There's little argument that banks are failing miserably at making customers of the more than 28 million Americans classified as unbanked. This failure means banks lose not only potential deposits, they also lose the transaction revenue these customers routinely hand over to money service businesses when they send cash home.
And it's a lot of cash. Western Union, MoneyGram and Ria (a subsidiary of Euronet Worldwide) have racked up revenue of more than $7 billion in 2008, according to Aite Group. Officially recorded remittance dollars topped $280 billion in 2006, according to World Bank statistics, not including the vast sums moved through informal networks globally.
But the remittance market has a high barrier to entry because it requires branches or pickup locations globally. Charlotte, NC startup Privier Inc. aims to solve that problem by allowing bank customers to send cash around the globe for pick up at any participating ATM, even without an ATM card.
In the Privier model, a customer who wants to send cash initiates a money transfer through an online banking account, or mobile banking application, and receives a 10-digit transaction number.
The sender then transmits the transaction number and amount to the recipient, who goes to the designated ATM and selects the "pickup cash" option on the ATM screen.
The person on the receiving end of the transaction gets the cash after entering the transaction number and amount - and he or she does not need an ATM card to execute the transaction.
"There's a huge need. For a couple of years banks have been trying to get into the remittance industry," says Charles Polanco, founder and CEO of Privier. "Our product is innovative because it allow the banks to be a competitor to Western Union and MoneyGram."
From a technology perspective, the patent-pending product involves the installation of a Privier cash server into the bank's data center, which must then be connected to the bank's online banking application and ATM network.
The business model has the consumer paying a transaction fee, which is divvied up between Privier, the originating bank and the bank whose ATM dispenses the cash; the company is also looking at licensing deals.
"The goal is to create an overlay network where you can pick up [cash] at any bank," Polanco says.
That's a lofty goal for a technology company with no disclosed partners. Privier says it is in talks with banks in the U.S., as well as the Dominican Republic, China, Mexico, India, Ecuador, and other countries that are significant recipients of U.S. remittances.
Industry analysts are intrigued by the concept. Within days of Privier's public launch, Polanco was invited to give a speech at a BAI remittance conference.
Aite Group Senior Analyst Nick Holland says the concept is interesting, though perhaps a bit clunky in its current iteration.
"Banks would be interested in it not just for the remittances, but tapping into the unbanked market," Holland says. "The system probably needs a bit more streamlining."