Remitly Global, Inc. (RELY) Earnings Call Transcript & Summary

All right, everyone. We are going to get started. I'm going to get a quick disclosure out of the way first. So we are required to make certain disclosures and public appearances about Goldman Sachs' relationship with companies that we discuss. The disclosures relate to investment banking relationships, compensation received or 1% or more ownership. We're prepared to read allow these disclosures upon request for any issuer. However, they are available to you as clients in our most recent reports and on our firm portal. So with that, I'm Will Nance. I cover payments and fintech here at Goldman Sachs. We are very excited here to have Remitly Co-Founder and CEO, Matt Oppenheimer as well as CFO, Vikas Mehta. There has been a lot going on in the cross-border space. And in the last few months, it's been dubbed stable coins summer. The investor interest and how stable coins could reshape various parts of the financial ecosystem has been very elevated, but Remitly has also been very busy this summer and had a number of product announcements on their most recent earnings call, shares reacted pretty favorably. We want to spend a little bit of time today digging deeper into both of those things. And so we're going to spend a little bit of time talking about some of the new products and some of the recent developments from the Remitly earnings call. and then we're going to dive deeper into the topic of stable coins and how they impact the remittance and cross-border industry at large. So let's start off with a couple of the product innovations. Matt, Vikas, thanks for being here. Really appreciate you guys taking the time to do this.

Thanks, Will. Yes, great to be here. Really excited about the conversation.

So you guys had, I think, one of the biggest product unveilings that I can recall since the IPO, Matt, I think you kind of deemed a bit of an inflection point in the trajectory of the company in terms of the amount of products you're rolling out soon. There's an upcoming product demo where we will hear more. But maybe just high level, can you level set for what are some of the recent developments on the product side that you guys were excited to share with us on the earnings call?

Yes. Thanks, Will. Definitely an inflection point, defining quarter for Remitly, and we were excited to talk about not only how we're extending the platform that we've built to serve new types of customers. So Remitly business we've talked about in the past, but continued trajectory there. high-dollar senders we've talked about and then also adding new products to our existing customers in terms of Remitly One, which is the membership product that we'll talk more about at Remitly reimagine in September. . And within that, things like Remitly Flex, which is our [indiscernible] now Pay Later solution as well as the Remitly Wallet, which will obviously connect to the stablecoin conversation that we'll talk about. But all of that is in service of the vision that we have, which is transform lives with trusted financial services that transcend borders, and more than happy to go into more depth on any of those areas you want to talk about.

Great. So there's a lot there. Let's -- you started on Remitly business, so maybe that's a good place to start. You guys have mostly focused on the consumer side of the cross-border since the company's founding. You've been talking the last couple of quarters about enhancements to the KYC process and some changes that you've made to be able to accommodate micro businesses on the platform. Can you talk a little bit more about those product enhancements and maybe what it's taken to kind of broaden out the aperture of the platform?

Yes. Well, Remitly business that's interesting was born from the fact that we had a lot of customers who were small businesses that were coming to our platform and trying to use it. And that was a signal to us that, one, we have the platform that's really unique and special in terms of speed, reliability, affordability but also extensible and serving an unmet need of customers that just historically have not been served. And so what we found is that, to your point about some of the product improvements that we've made, the primary thing we did out of the gate was just we changed the KYC from -- know your customer to know your business and having an automated KYB flow. But then we've started adding things like real-time watch list screenings, industry-specific attestation flows, expanding the types of businesses that we can serve. And we're in the process of rolling out some high-impact features that we've heard from our customers around bulk and recurring payments, transaction labeling, streamlined reconciliation tools. But the growth of it has been very exciting. And when you take a step back, we've talked about our total addressable market in terms of volume being $2 trillion. This expands at 10x to $22 trillion total. And as we often say Remitly, it feels like we're very much just getting started. And I see that in the overall growth of the Remitly business volume user base, as we talked about, those users also have a much higher lifetime value. But I also see it in customer stories. And so if you look at examples like a customer named Tony that we were talking about internally who's based in the U.S. runs a small business that manages short-term rentals in the Dominican Republic. And he actually heard about Remitly from one of his contractors who manage the repairs for some of his properties. And before Remitly was doing wire transfers and other expensive slow options. And now he's a Remitly business customer, and he relies on Remitly business to send money to his overseas contractors out there, big opportunity for us uniquely to serve them.

Yes. And I guess what else can you tell us about some of those customer profiles. I think the people in the U.S., it's a very large market and very domestic centric. I don't think -- there's not always a great understanding or an intuitive understanding for what these businesses what these cross-border needs look like. So anything that's really surprised you or the types of businesses that you thought I didn't know that was a thing, and now they are, and now we're helping them.

Yes. I would say, the biggest area, and this is why we started by calling up micro businesses, although we've expanded to Remitly business, given that I think over time, there's a wide range of businesses that we can serve. But if you think of what we can uniquely do out of the gate, it's that small business that maybe has 5 or 10 contractors, the freelancer space is very large in terms of freelancers needing to get paid from folks that they're working for in the U.S. or Europe or you name it. . And you've got 5 or 10 employees. You don't need a lot of bells and whistles. You need an affordable which -- given our unit economics and how we've optimized that for a low dollar tender, we can do uniquely well. You need a fast service which again, customer sending $250 in our kind of bread and butter out of the gate, they have to have a fast service because it's emergency medical expenses, it's paying for things like basic living expenses, et cetera. So the micro business needs that they have like freelancers or like Tony's example, paying contractors, we uniquely do incredibly well. And so I would see us starting in that micro business segment and then continuing to both move upmarket and continuing to add new geographies. So we're in the U.S. now, but you'll hear more from us soon in terms of how we're rolling out that capability to other geographies where we already have the licensing and infrastructure.

