Tech@State: Mobile Remittances

On Monday at the State Department, I joined a couple hundred innovators, policymakers, entrepreneurs, and thinkers at Tech@State: Mobile Money, which explored mobile commerce and its applications throughout the world.

One of these emerging uses lies in the field of remittances, championed by Bill Barhydt, founder and CEO of m-Via -- the first international mobile remittances company based in the U.S. In a nutshell, his business allows users to send and receive micro-payments using their mobile phones, creating "mobile wallets" which allow recipients to decide where, when, and how much they withdraw.

M-Via has enjoyed remarkable success in its roll-out phases, with 15% week-on-week growth in participation and nearly four times as many remits compared to conventional snail-mail or branch-banking methods. And although m-Via currently operates with Mexico, Barhydt told us that the program will expand to sixteen more Latin American countries by the end of this year.

Three take-away words from yesterday's conference easily explain m-Via’s uncommon success: convenience, security, and interoperability.

Convenience: Barhydt’s company saves users valuable time and money. The conventional process -- primarily mailing cash or wiring via Western Union -- consumes too many resources for both parties, who must have a credit-worthy bank account, time to fill out paperwork or visit the post office, and money to cover associated fees and travel costs. m-Via eliminates these issues. Once an SMS transaction is sent, all receivers need to do is reply, enter a personal code, and visit one of the tens of thousands of partners, retailers, and compatible ATMs stationed throughout the country to withdraw funds from their mobile wallet.

Security: In one rural town Barhydt visited during his recent trip to Mexico, wise families won’t make the trip to the bank to pick up remittances on Tuesdays. Thieves know, he told us, that most families withdraw remittances on Tuesdays, making the trip a dangerous outing. Considering that migrant workers send larger amounts on fewer occasions to save money, families feel at-risk picking up and carrying large sums of cash. m-Via allows recipients to take shorter trips to withdrawal facilities and to only take out as much as they need, leaving the rest in their “mobile wallet.”

Interoperability: Where m-Via shows the most promise is in its infrastructural capacity to function with major interbank networks (that Cirrus or Interlink logo on the back of your bank card). In other words, m-Via isn’t trying to get users to switch banks, change carriers, or use certain ATMs; on the contrary, the goal is to make the service as widely available and accessible as possible.

Contrast this to mobile money in the Philippines, where remittances comprise 11%, or $15.8 billion, of the country’s GDP. In this space, Globe GCASH and Smart Money compete heavily for mobile money consumers, making them use each company’s proprietary financial system rather than focusing on compatibility (although it must be mentioned that the latter recently reached an agreement with MasterCard). These “low-interoperability, highly competitive landscapes”, said Barhydt, make the mobile money ecosystem fragmented and inefficient.

m-Via’s success is magnified in light of the daunting obstacles facing the mobile micro-payment marketplace. The first, Barhydt explained, is the congested and obsolete financial regulatory process which stifles a small 35-strong company such as m-Via and absorbs too many resources. Another more serious issue, raised by Obopay CEO Carol Realini, is the fierce opposition mobile money start-ups encounter by powerful and established mobile operators in foreign markets. Indeed, Barhydt echoed that América Móvil, Mexico’s largest mobile provider led by mega-billionaire Carlos Slim, has given m-Via a hard time getting a foothold in the marketplace.  

Despite these obstacles, m-Via’s business model seems to be working, primarily because he’s tapped into the relatively untapped market of mobile remittances -- a $300-billion-a-year industry involving nearly 200 million migrants worldwide. And since users can send and receive money without a bank account, the program provides a great option for the marginalized unbanked population. All said and done, m-Via joins a fleet of new companies set to prove how mobile technology, when done right, can be leveraged to the benefit of millions.