'DeFi could solve the last mile problem for remittances,' says TransferGo CEO

For migrants, the act of sending money to their home country — known as remittances — is a key part of their financial lives. It’s also expected that this market will grow by $200 billion in five years’ time. 

Now TransferGo, challenger to market leader Wise, is eyeing up the possibilities of DeFi and stablecoin transfers for remittances. 

TransferGo, which Daumantas Dvilinskas set up after he migrated to the UK to study and experienced difficulty moving money from country to country using banks or Western Union, is deeply tied to the migrant experience. It specializes in sending money to migrant home countries for low fees in up to 30 minutes by partnering with banks, procuring local licenses, and building settlement networks to mitigate the so-called last-mile problem. 

The last mile is the final stretch that remittance payments must travel before reaching the recipient. However, it’s not just a simple point A-to-B route. It most often goes from a company like TransferGo to a partner bank and then to a recipient bank before finally landing in an account. How long this takes is dependent on the speeds of the partner bank, the country’s banking network and the recipient’s bank. 

The fractured state of the last mile means that remittance companies often can’t track the flow of money, which can create delays. But could DeFi streamline the process? 

Dipping into DeFi

In September, TransferGo sealed a $50 million Series C co-led by Elbrus Venture Fund III and Black River Ventures. 

A few months later, speaking over a video call, Dvilinskas says he is intrigued by the world of DeFi and how it can power remittances. “DeFi can potentially solve the last mile problem for remittances,” he told The Block. 

TransferGo has not yet dipped its feet into DeFi but Dvilinskas says the company has trialed various blockchain technologies over the past six years. In particular, it has looked at the use of stablecoin transfers for business-to-business use cases in African countries. 

Whilst Dvilinskas says that he has plans to explore stablecoins further in these markets, he believes blockchains have yet to fulfill the technology’s promise to transform payments. 

“The promise of crypto has always been let's make it instant, let's make it 24/7 and let's make it extremely low cost,” he says. DeFi can make that possible, he argues. Specifically, by reducing reliance on banks, DeFi wallets could potentially allow users to leapfrog over the many steps of the last mile. 

Consumer-first

For now, developing a last-mile network for traditional remittances across different corridors is the company’s primary focus. Its biggest markets are mainly across Europe, with particular concentration on corridors from and between Poland, the UK and Germany. Next in its sights are the Romanian and Russian migrant segments. 

It plans to use its recent cash injection to expand its local payment options across different territories, launch new withdrawal methods and continue to invest in measures for combatting money laundering and terrorist financing.

TransferGo’s focus on migrants will help the company scale and compete with Wise and Western Union, he says. 

“The reason why we went for the consumer segment first is because we were surrounded by people who were struggling with the same problem,” says Dvilinskas. “Some of them were white-collar, some blue-collar, but they all wanted the same thing, which is just to move money back, understand how much they've been charged, and have that peace of mind.” 

A crisis of payments 

Yet migrants are often at the forefront of international calamities that inhibit as much as they enable the flow of money. 

When the Covid-19 pandemic struck in 2020, remittances increased worldwide by 7.3%, defying World Bank projections. “There were a lot of gloom and doom predictions about remittances marketed by the World Bank,” says Dvilinskas. Instead, the pandemic enabled a shift from cash-based transfers to digital remittances, facilitating 36% quarter-on-quarter growth for the company. 

On the other hand, when the Taliban captured Kabul in September, remittances to the country ground to a halt for two weeks as sanctions against the new government ensued. Remittances are a key lifeline for Afghanistan, one of the world’s poorest countries. 

Dvilinskas says sanctions like these most often hurt people, not the regime. 

“Individuals cannot send money or access their accounts, even though they have nothing to do with the regime,” he says. “These very broad sanctions for managing these countries is a problem because it actually does more damage than good.” 

Without traditional remittance lines, the Afghan people looked to crypto to move money out and circumvent sanctions, according to TechCrunch. Conflict zones such as Lebanon, Turkey, and Venezuela have also seen uptakes in crypto remittances. 

Currently, Dvilinskas says, there is a crypto-sized window left open by regulators for migrants in crisis to funnel their money out of and into their countries using digital currencies. 

“But that window will inevitably blow over. So what happens afterward? That's the main question,” he says.