That's great. Maybe that's a good segue to the high-value centers. This is something you've been talking about for a bit, I think starting as long ago, it was about a year ago, you started talking about Remitly for seafarers, which I think you mentioned is also a very high dollar amount Ascend where are we on the rollout? And what can you tell us about the transaction economics here? And I think related to that, I'd also be curious to hear your thoughts on just what this does to your corridor mix because my sense is that, that may look a little bit different than your traditional remittance corridors?

Yes. So overall, really excited if you start with kind of the punchline output, year-over-year send volume growth of over 45% for customers spending more than $1,000 and the mix increasing 300 basis points year-over-year to those high dollar centers as we categorize them. So lots of growth there. I think when it comes to corridor mix, it certainly opens the aperture for us to serve a wider range of customers. that are already building brand awareness and affinity with Remitly. So I think about like we did ads in the Heathrow Airport as an example. And I think that we had a lot of customers who have been in some of our historically large corridors that certainly saw those ads, but we also saw folks that were traveling within Europe, from U.S. to Europe, a lot of other countries we serve. And so I think it makes the marketing dollars that we're deploying even more efficient, more effective. But I also think, well, to your point about corridor mix, while it will cause a shift in corridor mix over time. There's also a lot of high dollar senders in the corridors that we're in. And historically, we were putting, I think, transaction limits on them that we're prudent, but we've improved leveraging machine learning, leveraging the data that we have, leveraging the sophistication of our compliance and product teams to have more precise not tier limits that are kind of rudimentary in some ways, but more precise algorithmic approaches to assigning the amount of customer consent based on their specific risk profile. And so I think that we have a lot of opportunities in our existing corridors and new corridors, and you see that in the overall growth of that segment. You see it in the overall mix shift. And I think we're uniquely positioned again to be able to take this platform that, in some way, served the hardest customers to serve that will continue to grow and serve but extend it and be able to add additional customer types. Like what we call high dollar centers. And one other example to the point of having customers that are in the corridors that we serve, there's a customer named Prasant who we were also talking about internally, signed up with Remitly in 2019. And initially, he sent just a few dozen smaller transfers to support his family in India. And he chose Remitly because this is his words, it was straightforward and had no hassles. Since then, he's completed over half a dozen cross-border payments through Remitly totaling tens of thousands of dollars each to support his family and manage investments. And so it's customers like Prasant, who I don't think we were serving as well as we could in the early days. We've just expanded that platform to be able to serve customers like him and customers in a lot of other geographies more effectively.

And I know one thing that always comes with higher risk limits on the transactions is the potential for higher fraud. That's remained relatively well contained, but anything you can share on sort of the results from some of the sophistication of the new risk limits that you've put on in terms of managing higher levels of sand with lower levels of fraud, et cetera.

Yes. We have not seen increased fraud rates for higher dollar centers in terms of that being any sort of cause for increased fraud. I think that if you take a step back and you think about the fraud vectors also applied a $250 transaction being picked up in pickup methods like cash. Larger transactions tend to be bank to bank. And so there's offsetting reasons why there might be a lower risk profile as well. And I think that we, again, have a competitive advantage when it comes to our fraud systems. It's largely been compliance innovations, I would say, that have enabled us to do it in a very risk-based way and have a more sophisticated approach to our higher dollar centers. .

Makes sense. And then just on this idea of kind of more sent to send type markets, U.S. to U.K., U.K. to Continental Europe, et cetera, can you just talk about like the differences in sort of operationally what it's like to operate in those corridors? How FX spreads, on-ramp off-ramp costs, what does pricing and unit economics look like in some of these corridors relative to some of your more traditional corridors?

Yes. The punch line is the unit economics in those corridors are quite favorable. And they're favorable because when you're sending a $10,000 transaction versus a $250 transaction, a lot of folks focus on take rate. But you can do the math. In terms of take rate, obviously, is the price divided by volume. If you increase the multiple of $10,000 versus $250, that can be a much lower take rate and still be a very profitable transaction and very profitable customer. So that's point one. Point two is you tend -- in those -- in higher dollar centers, you tend to have less, or very little cash pickup. It tends to be more digital disbursement, usually bank accounts, sometimes things like mobile wallets. Those disbursement options tend to be, as you'd expect, lower COGS, lower variable cost for us, which can increase profitability and also gives us the opportunity to pass along savings to customers compared to the overall average. And then with our scale, we have been able to drive down costs on behalf of customers because our pay-in and payout, which are the 2 largest kind of variable costs. 4 years ago when I started the business, the rates we were getting could not be more different than the rates that we're getting now, given that we're sending tens of billions of dollars. And so with that, we have an opportunity to really take, again, a segment that we've optimized, expand it to, in some ways, a higher profitable segment in a way that's really elegant and good for customers.

