With all the talk about the $700 plus billion that will be required to stop the financial avalanche on Wall Street, a $100 billion might not sound like a lot of money these days.

But it’s plenty for the companies that are scrambling to enter the fast-evolving mobile money remittance space and cash in on the world’s biggest – and growing –money transfer market sector.   Their target is the U.S. to Latin America market, which accounts for at least a fourth of the estimated $350 to $450 billion sent internationally each year.

Industry players say statistics on the size of the U.S. to Latin America money transfer market vary depending on the source, but they all contend that it’s much greater than what is officially being reported.  And they all believe that mobile remittance services are the key to getting a piece of the cash cow that, until now, has been largely monopolized by Western Union and other traditional money services companies.

“When it comes to mobile banking and financial services, mobile remittance is the low hanging fruit,” notes Daniel Csoka, Founder and CEO of aKos Technology Corporation, which has developed a mobile remittance service tied to the purchase of prepaid wireless minutes.  “That is where the big opportunity is.”



The Case for Mobile Remittance

It takes only a base understanding of the current money transfer process to realize why mobile remittance services – which enable people to send money internationally via their cell phones – are so attractive.

Under a traditional money transfer scenario, a person is required to physically go to a money services location to send money.   A typical money transfer can cost anywhere from $15 and up, and can take at least a day to arrive at its destination.  And to obtain the money, the recipient must go to a designated money transfer location in their country, which, in addition to being inconvenient, can be dangerous.

Uni-Mas Corporation President Oscar Munoz, whose company recently launched a mobile remittance service called Rocket2U Mobile Money, says anyone who has gone through the experience knows just how much of a hassle it is.

“First you have to take the time to go to the money service business,” notes Munoz, who is originally from Puerto Rico and still sends money regularly to family members there.  “Once there, you have to pay to cash your check.  Then you pay $14.99 to transfer the funds.  Then there is the international currency exchange, which costs money, and then, on top of all of that, you are putting your family in harm’s way because everyone knows that if you are going to a money services location, you are either going in or out of there with money. 

“If you can replace this with an inexpensive, five second transaction that keeps your family out of harm’s way, you will never go back to a money service organization.”



Different Approaches to Mobile Remittance

While the race is on to grab up market share from traditional money transfer service providers, the approaches to the mobile remittance services being offered are vastly different and, in some cases, still evolving. 

At the core of Uni-Mas’ Rocket2U Mobile Money remittance service is its open loop debit card, UniBancard Prepaid MasterCard.  Originally, Uni-Mas developed a mobile banking solution to enable cardholders to check their card balances, a move designed to reduce the high volume of calls coming into customer service.  From there, Uni-Mas developed the money transfer service, which enables people to instantly transfer money from one card to another.

To use the Rocket2U Mobile Money service, people are required to purchase two UniBancard cards and send one of the cards to their loved one in Latin America.   Depending on the country of residence, the recipient also has the option of picking up the card from any Uni-Mas’ partner sponsoring bank branch within that region, or having it delivered to them via carrier. For consumers who opt to use the Rocket2U Mobile Money service, Munoz says transferring funds is as simple as sending an SMS text message to the Uni-Mas card processor, which instantly verifies their mobile phone number and the Rocket2U password they have been assigned.  Within seconds, the Uni-Mas prepaid card processor verifies the cardholder account number with MasterCard and manages the transaction based on the cardholder account balances at a master banking account.

 “We originally started with a downloadable application but it didn’t take us long to understand that many prepaid phones couldn’t facilitate it so we changed to SMS,” notes Munoz.  “Our Rocket2U Mobile Money service is easy to use, works with every prepaid wireless handset and is fast – it takes only a few seconds to complete the transaction.”  

Paris Holt, CEO of TelSPACE, says his company also currently uses a prepaid MasterCard (mCASH) as the financial instrument used to send and receive money via its mobile remittance service.  But rather than rely on SMS – which Holt says is ripe for hackers and fraud – his mobile application uses the carrier data network, which Holt says enables the transaction to be sent in a secure, hacker proof manner.

“If someone hacked the carrier network, they couldn’t read what we are sending because we encrypt the information and split it apart and put it back together later,” explains Holt.  “With SMS, beyond the safety and security issues, there is the fact that it’s antiquated technology.  It takes anywhere from 10 to 15 seconds to never.   So there is the question of ‘Are you actually going to receive what you are sent?’”

