Digging Deeper with TransferTo: The Emerging Hub of Global Value Remittance
Andrew Barnes’ series, “Digging Deeper” is based in Silicon Valley and focuses on key innovators and startups and how they are disrupting digital payments and commerce.
Somewhat surprisingly, airtime remittance companies are a legit contender for executing on the holy grail of payments, a global transfer platform upon which consumers seamlessly send value across virtually any border to any recipient without traditional intermediaries. For instance paying electricity bills, dental bills, or school tuition with the same ease as sending 10 minutes of airtime from a prepaid mobile phone.
There are four billion mobile phones worldwide with prepaid balances, and top-ups are often the first “baby step” for consumers prior to performing a money remittance, payment, or transfer. Airtime remittance companies are eager to leverage established consumer behavior, relationships, and a potential reach into billions of customers worldwide.
We dig deeper into this disruption by talking to a market leader, TransferTo, an airtime remittance company that interconnects mobile operators’ prepaid systems to deliver cross-border top-up services. Headquartered in San Francisco, TransferTo has big plans to leverage its partners, which include MNO’s, MVNO’s retailers, money transfer providers, and financial institutions via its expansive network of 350 mobile operator connections in more than 100 countries.
Andrew Barnes sat down with Eric Barbier, CEO of TransferTo to talk about really interesting (and lucrative) use cases worldwide, the future of global payments, and why venture capitalists get excited about this space.
Andrew Barnes: Great to talk with you Eric. Let’s first talk about the pain points that you are currently solving with airtime remittance.
Eric Barbier: There are two primary ones. First, current remittance channels are not well suited for sending small values. The second pain point is the recipient who is not conforming to the way the money is intended to be spent.
What are the mechanics, and the value amounts that we are talking about?
Typically they are sending from $2 to $15 and it really depends on the corridors. For instance, from US to Mexico our average transaction is about $12. From Saudi Arabia to India, it’s more like $3. We’re enabling people, directly from their cell phone, to use part of their prepaid balance to send it overseas. Most of what we’re doing is through SMS. People are sending an SMS saying, “I want to send $10 to this number in the Philippines.” And they do it in real time, directly from their phone. We’re working mostly with telcos and mobile operators in sending markets, and with money transfer operators.
From a compliance standpoint, how challenging is what you do?
What is interesting is that it cannot be exchanged for cash and it cannot be refunded. It is not a money transfer service and is not regulated like money transfers. Airtime can only be used for telecommunication services meaning voice calls, SMS, probably data in some countries when they have that but that’s all. They cannot be refunded, cannot be cashed out, and it has taxes. And in most instances the airtime expires so if you’re not using it within 3 months, the airtime goes away.
What other values can be transferred through TransferTo?
Let’s go one step back. We started with the easy piece by doing airtime. Airtime is easy because in a given country, we only have to connect to three or four players and because they already have spent a lot on marketing, their brand is already well known. Here in the US, everybody from Colombia knows the Tigo brand; so that’s extremely powerful. Same for Orange; if you’re from Africa, you know the Orange brand. So that’s why we started with airtime, with prepaid cell phone top-up. Our consumers know these brands. We have no marketing to do on behalf of the brands. As we’re moving into other types of prepaid services, the challenge is that these markets tend to have more players and they tend to not be as well known to the consumer.
An example of this is when we connected to the electricity provider in Indonesia. In Indonesia, they’re using prepaid electricity; so same thing as a cell phone. You’ve got a prepaid meter and as soon as there is no money left in the meter, the light goes out.
Ouch, what’s the fix?
Very simple. You top-up your prepaid electricity meter exactly in the same way you’re doing it for your cell phone. But you send the denomination of Rupiah, 5, 10, 50,000 or whatever, and it’s exactly the same process, and so that’s what we did. The first corridor we implemented was from Malaysia to Indonesia. We enabled an Indonesian living in Malaysia to top up the prepaid electricity meter directly from his phone, with a simple SMS. The only difference is that instead of entering the phone number of a recipient you enter the prepaid meter number. The average mobile top-up sent in emerging countries is between $2 to $15, and the average electricity usage is about the same amount, $5 to $15 per month.
Can you envision what your platform might look like in 5 years, and what are you moving across it?
Our vision is to be able to connect as many useful billers as possible. We want to enable immigrants to manage the way their money is being spent back home with useful things. A cell phone is useful. If you don’t have a cell phone, you can’t work. Electricity is useful; there’s no doubt about it, water; groceries and so on.
One of the big, very long-term problems that we would like to address, and it’s going to take us a while to get there, is education. Education is a big reason immigrants are working in another country. It’s extremely important and it’s one of the top reasons people are sending money back home. One of the challenges is that it’s a highly fragmented market but we believe it is one of our biggest challenges to solve in the future.
What else are you adding?
We’ve already added healthcare, so for instance we’ve implemented dental care in Philippines. Insurance is being added as well.