Interesting. Interesting. Maybe more profitable segment. That's an interesting characterization. I want to shift to Remitly One and knowing that you have an upcoming product event, I'm curious about anything that you can tell us about what this product might look like. I was interpreting from the comments that this could be a subscription-oriented product. Maybe if you could talk a little bit about the benefits of more of a membership model and what that might look like? And is this a platform for you to build a deeper relationship over time with customers than what you've historically had?

Yes. Yes. definitely a platform to build a more deep relationship with customers, definitely tune into the Remitly reimagined product Day on September 9, where you'll be able to hear more both for myself and Anker Sinha, who's our Chief Product and Technology Officer. So this will be an ongoing dialogue. But to give you a little bit more detail, Remitly One, I think, delivers tangible value to customers, starting with 2 products that you can get outside of Remitly One, and that's, as I mentioned, Remitly Flex, or Send now Pay Later solution and our Remitly wallet. But you only get the basic features if you don't have a Remitly One membership. So let's take the Send Now, Pay Later example with Remitly Flex. Remitly One members will get access to special benefits like flexible repayment schedules, free instant funding. And we've seen strong early demand and good repayment history for Flex as well as it being a powerful upsell for membership for the additional benefits. And then on the remote wallet side, we want to be able to give our customers the option to store multi-currencies both for Fiat and stable coins. I think that the early customer feedback in the U.S. there shows promise. And Remitly One members will get access to special benefits like interest, cash rewards on balances, things like that. And so the important thing when you think about Remitly One is it's not a loyalty program. Loyalty programs are like what airlines do, loyalty programs or what maybe some of the traditional competitors in our space do. which is just like getting points or things like that for usage. Reline is adding value. The analogy I draw is something like Amazon Prime, where when you think about Amazon Prime in the early days, it made the core e-commerce experience better and their killer feature out of the gate was that free shipping. And for us, I think we've got a few, including the ones I mentioned, with Remitly Flex and the Remitly wallet, that add distinct independent value but adjacent value to that core remittance transaction. And when you look at a 5-year time line, you can see where that goes, right? You can see the wide range of benefits that specifically our customers. When you think about an individual and there are 250 million individuals plus businesses that on the individual front, live and work outside the country, they're born. And financial services are just not designed for them. and even things adjacent to financial services, just additional benefits of coming to a new country and feeling that there is a company taking care of them and supporting their needs. That is a segment that I think has been underserved. That is a segment that we can serve with Remitly One via a wide range of benefits in the coming quarters and years, and we're incredibly excited about being able to talk more about it again on September 9.

That sounds great. We will tune in. I want to talk about each of those products. And I guess starting with Remitly Flex. So it sounds like there is a bit of a credit component to this. So I'd be curious to hear about your thoughts on that, the underwriting how you're thinking about the rollout? And then big picture, what are the pricing dynamics? And maybe for anyone who didn't turn into the earnings call, remind us about kind of the use case and the value prop of this product?

Yes. So if you think about Remitly Flex, it's up to $250. The customers can send and then they have to pay back in a short period of time. And if you look at that kind of send now, pay later, products, we believe it's very unique, and we believe it's very already, if I look at some of the customer feedback deepening the relationship with our customers because there are times where there is an emergency medical expense, where there's school fees, where, as I mentioned, there's just basic living expenses that a lot of our customers need funds to send at those times, and we help them with that kind of cash flow smoothing. And so you -- the way it works tangibly, as I mentioned, up to $250 in credit to send. And if you are not a remotely 1 member, you get those funds in 3 days. So you have to wait 3 days. If you are Remitly One membership, and you pay that monthly membership fee, you get access to funds instantly, you avoid having to pay that fee to access funds and we'll go into more detail in terms of some of the other Remitly One benefits, but it makes that Flex experience significantly better for members of Remitly One. And we've seen the repayment rates be positive. We have a lot of expertise at the board and managerial level around thinking about the right metrics to measure the profitability of that product. And the important thing is it's because lending is such a broad space. This is a very short-term cash advance to our customers that I think has limited working capital implications. And I think it also -- we have a lot of rigor and leadership around this to all manage it really effectively. So I'm really excited, and I think that the opportunity for us to add value to our customers in a unique way here. is big. We're seeing that in early customer feedback, both quantitatively and quantitatively, and we're just getting started when it comes to that product.

That's great. All right. And then I wanted to hit on Remitly wallet as well. This is 1 that I'm personally excited about because I think we have seen the journey that Remitly has been on at the time of the IPO with the Passbook product over the last year Remitly Circles product. And I'm curious if you could speak to the journey you've been on to get to this point of allowing stored balance functionality on the platform. How you're thinking about the rollout to the broader app? And anything you could tell us about just the implementation and kind of what was the lift like that it took to get here? And what's kind of left in front of you to get this fully deployed?

Yes. Yes, totally. So I think that the good news is if you look at a lot of the infrastructure, we had built out via that separate circle app that we had talked about. And so from a time line to integrate and launch, it was much faster because a lot of the -- what we call platform for our store value product was already there. We've now taken that integrated it into the core Remitly app in a way that doesn't disrupt the flow. That's why we wanted to do it separately out of the gate, and get that core functionality built out. So we have that platform to be able to what we'll get to in a bit, talk about how do we think about stable coins evolving and how does that integrate into our product. how do we add other Remitly on benefits like interest like benefits or others that we'll talk about in September. And so it's a really foundational capability. that is now embedded into our core app, and we're really excited about the platform that, that gives us to then add a wide range of benefits for our customers.

