Remittances are a key source of income for many emerging consumers, and often make up a significant component of GDP for developing countries. UN Secretary-General António Guterres described them as a “lifeline of the developing world”³.

In 2021, global remittances in the formal market totalled $589bn, representing 7.3% year-on-year growth⁴. The informal market may be similarly large. Despite the size of the market, the P2P cross-border payments market remains predominantly offline and is characterised by high transaction costs and poor customer experience, especially in emerging markets.

The global average cost for sending remittances is 6.3%, more than double the target of 3% set by the UN’s Sustainable Development Goal 10⁵. In Sub-Saharan Africa that cost is substantially higher at above 8%, due in part to low penetration of formal digital remittance providers and use of black-market money exchangers⁶.

These high transaction costs have significant impacts on low-income households. Around 75% of remittance flows are used to meet the immediate needs of emerging consumers, such as food, healthcare and education⁷. Inefficiency in the remittances sector also reduces overall GDP and government revenue in emerging markets. Remittance flows to low and middle income countries are a key contributor to economic growth, and are projected to surpass the sum of foreign direct investment and overseas development assistance in 2022⁸. In Somalia, the home country of Zepz founder and chairman Ismail Ahmed, remittances account for 35% of the economy9, and help finance the country’s substantial trade deficit, as well as underpinning tax revenue and stabilising the local currency¹⁰.

As the first financial product used by many lower income people, remittances often act as a stepping stone to further financial inclusion, from bank accounts to savings and loan products.

Zepz has revolutionised P2P cross-border payments, an estimated $1 trillion market opportunity, by leveraging the increasing uptake of mobile phones to provide digital solutions for global customers.

Somali migrant Ismail Ahmed founded WorldRemit, now known as Zepz, in 2010 after recognising the need for affordable money transfers between countries. LeapFrog identified the potential of Zepz in 2017, leading a $40m investment round alongside existing investors Accel and TCV.

Zepz services over 5,000 transfer routes, including in many previously underserved emerging markets and a faster and flexible user experience at fairer prices. 85% of transactions are settled in minutes. Senders are given the option to send money into bank accounts, cash pick-up points, or into mobile wallets for cash-out and airtime top-ups.

Compared to cash remittance services, the cost of digital remittance is significantly lower in both fees and FX margins¹¹. Identification and registration of customers is simplified through an online verification process backed by card payment infrastructure, removing a key pain point for the receiving low-income consumers who often have little documentation.

Zepz has built an expansive agent network to connect with recipients of funds no matter where they are located, reducing distance to access points and cost issues to allow for a high number of low-value or low-fee transactions. The company has also partnered with mobile money providers such as Africa’s MTN to improve convenience for customers.

The benefits of remittances flow further into financial inclusion for emerging consumers, with transaction records from transfers creating documentation that can be leveraged to assess creditworthiness for credit products¹². Remittance-receiving households have also been shown to have a relative higher propensity to save than non-receiving households – and higher amounts of savings in absolute value.

Further, studies show those receiving remittances are twice as likely to engage with financial institutions than those without¹³.

Since investment, Zepz has grown substantially into a key player in the high-growth crossborder payments market.

LeapFrog has supported the company to expand its footprint rapidly through inorganic growth, assisting with the $500m acquisition of app-based remittance company Sendwave to expand emerging consumer reach to over 150 countries in Africa and Asia.

LeapFrog has made several introductions to mobile money operators and cash-out partners in high priority markets. The company now has 300+ cash-out partnerships with reputable institutions with trained agents and local support to assist the 100% of receiving customers who live in emerging markets. On average, recipients are supporting a household of five with the money received and 45% of customers are women.

Zepz and LeapFrog have worked together to improve affordability by reducing the average transfer rate to 2-3%, versus a global average of 6.3% and much higher still in Zepz’s key corridors of Africa and Asia. Over the course of the investment, annual transactions per customer have increased from 5.9 transactions in 2017 to 10.3 transactions in 2021, a clear indicator of customer value.