Why TransferTo? Why will you be successful and your competitors’ offerings might not be?
We’re one of the leaders in the airtime transfer business and we’re the only global player. In order to succeed in this market you really need to have scale. We’ve got offices around the world, Singapore, Dubai, Barcelona, El Salvador, Miami and here in San Francisco and so we already cover the globe. We have a unique expertise in doing things phone-to-phone. No one else has our capability.
What changes in the mobile market have helped you?
We’re getting more and more mobile app users as the penetration of smartphones is growing; even in our target market. So we’re seeing, depending on the market, between 20% to 40% adoption of smartphones for immigrants, who are not the wealthiest consumers in that market. We’re talking sub $20 phones in India. If you have the right manufacturer, you can now get a decent smartphone for $20.
Now, with all the features and functionality of a smartphone, how does that change what you do or how you are doing it?
It really helps on user interface. So the example I was giving earlier about the meter number; knowing the meter number of your friend or family back home is a bit tedious. So the great thing when you’re using a smartphone is that you can have the same knowledge as if you were local. For instance you could take a picture of your meter and then the app can automatically recognize the meter number. The person in the US, the sender of the remittance, doesn’t need to know all the details. He just wants to make sure he is paying for electricity. Smartphones are making the user experience 10 times better.
The other thing that smartphones are providing is better feedback to the sender. One of the complaints that we’ve been hearing a lot is that those living abroad are only getting calls from home when people want something from them.. The only time they are getting a phone call from the Philippines is when those guys need money. With smartphones and apps, you’re able to tell the sender, ‘Hey, you’ve paid for the semester’ ‘you’ve paid for the education’ ‘here are the grades of the child that you paid for.” You know, feedback is automatically built inside the app.
Right, and that platform utilization has got to drive transaction volume as well. Do you have any examples of this?
Yes. That’s how you create the social of the network effect in the system. So to give you an example of things we’re doing today; we’re working with several mobile operators on the receiving end.
In the Philippines, Indonesia, and Pakistan, we enable the receiver, even if he doesn’t have money on his phone, to request airtime from his relatives in the US for instance. Using USSD, even if you don’t have credit now, you can still request for credit to your friends abroad.
If he doesn’t have any credit, he cannot place a call, send an international text, or even send a WhatsApp message because it might not work, or he doesn’t have access to Wi-Fi. Most of those places don’t have Wi-Fi and so that’s why we’ve been creating special deals with the carriers. It’s allowing someone to request a top-up, even if he does not have credit on his phone.
And the carriers now become more of a partner because you embed users further into their services through the social aspects so it’s a lot more sticky for them as well, correct?
Absolutely. We’re working with the carriers in very close partnership; they actually pay us to distribute their airtime abroad. We’re essentially their sales force abroad. Today they are very good at selling in their country but we’re helping them to sell in countries that they cannot reach. They’re paying us a commission for this airtime we’re bringing them from abroad. Obviously, they’re very keen on partnering with us, so we’re doing promotions all the time; we’ll be running one for Mother’s Day. We’re helping to get activation of new phones and those kind of things.
What are the high volume “corridors” for you?
In terms of outbound, worldwide, the U.S. is the most entrenched market but it still has the highest growth rate. I’m just talking about the airtime piece. Even with the growing awareness of the service it’s still pretty early. For instance, some markets have been very educated and so in countries like El Salvador, all the Salvadorians living here in the US have been very well educated. Immigrants from Africa have not been really served yet, it’s starting but it’s really the beginning.
Worldwide the U.S. is the biggest market, especially sending to Mexico. Also countries like Guatemala, Salvador, Honduras, the Dominican Republican and Haiti. We’re seeing traffic to Cuba as well. Cuba is a big destination; mostly from Florida. So that’s the US market; number one overall. And for us, it’s also our number one market.
And what about corridors in other parts of the world like in the Gulf States and in Asia?
The next largest market is all the Gulf countries. Saudi Arabia, Qatar, and Kuwait sending mostly to the Indian subcontinent to India, Pakistan, Bangladesh, and Sri Lanka. That’s a pretty large corridor. What we can’t explain, and what is puzzling to us, is why India is a very large receiver from those Gulf countries but it receives very little from the US. It’s very likely that the immigration pattern is very different. I don’t have an answer yet, but that’s a mystery I would like to better understand one day.
And then some migration inside Asia. Malaysia to Indonesia, Hong Kong to Indonesia and the Philippines. Australia mostly to the pacific islands, Fiji, Tonga, Papua New Guinea, so more of a regional immigration.
The least developed market today is Europe. Within Europe, we’re seeing that the two relatively big countries are Spain and the UK. So it’s pretty interesting across the board.
The remittance space is very, very active. There is a lot of investment interest isn’t there?