One thing that I know we chatted a bit about after the earnings call. When I think about a wallet and stored balance, one of the things that comes to my minder card products, things like debit cards. And so Curious if that's on the road map, if that's already baked in and just how you're thinking about the potential monetization opportunities that come from having store balances on the platform?

Yes. I think there's certainly a kind of foundational set of features that customers expect when it comes to holding a store value, a multicurrency account, et cetera. And so you mentioned debit cards. We'll talk more about those features broadly and specifically at the Remitly Reimagine event in September. . Sounds good. It's good teaser. Okay. I had one for Vikas here just because there were so many products that were announced. The guidance was obviously, you beat the quarter, you raised the guidance, it was very strong. If you could just talk about the -- how you think about the revenue contribution from some of these new products? And maybe clarify what's sort of baked into the guidance that you've provided to 2025 and how you think about timing of actually seeing a bigger contribution from some of these things?

Yes. Well, first of all, thank you so much for this opportunity. Q2 was a very strong quarter. And most importantly, as Matt said, we delivered breakthrough innovation. And as we say internally, we are just getting started. So very excited about the September 9 event and what we have in the offerings for futures. As you think about just the guidance, we are already 7.5 months into the year. And hence, we have a lot more clarity in terms of the outlook. This is very different from, call it, a quarter back or 2 quarters back when there was a lot of macro uncertainty also with tariffs and Remitly Stacks and other things. We feel we are in a much more clearer environment right now. A lot of those topics have been resolved. And with that certainty, it gives us a chance to give a guidance that's much more realistic and grounded. So if you feel really good about what we have shared. The second is just mathematically, as you see the comps are really tough in Q3, especially. We grew 39% year-over-year last year same quarter. So it's more of the comps that's creating a little bit of difference from a quarter-over-quarter growth perspective. But overall, we remain very confident and we remain very excited. And again, as I said, the guide that we have given is much more closer to the pin, given just the macro certainties now and us having a very clear view of what our business will deliver.

Got it. That's very clear. Okay. I want to transition this conversation a bit towards stable coins and talk about some of the -- some of these dynamics, specifically as they relate to Remitly, but also you guys are experts at cross-border, and I know there's a lot of people trying to understand just how stable coins fit into that ecosystem. So Look, the company was founded 14 years ago, you've been diligently building out the capabilities that you have today to reach thousands of corridors. I think most people know cross-border payments are very complex but they don't really understand how they work and what it takes to actually move money from one country to another. So I thought it might be a good idea to just level set here how a company like Remitly actually conducts cross-border payments today and how you would go about building a platform like the 1 you have today from scratch?

Yes. Yes. Great question, Will. I think that -- and a great foundation for them, as we then talked about stable coins, which I'm really excited to do. I think it's -- when I look back 14 years ago, we set out to solve a problem that is still ongoing, but we've made a dent in which was a problem I faced in Kenya in terms of how inconvenient and expensive it was to get paid in British pounds, living Canyon shillings, give money back to U.S. dollars. It was all the things that everybody knows, expensive and convenient. And if you look fast forward now, we made a dent in the sense that if you look at a $250 transaction, it's down to about 5%, plus or minus, at an industry level from about 8%. And we charge just over 2% on average. And that means more money getting back to folks love ones. But what I underestimated at the beginning and still, to your complexity point, is a journey is the sense that it's a very complex process to send money internationally that's fraught with delays and unexpected occurrences. And so we're proud 93% of our transactions are delivered in less than an hour, which is among the best in the industry, but delays still happen. And I think it's important to make that real for what it means because if you open an app or a competitor's app or you name it, you won't always see what it means when transactions are delayed. And so I wanted to -- there's an example, I won't say which competitor, but a trust pilot review, where a traditional provider said, my transaction was on hold for several days. despite sending my identification multiple times, the issue was never results. Customer service was unhelpful and I felt like I was being scanned. And you can kind of just feel the weight of that if it's for something like an emergency medical expense. And I actually think our traditional competitors just like us have really good intent to try to get money back quickly and efficiently. But the problem is hard to solve. And when we talk about complexity, every step of cross-border transactions are inherently difficult. So accepting pay in, accepting funds, which we call pay in via pathwork of banks, payment processors, local wallets delivering funds, which requires a wide range of various payout methods, settlement times, last mile infrastructure. Foreign exchange, as you can imagine, real-time conversion, fraud prevention, compliance, treasury operations and then multiply that by 170 countries, 100 currencies, and you can kind of get a sense of why moving money globally is so hard, so costly and so full of friction. We have leveraged technology, and this will be how we segue into stable coins in a bit to improve that, both cost and reliability. If you look specifically at digitization A lot of the transaction flow has been digitized. It's not by all means completely digitized yet, which folks can lose sight of but we're on that journey, and we're leading the effort when it comes to that. Because over the last decade, we've built this vertically integrated global platform that gives us control at every step, direct -- examples like direct integrations with local rails, intelligent routing to reduce cost and increase speed, embedded compliance and fraud prevention, a global operations network. And the results are more resilient capital efficient and customer-focused foundation that's hard to replicate because it takes time to work with all of these global financial services institutions. and build out the kind of network that we've built. Last thing I'll say is I do draw -- Jeff Bezos was an early investor. This was back 14 years ago when Amazon was a lot smaller than it was today. And based in Seattle, I do think about that analogy of e-commerce. Like if you look back to the days of late '90s, early 2000s, ordering online was slow, expensive, unreliable. And that what we experience now when it comes to the e-commerce took decades to perfect. And when new technologies emerged, whether that was cloud computing, machine learning, robotics and the warehouses, Amazon was positioned better than anyone to take advantage of those technologies. And I think we're in a similar position today in the cross-border space because we've built -- we've spent over a decade building a lot of the compliance infrastructure, the customer experience and knowledge of how this processing system works. And so that gives us not only the opportunity to serve customers well, but also when new technologies come out, whether that's real-time payment systems, whether that's stable coins as they mature, we're ready, and we're excited. And that's why we talked about it in the last earnings call. And so to answer your question to wrap it up, Will, if I were starting from scratch today, and that is the mentality of Remitly. Amazon says day one, we say we're just getting started all the time. It feels like that. We focus on trust, we focused on cost efficiency. We focus on speed. But now we've got new tools, modern payment rails, tokenized settlement options like stable coins, orchestration layers that can dynamically route funds in real time. And those do solve some challenges, they don't solve all of them, regulation, fraud, liquidity management, market-by-market differences still need to be solved. But the goal hasn't changed. The customer problems haven't changed. The technologies we continue to leverage to solve those core fundamental problems.