Consumers who use TelSPACE’s mobile remittance service are first required to download the mobile application, or purchase a handset already preloaded with the application.  To transfer money between mCASH cards, Holt says consumers simply go into the application, type in the mobile number that they want to send money to, enter their PIN and the amount of money they want to transfer, and hit “send”.

While the card to card transfer is the current solution TelSPACE offers, Holt is working on a money remittance solution that would enable people to transfer money from their mCASH card directly to a bank account in Latin America.  He says his company has already secured banking relationships in Europe and the Middle East, and wants to take the same approach in Latin America.

“We like what we are doing now, but I need to make it easier for consumers,” notes Holt. “We are going into every single market and picking the largest bank or two –and with all the bank consolidation, one relationship can get a lot of banks.  Then, if people want to participate, we tell them where to go to get a bank account and they are set.”

Munoz acknowledges that SMS can present a security challenge, but says his company takes numerous steps to ensure the transaction is safe – such as ensuring that no card numbers are traveling through the airwaves, just highly encrypted data that can only be interpreted by the Rocket2U platform.  He says his company also ensures the password for SMS transactions are different from the PIN the consumer would use to withdraw funds from an ATM, IVR or Internet-based transaction.

“We even provide our customers with the ability to name their own SMS commands which would not mean anything to anyone ‘listening’ in on the SMS traffic,” says Munoz.  “Finally, given that all R2U transactions are performed among our cardholders within our card platform, the audit trail of any possible fraudulent transaction is always at hands reach which, together with our Transaction Monitoring Service, makes our mobile remittance services as secure as one can get within this industry today.”

As for an application-based solution, such as the one TelSPACE offers, Munoz and Csoka say the problem is that it doesn’t meet the needs of the audience being targeted.

“It’s not the handset that can’t handle the data,” explains Csoka.  “It’s `Do they have a data plan?’ And even if it were the case that the data plan is free and the technology is already loaded, does that unbanked immigrant working in the fields doing drywall know how to use a gooey on a handset?”

Enter aKos Technology’s mobile remittance service, which uses the existing prepaid wireless infrastructure and process of adding funds for prepaid minutes to facilitate the money transfer process.

“We looked at the demographic, which is Hispanic, cash-based and unbanked; and looked at the kind of phone they used, which is prepaid cell phones.  Then we looked at their behavior and at what they are doing today,” says Csoka.  “What they do is go to a prepaid location, top up their phone an average of $26 per top up, and make a phone call to Mom to find out if she needs money.  Then they collect the money, go to Western Union, give them $300 to transfer the money, and then call their Mom to say, `Here’s the transaction number and the location to pick up the money.’  We realized that a wireless carrier already has all of these touch points so we thought, `Instead of loading $30 on the phone, why not load $330 and transfer the $300?’”

Unlike card-based solutions, which require the recipient to have a prepaid debit card issued by the same provider in order to receive funds, Csoka says thanks to partnerships with money transfer operators, people using his mobile service can deliver funds to thousands of locations throughout Latin America – including 10,000 locations in Mexico.  He says the money pick up locations range from banks to grocery stores, to movie theaters – places that he says aren’t automatically associated with money services and are therefore safer for the recipient. 

“Today, wireless operators have many different methods to add funds to a phone account and we don’t want to change customers’ behavior or the infrastructure or the carriers’ way of doing business,” says Csoka.

“We were involved with the billing side of ringtones.  When someone wants a prepaid ringtone, their balance is queried to see if there is enough for the ringtone transaction and if there is, the money is deducted and paid to the ringtone provider.  We are using the same process with our mobile remittance service – we have simply leveraged the existing technology and eco system of the day.”



The Future

To be sure, security and ease of use aren’t the only challenges facing the evolving mobile remittance sector.  There are also existing and emerging compliance rules people are grappling with, along with implementing the right revenue models that will ensure all layers in the sales process make money – while offering the most cost-efficient solution to consumers.

But even with the market challenges and the different philosophies for how to approach them, the one thing everyone involved in the sector agrees with is that mobile remittance solutions are the key to tapping into the huge Latino market opportunity. 

“All you have to do is look at the census data,” notes Munoz, who is also interested in tapping into the estimated $900 billion spending power of Latinos in the U.S.  “Last year in the United States, the ratio of birth to deaths for white, non-Hispanics was one birth for every death.  For Latinos, it was 8.2 births for every death.  The Hispanic population growth is just amazing.”