The continuing evolution of mobile technology has prompted a fledging mobile-payments company to develop a system that enables consumers to send free text message-based funds transfers to Central America.
The system from RegaloCard involves senders purchasing a prepaid gift card in the United States for a specific retailer. When the consumer buys the card, he tells the cashier the recipient’s name and cell-phone number, which the cashier enters into RegaloCard’s back-end system using software integrated into the point-of-sale system. The cashier then gives the sender a “unique code” that serves as a tracking number for the transaction, Keough says.
The recipient receives a text message instantly that contains a redemption PIN so he can use the funds at a participating retailer. To complete a transaction, the cashier enters the recipient’s mobile-phone number into a dedicated terminal. The recipient then enters the PIN to access the funds.
RegaloCard purchases small, inexpensive mobile terminals in bulk to distribute to participating retailers to complete transactions, according to Keough. He did not reveal the manufacturer.
At least seven retailers accept RegaloCard in El Salvador. The system works with any cellular carrier and phone.
RegaloCard has been conducting a “controlled rollout” since September, company Chairman and CEO Gregory Keough tells PaymentsSource. But the Miami-based firm already has secured some high-profile international restaurant chains to accept RegaloCard payments, including Burger King Holding Corp. and Chili’s Bar & Grill in El Salvador. Farmacias Economicas, a leading national pharmacy chain there, last week agreed to accept RegaloCard.
Keough soon expects to announce participating retailers in Guatemala.
Last year, consumers sent $8 billion using funds transfers to those El Salvador and Guatemala, according to Keough. “About 80% of those transfers go toward everyday things like groceries, medicine and even electronics,” he adds. Keough believes such use of transferred funds provides RegaloCard an advantage over traditional funds-transfer services because Salvadoran and Guatemalan immigrants sending funds back to their respective countries can be sure that they will be spent at a specific retailer, Keough says.
For example, a Burger King gift card purchased in the U.S. only can be redeemed at a Burger King in El Salvador. “That person doesn’t have to wonder if the money really is being used to celebrate a relative’s birthday at Burger King.”
The company’s distribution network is scattered across the United States, but consumers can purchase cards at locations that also sell prepaid phone cards, such as convenience stores in parts of New York, California and Nevada.
“We’re fundamentally changing a very large business in money transfers, but at the end of the day our business concept is simple and easy to understand,” Keough says.
RegaloCard receives a percentage of the funds loaded onto the cards for each participating retailer. “If we don’t sell any cards, they don’t have to pay us anything,” Keough says.
Western Union Co. and MoneyGram International Inc. did not respond to requests for comment about RegaloCard’s business model from PaymentsSource.
One analyst is convinced RegaloCard is a threat to the established funds-transfer companies. Bill Carcache, an analyst for the consulting group Fox-Pitt Kelton, wrote in a report his firm views RegaloCard’s technology “as both disruptive and groundbreaking.”
“For Western Union, RegaloCard provides evidence that the threat of a competitor devising a superior technology is no longer and abstract concept too distant to acknowledge. The threat is very real, and it’s here.”
Because RegaloCard’s business model is not dependent on charging consumers fees, the company “has proven money transfers can be completed in a way that is instant and free to both the sender and the beneficiary.”
Western Union and MoneyGram charge as much as $10 per funds transfer.
Keough believes RegaloCard has an opportunity to work with either company. “ I believe those companies can make more money on this platform than the way they are doing things now,” he says.
Early sales indicate consumers like this process, Keough adds. “You can’t get quicker than instant and cheaper than free,” he says. Keough did not reveal specific sales numbers.