Super helpful. All right. So I want to continue to sort of set the stage here and just kind of level set on some of the inherent costs in cross-border. And I think one of the things that comes up a lot in the stablecoin conversation is the lower cost of sending money, the fact that it's kind of limited to the marginal cost of sending money on the blockchain, which you can kind of ask them to to 0 over time. And so One of the things that I wanted to just discuss is when we see the numbers in the Remitly model, we see that transaction costs as a percentage of volume runs at about 70 basis points. And my understanding is that varies considerably based on corridor rails, et cetera. You just touched on some of the different variables. So maybe you could talk a little bit about what the marginal costs are in cross-border? And if there's any way to delineate that between on-ramp off ramp, the currency conversion, settlement, SWIFT in correspondent banking, what do you spend the most time thinking about the cost opportunity to minimize in the business?

Yes. Yes. So first off, you're right, it really varies depending on the quarter, our average transaction size, a lot of variables, and we look at the business that way, which maybe I'll come back to in a minute. But if you up-level it I think of like 3 large variable costs that I spend a lot of time and energy focused on and I'll list them in order of magnitude from highest to lowest. Off-ramping funds, on-ramping funds, and then I'm going to bucket other costs, which includes things like foreign exchange, risk, KYC tools, things like that, that we use on a per transaction basis. . Those first 2 are much larger than the third, which is an important context as we think about the rest of the conversation. Our ability to deaverage those costs, I think, has been a key competitive advantage. And I think it's, again, important to make it real with the customer example or 2. If you think about an ACH transaction from the U.S. to India, it might cost us only pennies if it's going to be an ACH transaction, regardless of transaction size. So you can imagine that's well below, it would be well below the average all up of 70 basis points because it's pennies as opposed to a debit card transaction picked up in cash in Mexico involves much higher on-ramp fees because of a debit card, more complex and higher cost for the disbursement because it's cash pickup. And we're good at that kind of precision, not only finding the right price for the right customer. You can imagine across 170 countries, you also have to merchandise and explain that to a customer in a way that matches the speed of the payment method, the type of payment disbursement and the cost of all of those in a way that helps them maintain trust but also charges them the right amount because that could be a very different variable cost than in other customers. And so there's -- that complexity is where I would say, Remitly shines, not just in optimizing the economics behind the scenes, but explaining it to customers in a clear way. And so as technology evolves, we're getting even better at that, whether it's mobile delivery, machine learning, conversational AI interfaces, I think we have the opportunity to continue to innovate in that space. But at a punchline level, payout, pay in other costs, including FX risk, et cetera, those are the 3 biggest costs in that order.

That's super helpful. Okay. And then I guess, maybe we can bring stable coins into this conversation because that dovetails nicely. When you think about a stable coin transaction, what it can do for your network efficiency, what part of the transaction do you think it's most useful for in addressing costs? And maybe where is it not applicable?

Yes. So again, I always come back to what's the customer problem. And so even today, big opportunities to drive down costs and increase reliability and efficiency. And I think there's 2 ways that stable coins can do that. One is infrastructure. That's in that third variable cost, which is making the flow of money behind the scenes, faster, cheaper, more flexible, more transparent. And then the second is there is demand. And there has been demand for a long time. We can talk about this and how stables might solve it. But there's demand if you are in an emerging market, there is demand to hold a more stable currency than the the currency in that local market. And again, to make it real, I was thinking about Turkey. And let's just -- this is -- all the other examples I've mentioned are actual folks. This one, though, I just wanted to kind of picture a small business owner in Istanbul, okay, let's call it [indiscernible]. Over the past -- over the last 5 years, and this is Turkey, there's a lot of countries out there like this. The Turkish lira has lost more than -- this actually surprised me, 5 years, Turkish lira has lost more than 80%, 8-0, 80% of its value against the U.S. dollar. And so [indiscernible] working hard, let's say, to save for her kids education or maybe reinvest in our shop. But every month, Her savings are losing purchasing power. And so stability is not like a nice to have and it pales in comparison to like how much interest can I earn?"If the currency is deflated by has gotten less value by 80% over 5 years. That is a big customer problem. So those are the 2 problems. Problem number one, infrastructure. Problem number 2 is customers in emerging markets would like to hold a more stable currency. I'm happy to go through each. Maybe it makes sense to start with infrastructure because I -- but we can go through in whichever order you'd like in terms of [indiscernible]

Yes, it's like [indiscernible]

Okay. You want to start with infrastructure?