Absolutely. One of our customers in the UK, WorldRemit, just raised $40 million; that’s really amazing for an A round. They’re aggressively using us to acquire new customers; Basically it’s easier to convince someone to send £5 in the UK than to send $200; so it’s a great way to acquire customers with a value that is not as big. So they can make sure that their brand is being trusted because I trust them to send my $5 or $10 mobile top-up. Now they can move customers into using them to send money. That’s really a very successful strategy and I think using our service has been a big part of their success.
In terms of your customer acquisition, is that almost entirely through partners? What’s your mix in terms of direct verses indirect?
We’re totally B2B. In most instances, nobody knows that we are the company behind the top-ups. So when you go to Western Union to do an international top-up, the TransferTo name never appears. The same thing for WorldRemit. If you were a mobile subscriber in Qatar, on the SMS, you would not know we’re running the service.
Which is a very advantageous place to be isn’t it, the pipes?
Absolutely, we’re not competing with any of our customers. We’re an aggregator, we are a hub, connecting as many mobile operators as possible, processing as much volume as possible, so that we can give the best price to our distribution channels.
If I’m a payment professional, why should I care about TransferTo?
Whenever you’re in something that’s related to cross-border, international top-up is the first step to mobile remittance, or to remittance in general. So if you want to do remittance, it’s usually good to start with international top up. As soon as you’ve got money in an electronic format, one of the first things you want to be able to do is to top-up your own cell phone. Because if you’re living in Mexico, in Pakistan, even if you’re the middle class, you’re still keeping a prepaid cell phone. In most instances, there is no infrastructure, there’s no credit history, and there is no way to issue proper bills.
So even the well-off people, they tend to be on prepaid and you need to find a convenient way to top up your own phone. We are working with couple of prepaid debit card issuers and we’re one of the merchants they need because if you’re a prepaid debit card user, it’s very likely that you’re a prepaid mobile user as well.
So where there is digital money, it’s important to understand that top up and value remittance is not far behind, correct?
Yeah, that’s correct. And we’re seeing those two worlds blurring in a way.
What are TransferTo’s big goals for 2014 that might not be obvious?
That’s a good question. Beyond doing what we’re supposed to deliver on all the things I’ve mentioned, I think one of the big goals is to have more and more people using airtime for stuff we did not think about.
We’re getting and we’re having more and more customers using us for instance, to pay for a survey, or to offer airtime as a prize in a contest. Using airtime to reward customers for participation in some kind of marketing activity, customer education, or consumer education about something.
We’ve got a project for verifying valid serial numbers on medicine. We’re asking people to send numbers to a special code and if they do that, we’ll tell them whether it’s real or fake medicine and they will receive airtime for doing this extra step. So it’s fascinating to see developments in airtime; in things I never would have imagined in 2005 when I started.
And the beauty of airtime is that you pay people as low as 10¢ and 10¢ worth of airtime is still great. It might sound very small to you but it’s a great gift. It’s going to give you probably an hour or two of phone calls in these markets.
You could effectively crowd source an activity through these micro top ups. Storm an embassy maybe? Just kidding…. Great for market research.
Absolutely, yes. People are doing activities and they’re being rewarded in increments of 10¢. There’s no way you can do this using the current channels today. You don’t have the ability to track or disburse. You can’t pay someone in Kenya, 10¢.
Wow! That’s quite a reach into a market or geography.
Yes, certainly. It’s about 4 billion people who we can reach. 4 billion people around the world have prepaid cell phones. Think about it.
Eric, it has been great to talk with you. This has been tremendously informative and eye opening.
Glad we could talk Andrew. Good to see you. It has been my pleasure and I look forward to doing it again.
TransferTo is a Global Airtime Remittance Hub that interconnects mobile operators’ prepaid systems to deliver end-to-end, International Airtime Remittance services via our global network of 350+ Mobile Operators in 100+ countries. For more information: http://www.transfer-to.com
Eric Barbier, CEO, TransferTo
Before founding TransferTo in 2005, Eric co-founded Mobile 365, the global leader in mobile messaging interoperability, delivery and settlement of SMS and MMS content. Mobile 365 was then acquired by Sybase in 2006 (for 425 M USD). In his present role as Chief Executive Officer, Eric oversees the strategic direction of the company as well as manages the relationships with many of TransferTo’s customers and partners. Eric is based in TransferTo’s head office in San Francisco, Ca.
Barnes is a self-confessed payments “geek” and recognized entrepreneur-intrapreneur working in Silicon Valley. He leverages his business development track record and network in tech, startups, retail, and FI’s to profile opportunities and solve challenging revenue problems in payments and mobile commerce. Barnes has held executive positions internationally with Sprint, Global One, and 2Roam Mobile. He founded the National NNN Investment Group and is an Advisor to the Electronic Transactions Association (ETA). Barnes has an MBA from Waseda in Tokyo 早稲田大学大学院 and a BA from Penn State. He can be reached at @AndrewinSV and Linkedin.