The synergies between prepaid and
remittance applications have not gone unnoticed by leading industry
players, particularly those serving the sizable Hispanic segment in
the US. A new player in the market, RegaloCard, is aiming to
capitalise on this demand by using prepaid gift cards as a
remittance tool, as Charles


The one-upmanship in the
international remittance market continues unabated, with the newest
player delivering quite a shot across the bow: free text
message-based, retailer-specific funds transfers to Central
America. Regalocard, a Miami-based prepaid card company, has
developed a system that allows senders to purchase a prepaid gift
card in the US for use at a specific retailer in Central

When the consumer buys the card, he tells the
cashier the recipient’s name and mobile phone number, which the
cashier enters into RegaloCard’s back-end system using software
integrated into the point of sale (POS) system. The cashier then
gives the sender a code that serves as a tracking number for the

The recipient instantly receives a text
message 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

Leveraging mobile phone

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The RegaloCard service works with
all mobile handsets and all carriers worldwide and is delivered
instantly 24 hours a day, 365 days a year, so recipients no longer
have to go the bank or only receive gifts from their family members
during banking hours. RegaloCards are available from some of the
best-known retail brands in Central American countries, allowing
consumers to choose from brands they know.

RegaloCard purchases small, inexpensive mobile
terminals in bulk to distribute to participating retailers to
complete transactions, essentially creating a private-label prepaid
network. RegaloCard receives a percentage of the funds loaded onto
the cards for each participating retailer.

“The markets we understand on both sides of
the border are all aimed at building better mousetraps for the
consumer,” said Gregory Keough, chairman and CEO of RegaloCard.
“Consumers are spending hundreds of millions of dollars a year in
costly money transfer fees and are still not getting the service
they want. We have used mobile payment technology and a different
business model to accomplish these goals, providing consumers for
the first time with the offering they really want.”

It is a free and instant replacement to more
costly money transfer services, and was highlighted in a recent
Fox-Pitt Kelton Cochran Caronia Waller analyst report on Western
Union, which described RegaloCard as “disruptive and

Fox-Pitt Analyst Bill Carcache, the author of
the report, compared the benefits of RegaloCard’s free and instant
money transfer mobile payments technology and business model to the
current money transfer models used by traditional money transfer
companies and concluding that RegaloCard has a game-changing

“For Western Union, RegaloCard provides
evidence that the threat of a competitor devising a superior
technology is no longer an abstract concept too distant to
acknowledge,” Carcache wrote. “RegaloCard has proven that money
transfers can be completed in a way that is instant and free to
both the sender and the beneficiary. The beneficiary is able to
enjoy 100 percent of the remittance received from the sender
without any charges being imposed on either the front or the back
end of the money transfer.

“No matter how much Western Union spends on
new technology in an effort to defend its market position, it
likely will never be able to offer money transfers that are faster
than instant or cheaper than free.”

Expanding the service to other

While initially focusing on the US
Hispanic market, RegaloCard plans to expand the service to other
regions that have a high level of immigrants residing in the

RegaloCard has been conducting a slow roll-out
since September, and already has secured some high-profile
international restaurant chains to accept RegaloCard payments,
including Burger King and Chili’s Bar & Grill in El Salvador.
Farmacias Economicas, a leading El Salvadorian pharmacy chain, also
has agreed to accept RegaloCard. The company soon expects to
announce participating retailers in Guatemala.

Consumers sent about $8 billion using funds
transfers to those in El Salvador and Guatemala alone in 2009,
according to RegaloCard. The vast majority of those transfers go to
fund everyday expenses, so a retailer-specific prepaid system makes

The company’ distribution network is scattered
across the US 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.

Xooming forward

San Francisco-based Xoom, which
develops internet-based money transfer applications, recently
partnered with Bancolombia to provide customers faster access to
money and more locations for receiving remittances in Colombia.
Xoom’s money transfer service allows customers to send money to 42
countries around the world, including Colombia, from any
internet-enabled computer using a checking account or credit card
to fund the transaction. The money can be retrieved at Bancolombia

In Mexico, Xoom has entered into similar
partnerships with institutions like Banorte, BBVA Bancomer and
HSBC. In the Dominican Republic, it is working with Remesas
Dominicanas, a member of Centro Financiero BHD. In Argentina, it
has partnered with MORE Money Transfer, Bancomer Transfer Services
and Latin Express.

Meanwhile, in Bolivia, Xoom does business with
MORE Money Transfer, Banco Ganadero, Remesas Bolivianas, Uimpex,
Banco Bisa and Banco Mercantil. In Uruguay, Xoom’s partners are
Bancomer Transfer Services, Latin Express and MORE Money Transfer.
Other LatAm countries where Xoom has partnerships are Chile, El
Salvador, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama
and Peru.

A 2008 study by Boston-based consulting firm
Arthur D Little found that while the banking industry in Asian
countries is advanced with implementing mobile banking systems,
most Latin American countries “have not yet started to exploit the
potential of mobile payment services significantly”. The study said
it expects “a rapid development in these countries as soon as an
optimal service platform is selected for implementation”.