital subsidiary of Singapore’s sovereign wealth fund Temasek.

The round also featured another Temasek vehicle, investment fund Fullerton Financial Holdings, and Global Founders Capital, the venture capital affiliate of e-commerce group Rocket Internet.

Instarem operates a platform for users to send money abroad, offering lower transaction fees and better foreign exchange rates than traditional banks. The company currently targets the Australian, Canadian and Hong Kong markets, though it hopes to be licensed in Singapore, Malaysia, Japan and Luxembourg in the near future.

Obviously being the odd one out, the goal to gain regulatory clearance in Luxembourg demonstrates Instarem’s ambition to take on the western market, one over which a similar service currently holds a significant grip – UK-based TransferWise.

Instarem partners mid-size banks that already trade in foreign currencies and piggybacks payments of its users with larger sums transferred by the partner bank, enabling the company to offer fees typically less than 1% of the sending amount.

TransferWise on the other hand channels the money through accounts set up across the countries where it operates. That means the money might take a bit longer than if a user chose Instarem, but TransferWise has several other advantages it can claim, first and foremost the service is already available in 59 countries and covers 504 currency routes – up from 292 routes in January 2015.

TransferWise itself may be fighting behemoths like payments processing service PayPal, but the company is throwing around some impressive numbers. In fact, it claims to be processing more than £500m ($720m) a month and was developed by former PayPal and Skype engineers.

The company is also well equipped financially to defend its market position. Most recently, in January 2015, TransferWise raised $58m for a series C round led by Andreessen Horowitz that featured Valar Ventures, Index Ventures, IA Ventures, Seedcamp and angel investor Richard Branson, founder of diversified conglomerate Virgin. Its war chest currently stands at $91m – more than 18 times the disclosed firing power of Instarem.

TransferWise’s shareholders do not include any government or corporate investors so far. It is unlikely a public investor would invest at this stage and their absence in the early days may have been caused by an aversion to fintech startups – the company was launched, after all, in 2011, only a few years after the financial crisis had western governments pouring billions of taxpayer money into failed financial services firms.

Government support gives Instarem a competitive edge, even in Europe where Temasek has been increasingly active and may be able to offer the company access to an influential network to accelerate its growth. With the EU currently numbering 28 member states, entering that market would boost Instarem’s availability a lot closer to that of TransferWise.

Instarem is also taking on another segment of the market that is often overlooked by Europe-based businesses for the simple fact it aims at people without bank accounts, less of an issue in western economies. The company plans to target these consumers in countries across southern Asia in the near future.

Instarem may be taking on a big player, but it would not be the first time an underdog ultimately comes out on top. In any case, the game has just become a lot more interesting.

See more from this Government Report: Singapore


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