To say that immigration from Mexico to the United States frequently involves informal and illegal channels is an understatement. The border between the United States and Mexico is rather porous, with plenty of people, money and who knows what else traversing it every day. Coming to the United States in search of a better life (or at least higher wages) can be an expensive and extortionate experience. And once migrants get here, and get on their feet, they continue to be shaken down for their money everywhere they turn: at Western Union, at the check cashing store, at the payday lender. Dealing with these alternative financial service providers can eat up anywhere from 10 to 20 per cent of an immigrant’s take-home pay, according to Bill Barhydt, CEO of Boom: the first cross-border mobile banking and remittances service. Barhydt hopes to change the way newcomers to the U.S. send money to their loved ones, by leveraging the power of mobile technology.
Boom just closed on a $17 million round of financing led by Digicel Group, the largest mobile provider in the Caribbean. The company changed its name to Boom from m-Via, as it plans to expand its network across Latin America and the Caribbean. By expanding its network on the receiving side of the remittances, Boom hopes to make the service more popular with people in the United States, too. It has the potential be something like M-Pesa, Kenya’s much-lauded mobile banking service, but for the Americas.
Boom’s main value proposition is this: we make it affordable and easy to send money home. About 60 per cent of Latin American immigrants send money to relatives back home. According to a report by the Inter-American Development Bank, in 2011 Latin American and Caribbean immigrants sent $61 billion home. It’s a big and lucrative business for whoever moves the money, and unfortunately many immigrants are un- and underbanked and rely on expensive nonbank remittance providers who charge exorbitant fees. To send $500 to Mexico via Western Union can cost as much as $25 — that’s a 5 per cent fee. And it scales upward along with the amount of money sent; to send $1,000 costs about $40.
“Our goal is to replace that feeling of helplessness with a feeling of control,” said Barhydt, in a phone interview with MyBankTracker. Boom users can send money to anyone with a mobile phone in participating countries. To demonstrate, he sent me $0.10 (FULL DISCLOSURE). Shortly thereafter, a text came to my phone: “Boom! William has sent you 0.10 USD via Boom! For more info, please call…” and it offered an 800 number. Boom text recipients can call that number, and set up an account with Boom’s call centre. Within days, a debit card will arrive to their doorstep, which gives them ATM and POS access to the remittances they receive: it’s essentially a bank account, and it’s totally free for recipients in foreign countries.
For recipients in the States, it’s free for the first year, after which point Boom charges a $25 annual subscription fee for using their remittance service. They may load their account at kiosks at 7-Eleven for just a couple dollars. Barhydt said they chose this route because MoneyPaks, frequently used to load money onto prepaid debit cards, cost $5 which is a bit much. Then, all it takes is an SMS message to send money home to your loved ones — meaning the Nokia 1100 can work with Boom. Mobile penetration in Mexico is around 90 per cent, according to Barhydt, and it’s approaching that in Central America and the Caribbean.
Sending money via mobile is safer than sending a traditional remittance to the developing world, according to Barhydt: “It’s the same story all over Latin America and the Carribean: people receiving money from the U.S. getting robbed on a regular basis. I can’t think of the last time I spoke with somebody who receives money from the U.S. who couldn’t give me a story of either being robbed or having a family member be robbed.” On a recent trip to Haiti, Barhydt saw refugees in a tent city who kept cash under their pillows — but stole electricity from the grid to charge their mobiles.
Of course villages in Mexico and most of Haiti don’t have robust electronic payments infrastructure, so the Boom debit card might be of little use to many recipients, which is why Boom will be building out its on-the-ground network of “mobile money agents,” as Barhydt calls them. Boom is in contract to hire 25,000 mobile agents in Mexico. These agents will accept Boom payments and give out cash in locations where there aren’t ATMs doling out pesos, or stores with card readers. According to a spokesperson, these agents are unlikely to gouge their customers. Boom polices the agents closely and can revoke agents’ privileges at any time, and furthermore, Boom believes firmly that by hiring tens of thousands of agents, they ensure robust competition, which should lead to fair pricing.
“Now what you end up with when you tie all this together,” said Barhydt, ” is a really good cross-border mobile money ecosystem.” Earn money in the U.S., load it onto your account, send a text, and recipients can take out cash at their local Pemex station (or wherever.) It’s certainly not seamless, but it seems safer, easier and cheaper than the alternative.
Response has been good, according to Barhydt. Though he didn’t share any specific user numbers, Barhydt did point out that Boom users are using the service more frequently than immigrants typically use remittances. “If you’re a Boom user you’re probably sending money to your family anywhere from two to four times a month, as opposed to every four to six weeks with cash services,” he said, adding that “people are reverting to behaviour that’s more in sync with how they really want to share and manage money in the first place.”
For all the bloviating about the future of commerce and mobile wallets that takes place in the tech/finance world, it’s always refreshing to see a service that actually helps empower those who actually need financial services. People in Haiti run the risk of being robbed when they pick up cash at Western Union, and their relatives here in the States shouldn’t have to spend 5 per cent of their pay just to help out back home. If Boom can achieve scale, and its mobile money agents don’t abuse their power, we might actually have an example of mobile technology truly changing the lives of immigrants in the U.S. and their folks back home.
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