Wednesday, August 29, 2018

Moving Money with Minimum Misery

Moving Money with Minimum Misery
By Douglas Cruickshank

The best things in life are free
But you can keep them for the birds and bees
Now give me money
That's what I want...

In the days before the telegraph, the legendary Pony Express, during the 19 months it operated in the United States --April 1860 to October 1861 -- was the fastest way to get money, messages and other mail, from the West Coast to the East Coast: 10 days. Today, it can take my bank, Citibank, a multi-billion-dollar corporation, just a few days less to do the same thing; 3-5 business days is typical, and it can stretch to 7+. Citibank uses computers not horses, but, in my experience, its computers (it must have a jillion of them)  are not much faster than 19th century horses. In other words, a Citibank funds transfer can take just half as long as moving money did in the 1860s. Not to pick on Citibank, all the big (and little) banks are just as bad. However, I'm guessing that when it moves hundreds of millions in illicit drug money for Raul Salinas, the brother of the former president of Mexico and his fellow criminals, things go a bit more quickly. (According to, Citibank's parent company "Citigroup operates in 100 countries, with $1.2 trillion in known assets [largely loans] and over $100 billion in client assets in private bank accounts." It has been convicted 17 times of illegal money laundering, usually drug money.)

Back in the sphere of legal businesses, at the heart of many inventive new operations is a seemingly intractable story, overturned by a solution so simple that no one’s thought of it. Take international money transfer. It’s not a sexy venture, but it became thrilling indeed when TransferWise, an easy-to-use smartphone app, started offering peer-to-peer, worldwide money transfers at 90 percent less than conventional financial institutions.TransferWise was started by friends Taavet Hinrikus and Kristo Käärmann. As their company history tells it, “Taavet worked for Skype in Estonia, so (he) was paid in euros, but lived in London. Kristo worked in London, but had a mortgage in euros back in Estonia.” Taavet needed pounds, Kristo needed Euros, but the exchange and transfer fees would take a big bite of their salaries. So each month Kristo deposited pounds into Taavet’s London bank account, and Taavet put euros into Kristo’s account. “Both got the currency they needed,”TransferWise explains, “and neither paid a cent in hidden bank fees.”

Hinrikus’s and Käärmann’s singular leap in thinking questioned how the market’s dominant players had for years been operating something as wham-bam basic as currency exchange and/or transfer, while charging exorbitantly for it. TransferWise’s success highlights a weakness that disruptive businesses frequently exploit: an historical lack of innovation by an industry’s leaders, such as Citibank. Indeed, the calcified, glacial money transfers the big banks offer has created fertile ground for the innovators, creators of smartphone apps that move money with zero fees in seconds, making their profits solely on their very favorable exchange rates. Names like TransferWise, SendWave (my personal favorite for USA to Africa transfers), AfroRemit, WorldRemit, SquareCash, Venmo, and a number of others are making the financial dinosaurs eat their (gold) dust. They are simple, fast, affordable, easy to use and convenient. Not traits of which one could accuse Citibank and the other old school banks.

Well, things are changing as another competitor dubbed Wave, has launched in the money transfer industry in Kenya, Tanzania and Uganda. The service was launched in its beta form back in May, 2014, by two entrepreneurs Drew Durbin and Lincoln Quirk. They already have an app out for both Android and iOS devices.

As Durbin and Quirk described their proposed operation when starting: "Wave wants to offer users free and instant money transfer service directly to their mobile wallets. ...users on the platform will be able to send money as fast as they can send text messages from one mobile phone to another. Additionally the service also allows for fund transfer into East Africa’s most popular mobile money service, M-Pesa. The service will save users from having to spend as much as $10 on each transaction charged by Western Union and MoneyGram. (the appr now also uses MTN and Airtel mobile money for direct transfers.)

Durbin, the CEO of Wave, says he was inspired to start Wave after the difficulties he experienced when working for an NGO in East Africa. After leaving the NGO, he teamed up with Quirk and together they founded Wave. Christin PetersonWave currently enables users to send money only to three East African countries; Kenya, Uganda and Tanzania. Users have the option of receiving their money through their bank issued debit cards or on M-Pesa with no fees charge and the best available rates. This is literally expected to give Western Union and MoneyGram a run for their money as the two have been accused of levying high surcharge fees and have problems with delayed payments.

