Cleo Capital Thesis: Cross-Border FinTech
Cleo Capital is a thesis-driven fund and in addition to our previous focus areas, we are newly focused on 3 key areas: Blue-Collar Work Enablement, Cross-Border FinTech, and Cybersecurity. We invest from pre-seed to series B. No one is too early for us to fund.
This article is part of a series explaining our thesis areas and the specific markets we are interested in.
Cross-Border FinTech
We seek to lower friction from the process of moving money across borders.
If two Americans, one from California and one from Maine, meet in Iowa at a farmer’s market, it’s easy for them to make a purchase from a vendor or pay each other back for the cost of their cab. That’s because moving money around within the country is typically not a problem. Move this scenario internationally, however, and you’ll find a lot of friction. If someone from Latvia and someone from Honduras visit Malaysia, do they have the ability to purchase something from a streetside vendor without using cash or a credit card? How do they pay each other easily between their 2 currencies? While systems that move money across borders already exist, they are expensive and often slow, and we believe there is a lot of room for improvement.
People need to — and want to — make international transactions
The global payment market was worth $190 trillion in 2023, and is projected to grow 53 percent by 2030. Including wholesale, banking, enterprise, B2B, and C2C payments, there are many reasons to move money across borders. Businesses pay international employees and purchase goods from international organizations, for example. Middle class consumers, in a similar vein, don’t see borders when it comes to making purchases.
According to the MasterCard Borderless Payments report, 43 percent of people move money across borders to buy products from other countries, while 39% percent of people do it to financially support family that live in a different country. Other reasons include financially supporting friends, making international investments, paying for medical expenses, and paying for higher education tuition.
In terms of currencies, the top most used currencies in the world for international payments include the US Dollar (USD), Euro (EU), Japanese Yen (JPY), Pound Sterling (GBP) and Chinese Yuan (CNY). However, this doesn’t mean payments are limited to and from these places – they happen across the globe.
A confounding factor for the evolving cross-border payment landscape is that both enterprises and consumers are dealing with an increased threat of fraud and financial crime. Whether your business is making a purchase from a vendor located abroad or you’re traveling to a new destination and want to buy a small souvenir, sending money across borders can become a security risk.
Why not create a frictionless experience?
If you’ve ever tried to make an international payment or buy a product from another country, you’re likely familiar with all of these scenarios:
Moving money across borders takes multiple days, sometimes up to a week
You may need to use several systems to transfer money from one account to another
Predatory fees, on top of exchange rates, come out of your pocket
Currency fluctuations cause havoc in recordkeeping and paperwork
It’s no surprise that 30 percent of people consider cross-border efficiency as a pain-point for making payments, because the process simply takes too much time, energy, and money.
While both legacy and digitally native players have solved some of the problems related to moving money across borders, they have only touched the surface. The majority of these solutions only work in specific scenarios, such as enterprises paying international contractors or friends from the same country sending each other money. There is still a lot of headway to make in order to create a truly international frictionless money-moving experience.
An example that breaks the typical mold of banking apps is nsave, which is on a mission to democratize safe and secure financial services for all people — especially those coming from countries with struggling economies. This is a solution that moves international banking forward, solving urgent problems for millions of people.
We seek to make moving money across borders headache-free
Moving your money, whether you’re an enterprise or a consumer, across an international border should not come with additional stress. It should be easy, simple, and headache free.
We seek to fund startups that solve the cross-border fintech problem in a variety of ways, from connecting different banking systems with one another to increasing the speed of moving money abroad. Thematically, this thesis area emerges from our work on decentralizing the enterprise and the complicated consumer. In a similar vein, we want to make cross-border payments easier, faster, and less costly.
We understand that many solutions that help people move money across borders already exist — what we’re looking for are startups that do things better than how they are currently done.
What could cross-border fintech solutions look like? Here are some non-cross border examples from our own portfolio.
Stack, located in India, is a platform that brings together real experts, multiple asset classes, and world-class wealth-building strategies together to guide all types of investors to grow their wealth. These types of startups aggregate money-making knowledge and share it with people from across the globe, helping them reach their financial goals with international investments.
In a similar vein is Alto, which is a self-directed IRA platform. It helps people build wealth beyond the stock market, which includes international investments. This type of startup is ideal for helping people to globally diversify their investment portfolio.
Another example is Brigit, a personal finance app, which helps users get cash, build credit, and save their money. Brigit also teaches financial literacy, which helps people manage their money more effectively. Earn in is a platform for instant payouts, helping people get paid right away. Both of these models could apply globally as well, supporting people internationally.
Cleo Capital: Request for startups
Moving money from country to country doesn’t need to be painful. We are looking for startups that streamline sending and receiving money across borders — both for the enterprise and for consumers.
While we’re particularly focused on startups in the following categories, we are open to startups that solve the cross-border fintech problem in other ways, and are especially interested in hearing from startups located outside the United States who may understand this money-moving problem from a different vantage point.
Travel: We’re looking for startups that simplify transferring money for travelers, such as making a purchase at a market or paying for a hostel without a credit card.
Credit scores: Countries typically have their own credit scores, but what happens if you move? How can countries and their systems communicate credit scores so we can address this globally?
Enterprise operations: Hiring, payroll, remittances, purchase orders, and more – how can we make business operations easier for companies that work internationally?
International work: How can employees, contractors, and small businesses that work for and with companies located in other countries easily get paid and have instant access to their money — without paying exorbitant fees?
Systems integration: How can we help banking institutions connect, communicate, and collaborate more effectively with one another so that businesses and people can move their money around?
Geographic areas of disruption: What are the ways we can help people who live in countries that are going through a disruptive event like a war or natural disaster have easy access to their money?
Investments: How can we provide education and resources to support people with making cross-border investments and building wealth globally?
Speed: Transferring money across borders takes at least a few days on average. What can we do to speed up this process so businesses and people have access to money faster?
Other: Tell us what you think cross-border fintech solutions can look like.
Join us in lowering friction to help people move money seamlessly across the globe. Get in touch at cleocap.com.