Yes.

Okay. Cool. I think that we talked about how we're leveraging already the ability to use stable coin to improve our real-time treasury and liquidity. So instead of prefunding across 100-plus corridors, stable coins could help us move funds instantly, including weekends and holidays. That means less trapped capital, faster settlement and precision in how we deploy liquidity. I think there's opportunities for smarter FX management in tough corridors where there is illiquid or volatile currencies. I think that unchanged settlement gives us kind of always on transparency and auditable trail of funds. And then finally, I think there's elements of programmable money when it comes to imagining things like automatic refunds, instant partner networks, things like that. So that's the opportunity. And there is a clear pay point. And I do think when we look 5 or 10 years out, there will be a lot more stable coins that will be used to improve some of the infrastructure of sending money globally. it's modest right now. It isn't making an impact now. We're investing more again in that 5- to 10-year time line. And when we contextualize it, that's the third most -- and it's a bucket of other costs that I mentioned in terms of treasury FX cash management. So that might actually even have a bigger impact for other businesses that are trying to manage global funds. For us though, again, if there's a customer problem, us being the customer in this instance and there's opportunity to improve the system, we're going to be investing ahead of the curve and really innovating in that space, which is what we're doing. So we can actually gain the benefits of some of those infrastructure and FX components that I mentioned.

So that settlement thing has come up a lot, I think. And I don't know if Turkey is a good example if there's another market that comes to mind where either the volatility of the currency or the capital controls into that market or just normal banking hours. makes it a pain for you guys to manage the settlement and the working capital needs of the business. And so again, if Turkey is not the right example, I'm sure there is 1 that you do have. But like can you make it real for us in terms of where you see the biggest friction on your own rails around settlement and where stable coins met actually, is it more the 9 to 5 banking hours thing? Or is it currency liquidity and capital controls that you're fighting more often?

Yes, it's more the 9 to 5 banking component. And what that means is if we're distributing funds to customers instantly because our product goes 24 hours a day, 7 days a week, then we have to -- we announced this last earnings, we have a $550 million line of credit, right? That line of credit has a cost. It's not -- if you do the math, not near as large of a cost of some of the other variable costs that I mentioned, but it would reduce the need for things like that $550 million line of credit because of the fact that we would have the ability to do the things that I mentioned in terms of real-time settlement. That also could marginally decrease the foreign exchange exposure as well. But again, I'm giving the broader context for Remitly and then more broadly, I think about also companies who are moving have other foreign exchange needs, working capital considerations. I think there'll be action in this space, and it will be exciting and it will be beneficial for us, but I think it will be even more beneficial for companies outside of the remittance space. If you look at this specific area, because I think that as rails get faster globally, there are other companies that can reap even more benefits from that.

Okay. Okay. So then, I guess, the next was customer need, right? That was great on the structural costs. One of the things that you mentioned on the earnings call, which I thought was interesting was the Dominican Republic, where the delivery mix that involves someone physically showing up at the door to deliver cash. And I'm sure that's not something that sits at the efficient frontier of payments, but that's a market convention thing. It's not a remitly thing. There's clearly a reason why the customers want that. So how do you think about stable coins in that example, clearly, it's helpful, what needs to happen? And what are the benefits to the customer and also what are the events to Remitly in that scenario?