I've polled ex-pat friends here, mostly current Peace Corps volunteers (PCVs). Their experience with these apps has been more positive than negative. Here's what a few of them had to say:

Katharine Murphy, a PCV in Tororo, Uganda, tells me:  "I’ve used WorldRemit a few times in country to send myself American money. (Backstory: my debit card never worked here and I can’t withdraw cash on my credit card, but I’ve needed some extra cash a few times. I looked into wiring money but the fees are super high. WorldRemit seemed like my best bet fees-wise; and I already had mobile money set up). When I first signed on to WorldRemit I liked them immediately. There was a customer service person (based in US, I think) who called me to confirm my identity and all that jazz, so I felt it was a nice secure service with people on the other end to help me if anything went wrong. The few times I’ve had questions, they always email me back promptly. The fees are super low, I think the exchange rates are OK (haven’t checked in a while) and the app is a breeze to use. It even has fingerprint sign-in, so I don’t have to remember yet another password. I also noticed the app had some bugs in the beginning that they’ve since smoothed out. Overall cool service, I recommend."

Karen McMillan reports, "Wave [aka SendWave] has been quite good. It's easy to use once you get your account set up. Customer support was extremely responsive, when necessary (rarely).

Christa Preston, Executive Director at EmbraceKulture in Entebbe, which serves the disabled, told me: "I used WorldRemit - worked really great for sending money to individuals - but they do not allow you to send money to NGOs, which I believe is a huge market in Uganda
People are definitely skirting it by sending to NGO directors and calling it "individual support" but that can have significant ramifications for the organization and World Remit in the future. Really great for sending money to individuals - but they do not allow you to send money to NGOs, which I believe is a huge market in Uganda.

And Peace Corps volunteer, Danielle Parker, said: "I first started to look into these apps when I was home this past Xmas. I needed to send money to [her fiance] in Uganda. I downloaded both but tried SendWave first since sending money had no extra charge associated with it. They required me to submit a photo of a government issued ID, which I thought was weird, but after reading reviews it sounded like a reasonably normal thing to happen to people. I did it. And tried to send money. They basically told me my money would be sent as soon as my ID went through. Never happened.
So I started using World Remit, which I’ll talk about soon. Recently MTN Mobile Money went down for a day or two (due to something on the UG side of things). I tried SendWave again and they said I couldn’t send money until my ID was processed. I questioned why I submitted my ID in Jan and now in July(ish) my ID still had not gone through. I text customer service the problem, and they wrote back asking my email to look up the account. I sent it and no reply. I tried to inquire again and no reply. I was basically done by then because World Remit worked so well for me all the time prior. In terms of WR, I feel they are fast, reliable and have good customer service. Yes there is a fee, but I’ve only paid between 1 cent and 2 USD. If you send to MTN it goes in within a couple minutes, I always get confirmation. If I email them, they respond within a day. When money has had to be returned, it happens within 3 business days and the one time I forgot and they just credited my account anyway. My best friend loves WR. AfroRemit is also supposed to be good, as is TransferWise.If you call customer service that’s the only pitfall as you will wait about 20 minutes but when you do get through they are super helpful and nice. I know people who love SendWave too but it has always given me problems. So I go with who I trust even for the fee."

The consensus seems to be that these apps work very well with only a few hitches. A friend who recently tried to sign up for SendWave got flummoxed by all the requirements and  cancelled transactions and finally gave up. There is a lot of fraud with money transfers to Africa from USA and Europe, so it makes sense that these apps are guarding their reputations by being extremely cautions.

Perhaps the reason the big banks have been slow to come to this party is that few people in Africa have bank accounts, so the banks overlooked the need for such a service and how lucrative it could be. Mobile money accounts that go directly to people's telephone accounts are much more widely used here, and in other developing countries, consequently, these "disruptive" new apps are gobbling up the business that big banks initially didn't even acknowledge. That's how companies become obsolete.

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