How an online remittance app could help millions of people
The phrase ‘social entrepreneurship’ is not always the easiest concept to define. Here’s a case in point: Does a small company that uses as much of its income as possible to help people, but isn’t scaleable, score more highly than a big business that doesn’t have a charitable bolt-on, yet caters to millions of previously disadvantaged customers simply because its model works so well?
This discussion took place at the Chivas The Venture regional finals last month, and it resulted in Now Money triumphing in the face of some worthy competition. It most definitely is a business rather than a charity, but one that could have a transformational effect on a huge portion of society, in the region and further afield.
Its co-founders are Katharine Budd and Ian Dillon, both of them bankers with London and Dubai experience. They’d worked with the new breed of online-only banks in the UK and wondered if such a business might work in the GCC – and it quickly became apparent that there was a very obvious gap.
Astonishingly, only 20 to 30 percent of the population earns enough to meet the minimum salary requirements of a traditional bank, where the average threshold is Dhs5,000 per month. The rest receive their salary via a pre-paid card through the Wages Protection System. This offers little functionality beyond one withdrawal of their entire funds (subsequent ones are charged) and they can’t use cheaper online remittance services that require a standard bank account. “And this,” says Katharine Budd, “led us to realise that the region was crying out for an alternative.”
Budd explains how their follow-up research proved the point. To transfer money home without bank account you must withdraw it from an ATM. You’ll probably have to queue because mostly everyone where you live will get their wages on the same day. And if you’re a labourer you won’t be allowed in any shopping malls, further reducing the number of accessible cash machines. Then you’ll go to an exchange house and queue again to transfer money, with typical fees ranging from 10 to 12 percent.
As well as being a waste of time and money, it’s a missed opportunity. Almost all of these people have smartphones and come from countries that have established mobile payment systems. Servicing this huge audience is a no-brainer, so two years ago Budd and Dillon set about creating a solution.
“We spent six months refining the idea and working on how to get it regulated, which is difficult here,” says Budd. “Eventually we got a license that allows us to build a technology ecosystem around other financial providers such as banks and remittance services.” They then hired a former colleague to help build the app, got investment to build out the team, and went to market.
Given the complex architecture that lies beneath the surface, the top-line is simple. It’s a B2B set-up, so Now Money will sign up companies who agree to transfer staff wages to the app. Its workers are then trained to use the system, which allows them to pick a remittance provider (there are currently six on the app) depending on cost, transfer times and method of collection. Rates vary between one and four percent, which is comparable with the online providers that people with bank accounts can access. This includes the fee that Now Money makes from each transaction.
To return to the question posed at the outset, does this make Now Money a social entrepreneurship enterprise? “Well, I’m glad I’m working in a viable business that also addresses an enormous problem,” replies Budd. “You’re at much more of an advantage if you can do something commercially rather than just asking people to pay to do something good. It’s just very difficult to scale that model.”
Speaking of scale, the GCC remits $100 billion a year in remittances, the largest market in the world outside of the US. Clearly there is a huge business opportunity. And in case you still wonder if the service will make a real difference to peoples’ lives, consider that a worker with a Dhs30,000 annual salary would save nearly Dhs2,000 over five years using Now Money. This is the equivalent to 4.5 years of secondary school fees in the Philippines, 30 months of medical care in India, or six months’ rent in Pakistan. Clearly it will help millions of families in developing nations. Is that social entrepreneurship or just a really smart business solution? Almost certainly both.