Yes, yes. So I think that this -- the the problem of customers wanting to hold a local currency that's less inflationary like [indiscernible] story, I think is one that I think about a lot because if you think about it, it's not a new phenomenon. Like if you look at the top 1% globally, they have U.S. dollar accounts. They have the ability to hold multicurrency accounts across the globe. It's just historically, that's not been available to most consumers around the globe. And so I think first, if you go into the actual problem we're solving, it's about the ability to store their savings, their savings in a more stable currency. I'm not talking about replacing all local currency. I don't think that is something that most governments will allow because they're going to want local taxes, payroll, any day-to-day transactions to happen in their local currency. But when it comes to savings, families that are setting aside for education, for home, for retirement in a country that has a more volatile currency, holding that in something like U.S. DC is ideal, okay? So there's 2 ways that we're solving that. One is, I mentioned that when you think about the Remitly wallet, the ability for customers in Turkey or Nigeria or Argentina or Zimbabwe or you name it, to be able to hold UDC is something that we want to enable customers to do in their Remitly wallet. And that is something we're incredibly good at because if you take a step back, what we are good at is we are good at the translation of feet to stable, stable to stable, stable to any of those perputations. That is what we have done very well at. And so we can do this in a way that others can't because one, we built the trust of 8.5 million consumers, really importantly, because I think this is a question that I'm happy to talk about more. We can operate within a strong regulatory framework, which I think is an open question as we think about stable coins evolving. And I don't know which of these is most important, honestly. The last is very important because if it's a savings account, there still has to be that last mile network for those funds to be able to be usable in real life for that customer in Turkey or Nigeria. And we have the ability to send a 4 billion bank accounts, 470,000 cash pickup locations, 4 million bank counts or mobile wallets and even things like door-to-door delivery in the Dominican Republic. That gives us a really large competitive advantage, especially in this adoption phase of folks wanting to save, but still needing to use those funds. So that's number 1 is whole USTC or another stable coin in a remit wallet. Number 2 is I mentioned that disbursement network we have. We're opening up that disbursement network to be able to send money to a stable coin wallet across the globe. And that is just an extension of how we have always built a network in the way that customers want to receive it. And in fact, in some markets today, like Honduras is an example, 100s is a dollarized economy. So if you go to the really product and you try to send money to Hunters, you send money from USD to USD. There's a fee associated with it. If you send money to the Philippines because they have such a large population in the U.S. and their folks in the Philippines that want to hold USD. There is an option to send money from USD to a USD account in the Philippines. And so that construct already exists. I think stable coins will broaden the ability for more folks to be able to hold stable currencies. And we're going to be great at both giving customers the ability to store that with the remotely wallet or send that to other stable coins across the globe. The one last thing -- I'll stop there, but I'm happy to talk more about any aspect of that, including some of the regulatory components, which I think are going to be really interesting as they evolve.

No, I definitely want to come -- that's actually my next question. But I guess before we move on to that, I just -- there's one thing that you didn't mention, which is just stable coins being an accelerant to digitization trends more broadly? I know this is something you've talked about, I think, actually in the Philippines over the last couple of years and the adoption of mobile wallet. So to go back to the #1 cost in this market is that off-ramp into the local economy are there areas like the Philippines, like the Dominican Republic, potentially some, maybe some of these markets where you see more demand for stable currencies, where your structural cost to the transaction is still very high. And if we do see the market adopt something like a stable coin, what could that do to your cost structure and to pricing trends more broadly in the industry?

Yes. In terms of where we're seeing adoption, it's super important that it's early in the sense that it's not -- we're not seeing widespread adoption yet. The great thing about our strategy is that, given the 2 elements that I just mentioned and the fact that we have trust with 8.5 million customers, we will have a front row seat to seeing where that adoption is actually taking place. And that can drive our product road map and other things that will help us capitalize on exactly what you said, well, which is digitization because I love it if a transaction is being sent into digitized form of disbursement like a stable clone wallet as opposed to cash pickup. And I love it because, one, it's more reliable. I can bring up that 93% of being delivered in less than an hour. And two, as you can imagine, there's a real cost to having cash picked up. And so we have to pay that disbursement partner relatively more. then we'll need to pay to actually have funds delivered to a stable coin wallet. And so it is a continuation of this digitization trend that's very positive for our business and very positive for customers.

Got it. Okay. Let's talk about regulation, very important. We -- obviously, the passing of the Genus Act in the U.S. was a big catalyst for the stable coin conversation over the summer. One of the things that almost every company in the cross-border space Remitly included, has spoken about is just the complexity of managing the licensing and the KYC and regulatory requirements to move money cross-border, every end market, every receive market, every transaction and every customer needs to be kind of managed responsibly. So what did it take for Remitly to obtain the licensing to operate. And when you think about stable coins, like what do you see as some of the -- maybe the regulatory hurdles that need to be cleared to implement them?

Yes. Maybe I'll start with the second, and then I'll go to the first. I think on the second -- it's going to vary by country. Like the world is a very large place, and it's going to be fascinating to see how various. Actually, let me say the U.S., the U.S. first, let me take one step back. The U.S. with tiginiusAct has created regulatory clarity for stable coin issuance and the stable going ecosystem in the U.S. That should be applauded in my view, because the innovation can build off of that, and you're seeing that with companies like Circle and others. That regulatory clarity does not exist in a lot of emerging markets yet. And that is where I would argue a lot of the stable coin actually like usage when you think about that customer problem has the opportunity to grow the fastest. . The challenge is because that regulatory clarity doesn't exist in most markets, it's going to, by definition, very. I think some regulators will embrace it. I think other regulators will try to stop it, and they will be able to stop it because the moment you try to get the money out of that stable coin wallet to do something with it, that's often via locally regulated institutions, whether that's banks, whether that's telcos, whether that's large merchants. I think that that's where regulators can actually influence their local economy to not allow it. So yes, you could have somebody in an unregulated environment in Nigeria as an example, that holds USDC, but it will halt adoption if that customer can't do anything with those funds or it's very, very difficult, too. And so that's where I feel like we have a big competitive advantage. I shouldn't say if we feel like that's where we have a competitive advantage. We have relationships with financial services institutions across the globe, and we have a regulatory infrastructure that has taken years to build. And given that I came from banking in Kenya, we took it seriously from day 1. Our second hire was our compliance officer. He was the Compliance Officer for Amazon Payments. And he was with the company for about 10 years before he retired. We have an equally impressive compliance team now. But the reason I mentioned that is because building out the licenses whether that's e-money licenses, whether that's -- there's all different sorts of regulatory options, obviously, in terms of when we talk about the regulatory framework. Some are more catered towards banks, some are more catered towards digital payments, et cetera. but compliance is something that we have done well from day 1. And I think that not only do we have a lot of the licensing infrastructure, just expertise to apply for new licenses should we need them. But also, we have relationships with highly regulated institutions in emerging markets around the globe. And so as we think about that regulatory question when it comes to stable coins, I think we can be on the forefront of helping solve that. And it connects to the pain point of, okay, I've got the savings in USDC, but what do I do with them? That is an area where given our scale size and credibility in this space, I'm excited for us to lead as this space continues to evolve.

