Gift cards issued by Latin American merchants are being
used by start-up RegaloCard to challenge established methods for
remittances from the US and Canada. The virtual gift cards travel
at the speed of an SMS message and there is no charge to either
senders or recipients of the cards, says Robin
Arnfield.
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RegaloCard’s remittance system
involves a migrant loading money onto a gift card (‘regalo’ means
gift in Spanish), which they obtain from a US or Canadian
retailer.
After the card is activated, a PIN
for the associated virtual gift card account is sent via SMS to a
relative in the migrant’s home country. To make a purchase at a
participating retailer connected to RegaloCard’s network, the
recipient gives their PIN and cellphone number to a clerk.
To accept RegaloCards, merchants
need a dedicated mobile point-of-sale terminal supplied by
RegaloCard.
The cards’ costs are funded by
merchants. They can be used for remittances as low as $5, making
them very competitive with Western Union and MoneyGram which levy
per transaction charges.
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By GlobalData“Merchants see an opportunity with
RegaloCard,” says Ryan Deslippe, CEO of SelectCore, which is
gearing up to distribute RegaloCards from merchant locations in the
US and Canada.
“Merchants see remittances from
North America as a new revenue stream.”
RegaloCard offers an innovative
service that will ultimately outshine incumbents such as Western
Union, says a research note by stockbroker Fox-Pitt Kelton Cochran
Caronia Waller.
“No matter how much Western Union
spends on new technology to defend its market position, it is
likely that it will never be able to offer money transfers that are
faster than instant or cheaper than free,” the report says.
“While RegaloCard would appear to
pose little threat to Western Union on the surface, we view its
technology as disruptive and ground-breaking.”
RegaloCards also compete with Visa
and MasterCard-branded gift cards, says David Lott, senior
vice-president at US-based consultancy Speer & Associates.
“Although these network-branded
cards have significantly more points of acceptance than
RegaloCards, there are fees associated with the cards for
purchasers, while there are no such fees for RegaloCards,” Lott
adds.
RegaloCard was co-founded by
entrepreneur Gregory Keogh, now chairman and CEO of the Miami-based
firm. Keogh says he gained his Latin American expertise through the
three other Latin American financial services firms he founded,
including ZonaFinanciera.com.
He has been building up RegaloCard
since 2007, developing the technology platform and building
connections to US distribution networks and Latin American
merchants.
RegaloCard has signed up an
extensive network of agent partners across the US and Canada to
sell its gift cards alongside prepaid calling cards.
“Almost all immigrants use calling
cards to phone their family back home,” says Keogh. “RegaloCard has
now made sending micro-money transfers not only profitable but as
easy for the consumer to use as a calling card.”
Partners include prepaid calling
card network operator SelectCore; transaction processing services
provider iPayStation, which serves 4,000 retail locations in the US
and Canada; Dinero Ahora, a money transfer marketing company
serving 1,200 locations in the US; and IDT, a distributor of
prepaid products to the US immigrant market with 250,000 locations
nationwide.
“In all, we reach 200,000 potential agents in the US and
Canada,” Keogh says. “Currently, 500 agents are selling thousands
of RegaloCards per week in the US but RegaloCard is rolling out
more agents every week.”
SelectCore
SelectCore’s partnership with
RegaloCard is still at trial stage, says Deslippe. SelectCore
provides calling card services to Latin American countries such as
Honduras, El Salvador, Mexico, Brazil, and Colombia.
It has a network of 10,000 direct
sales agents in the US and 50,000 indirect outlets in the US and
Canada.
According to Deslippe, SelectCore
has completed the integration of its service with RegaloCard.
“We worked on the development and
extension of our existing platform to include RegaloCard over the
last year and we expect to have full roll out in our distribution
channel early in the second quarter of 2011,” he says.
Deslippe says the market for
RegaloCard is still at a very early stage.
“It will grow because remittance
gift cards provide a value proposition for senders, recipients and
definitely merchants,” he says. “SelectCore is working with a few
other remittance gift-type aggregators besides RegaloCard.”
Despite RegaloCard’s impressive
network of distributors, Lott thinks it is the signing up of
convenient redemption outlets which is key to a successful
remittance gift card programme.
“RegaloCard must ensure it has a
significant number of retailers in destination countries
participating in its programme to make the product attractive to
potential buyers,” he says.
“A characteristic of Latin America
is that, outside some major fast food brands and big box retailers,
the retail market is dominated by local and regional supermarkets,
pharmacies and general retailers. Signing agreements with these
local and regional players is time-consuming and pushes up
operating costs.”
Keogh sees a market opportunity in
the smaller Central American republics.
“The size of the remittance market
is $10.3bn per year for El Salvador, Guatemala, and Honduras
combined, compared to $26bn for Mexico,” he says.
In April 2010, RegaloCard announced
exclusive agent partnerships with Almacenes Siman, a Central
American department store chain with operations in El Salvador,
Guatemala, Nicaragua and Costa Rica.
In October 2010, it announced a
partnership with Unicomer Group, which owns the La Curacao,
Almacenes Tropigas and Loco Luis chains. The group’s 300 retail
locations span Guatemala, Honduras, El Salvador, the Dominican
Republic, Nicaragua and Costa Rica.
“RegaloCard has also signed up merchants in Haiti and Jamaica
and will be live there by the end of the first quarter of 2011,”
Keogh says.
