m-Via Launches Mobile Payments for Immigrant Workers

"Our goal is to kill the Western Union MoneyGram cash services model," says Bill Barhydt, CEO of m-Via. It's a surprisingly violent statement from someone whose idealistic mission is to bring payment and banking services to the underbanked.

m-Via has built a mobile payment network designed to provide immigrants with a low-cost, safe alternative to high-fee money transfer services. Today, the company rolled out a mobile money service called Boom for this community, which Barhydt and Hillary Clinton refer to by the Biblical term "diaspora."

"Citi is the bank of the rich world," Barhydt says. "I look at migrant populations as being the middle of the pyramid. I want to be the bank in the middle of the pyramid." This market is the $60 billion a year that's sent from U.S. workers to their families in other countries. Where traditionally immigrants use wire transfer services that cost $20 or more, "I want to eliminate all those fees, which come to tens of billions of dollars a year, and make all those people part of the traditional system that gives them access to all the kinds of commerce they should have."

m-Via has partnered with the State Department on a Diaspora Engagement Alliance that helps people in migrant communities learn how to become entrepreneurs and find investment opportunities. Yesterday, they launched an idea marketplace where entrepreneurs from the diaspora community can get their best ideas sponsored and where m-Via will provide banking services.

The product m-Via is rolling out today, Boom, is a bank account that uses the customer's phone number as the bank account identifier and lets people store and access funds via text message, as well as send money to other Boom accounts. If a member sends money to the phone number of someone who is not a member, m-Via will instantly create an account for that person. There are no transaction fees for the user, although customers pay a $25 annual fee for the Boom account. M-Via also charges merchants a transaction fee. But both these fees come to less than existing mobile payment players like Western Union charge, according to Barhydt.

To enable customers to fund these accounts, m-Via has built a "load network" at 15,000 U.S. locations, including convenience stores like 7-Eleven, bill payment network PayXchange, and supermarket chains.

m-Via acts as the agent of CBW Bank, a 119-year-old wholesale merchant bank based in Weir, Kans. (CBW is also a bank partner of Simple, Josh Reich's online and mobile banking platform that until its rebranding today was called BankSimple.) m-Via has worked out compliance issues such as Know Your Customer rules. "We're our own account processor, we help the bank with regulatory filings," Barhydt days. The accounts themselves come with a debit card are also integrated into Shazam, the bank-owned electronic funds transfer network, and MasterCard, so transactions can be routed through those debit networks.

To access cash in their Boom account, urban and U.S. users can use ATM machines that accept MasterCard debit; there are 150,000 of these in the U.S. and Mexico and another 650,000 in other countries. For people in extremely rural locations where there's no ATM within an hour's drive, m-Via has built an agent network. In Mexico this is 25,000 village store locations at which customers can purchase products and get cash back by sending a text message to the store's phone number. (Mexico receives $27 billion a year in money transfers from the U.S.) "The net effect of all this is a massive network that for first time can bank all these cash service consumers in a way that's useful," Barhydt says.

 

To make a payment, customers send a basic text message to the phone number of the recipient. m-Via's software will call the customer back and have them type in a personal identification number before sending the money. Payments can be of any size from $5 to $1,000.

"You have all these people who literally send money home once a month, now they can send it several times a month because they're not being reamed with transaction fees," Barhydt says. "When you eliminate the transaction fees, the psychology of free takes over and people's usage patterns revert to what they really want, which is sometimes in an emergency I might want to send someone $15." Tests have shown this customer segment would also send more large-dollar payments if they were free, too. "That creates a whole new economy around mobile banking," Barhydt says.

Underbanked people will eventually use Boom not only for money transfers, but as bank accounts they can use to deposit their salary, pay bills with their debit card and cash checks from their phone, Barhydt says. "They can do all these things that you and I take for granted, but now they have a model that's inexpensive, they're not getting nickled and dimed," he says. "The movement of money costs a bank nothing if it stays within the bank, why would you charge a fee for that?"

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