Very good. That sounds exciting. We've got about 10 minutes left here. I have a couple more that I wanted to cover. I wanted to talk about fraud. I think that's 1 thing that gets missed a lot in this conversation. It's a huge costs that you need to manage, 1 of the, I guess, the scariest things that everyone in the payment space talks about is some fraud vector and not catching it soon enough. A recent example, I think Remitley fraud costs were elevated this past quarter by about 3 basis points off of 13% due to an isolated fraud incident. So I guess, maybe walk us through that, what -- how do you detect that and manage fraud. And how do you think about special considerations for managing fraud risk with stable coins?

Yes. I think that when you -- overall -- I'll kind of break out the question in 2 parts. On the first part, the I won't repeat what we had in our earnings. But yes, our fraud loss for the last quarter was right around 15 basis points. But if you look at that 1 specific targeted event and you exclude that, it was within the 13 basis point range that is within normality. And I think our team did a great job of isolating that and then being able to react. And we weren't the only ones in the industry impacted by some sophisticated fraud events. So continues to be a big competitive advantage for us, continues to get better as we get more data because we can feed that into our own custom-built machine learning models to delineate between bad actors and good customers. that's part of delivering that 93% within an hour and continuing to get that up. And I think that only becomes more important in a stable coin environment because I think a lot of investors on this call probably know, but when you think about things like card schemes and other payment networks, while they aren't as fast, there's recourse and there's multiple layers of protections for the consumer. And so when you think in a stable coin world, where it's nonreversible and it's done. I think that the companies that will be able to actually deliver that instantly are ones that will not only have the right compliance infrastructure, but we'll do fraud incredibly well. And that's something that does get better with scale because you have more data, you have more analytics, you have more sophistication to be able to do some of the things that I mentioned in terms of delineating between good and bad customers. And so excited about -- well, I would say, an industry level, it's a problem that needs to be solved, excited about our ability to really lead the way and solve that.

No, I mean, 13 basis points is a very low level on an ongoing basis, and it's kind of in range bound for a very long time. So I know it takes a lot to get to that level and maintain it. I wanted to talk a little about -- we talked a lot about where the industry is headed, the opportunities longer term. To bring this conversation back more to the nearer term as we end the call, I wanted to go back to the Remitly wallet and some of the specific stable points features that you are thinking about rolling out in the near term. What do you envision for customers to be able to use stable coins on the Remitly wallet? And what is sort of the road map or time line for other use cases for stable coins, both customer-facing and internally?

Yes. I think that if you look at the wallet, I think that first, it's about continuing to build out the infrastructure to where folks have the basic features that they need. You alluded to some, I won't steal the thunder of some of the things that we're going to talk about in September at the product day, but I think that those are coming along nicely. And then I think it's about expanding the number of currencies and the number of countries that customers are able to hold those funds in both Fiat and stable coin currencies. And right now, you see USGC given the regulatory clarity and given their momentum, and so we're excited to have partnered with them. But we're well positioned to be able to expand to a wide range of currencies in terms of what customers want to hold, and we're excited to be able to do that for customers. And then you wrap it all in that Remitly One umbrella and membership model. And I am incredibly excited about being able to offer to customers a lot of benefits that they'll get in exchange for paying us a monthly fee to be a member of Remitly One. And that's where I think a lot of excitement happens, not only within the stable coin space, but when you think about really accomplishing our vision of financial services that transcend borders, the last part of our vision. So that's where we started. It's a good place to start to wrap, which is making a huge impact on the globe, 8.5 million customers just last quarter, transforming lives. That's the first part of the vision with trusted financial services that transcend borders, -- and as I say, we often say internally a Remitly, we're just getting started. And certainly, with some of the latest technologies coming out with the fact that we're only 3% of the market, and that's just payments. I am incredibly excited about some of these things. We don't even talk about AI today, but stable coin AI, a lot of innovative new technologies as well as just the continued digitization of international payment system that has historically been cash and been slow. We are just getting started, and we are excited about accomplishing that vision of transforming lives with trusted financial services, the trends and borders.

Awesome. Matt, thank you very much for spending the time today. Matt Abacos, it's been great. I think I learned a lot. I know other people did as well. It's a fascinating space, and it's 1 that I know there's a lot of demand for people to learn about, and I think you've given a lot of people a lot of stuff to think about. So thank you. I hope you guys have a great summer. Thanks for doing this, and we're looking forward to seeing you at the Goldman Sachs conference in San Francisco in a few weeks as well as at the product event on September 9.

Likewise, thanks so much, Will. Really enjoyed the conversation. .

Thank you, Will.