When it comes to mobile money, the hype is on these days. There are more and more mobile money services in an increasing number of countries. Success is highly dependent on many factors, including: reach, reliability, user retention, ease of use, the availability of agents, number of customers, geography, mobile infrastructure and landscape, technology used, language, cost, and banking and telco regulations. Here, we hear from Bill Barhydt, CEO of m-Via, the company behind the new mobile banking service Boom. Boom allows people in the U.S., Mexico, Haiti, and Guatemala to create bank accounts, and send and access money via a basic mobile phone.
While Barhydt did not disclose numbers of Boom users, transactions, and total amount of transactions since the service formally launched in November 2011, we do learn more about how Boom works across the Americas.
What is Boom?
Boom taps into a market of remittances sent from the U.S. to Mexico, Haiti, and Guatemala. Traditionally, remittances - payments from diaspora back to the home country - are often made via wire transfer, check cashing, or payday loan services, all of which incur additional fees for the sender. Boom enables people in the U.S. to send any increment of money via a mobile phone. “To my knowledge, it’s the first cross-border mobile banking service in the U.S,” Barhydt says. “We’re replacing this cash-based world with a bank-based world, and the right way to do this is via mobile phones.”
Barhydt says that Boom addresses a number of problems associated with remittances currently: It lowers the cost of sending money between immigrants and their families, and it improves their safety by reducing the risks of handling cash. It also creates new commerce capabilities, as users can receive payment for signing up others for the service.
Users include both those in the U.S. who often create the accounts and send money, and those elsewhere who receive funds by activating their own accounts. “We look at this as a single social network that transcends the border,” Barhydt said.
How does Boom work?
To use Boom in the U.S., you can purchase a membership kit at participating 7-Eleven stores or by calling Boom customer service. To activate your account, you load money at the same stores, and then call Boom with the load receipt, an ID, and the membership kit. Barhydt says that the “Know Your Customer” information necessary to create the account is the same information already being asked by wire service agencies and others.
Once you have a "loaded account", you can begin sending money. On a basic phone, you enter a local short code (there are codes for each country Boom operates in) then use SMS commands to either load money, check your balance, or send money. Say I want to send $100 to my cousin in Mexico. I send an SMS to my local short code, with her mobile number, so I type: “SEND 100 5215555555” to send $100 to the mobile number 52+1+555+5555. You can assign names to recipients, too, so in the future you can send money via the SMS message, “SEND 100 COUSIN.”
We did a brief test for this article. If the SMS recipient is new to Boom -- as I am -- the system recognizes this, and the sender, in this case Bill Barhydt, receives a call from an IVR system, asking him for his PIN code to approve the transaction. This information is not requested via SMS, Barhydt explains, “because text messaging is not secure. No PIN codes or confidential information is shared via SMS.”
As Barhydt received the IVR call, I received the following text messages:
22334: Welcome to Boom! Since your phone is not yet registered, there is one more step to start freeing your money. Please call us at 888-880-6842.
22334: William saves a lot of money by using Boom to send and receive money, and thought you’d be interested. Want to know more? Please call 888-880-6842.
22334: William has sent you 1.00 USD using Boom! Your new balance is 1.00 USD.
To access this $1, I will need to call Boom customer service, provide my name, mobile number, address, and form of ID (drivers license, government-issued ID, Social Security or Passport number) to complete the account registration. Boom then sends me a welcome kit in the mail. Once I have this, I can load money at participating locations, and call Boom to verify and start the account. Because the Boom system does not know who I am until this moment, the funds remain in escrow until I activate my account.
What About the Fees?
While Barhydt notes that Boom significantly lowers the cost of sending remittances, the service is not without fees. For the person (typically in the U.S.) who joins as a sender of money, he or she pays an annual fee of $25. Boom account holders and recipients outside the U.S., like my cousin in Mexico from the above example, pay no annual fee. There is no fee for sending person to person transfers (via SMS), regardless of the amount, so I am free to send any number of remittances to her, via mobile phone. In the U.S., if you are receiving money from another user to open your account, the $25 annual fee is waived for the first year, regardless of the amount you receive.
A recipient can access cash at an ATM machine, with 3 free such transactions per month. After this, fees are $2 for each withdrawal. If you want to make a purchase at a retail location using Boom, the merchant is allowed to determine and charge a fee. Currently, Boom does not charge merchants or agents a fee to accept Boom accounts, but may do so in the future.
Additionally, when a Boom user converts money from one currency to another, m-Via charges a fee to cover the cost of the foreign exchange conversion.
At the end of the day, m-Via is not a non-profit organization, and Boom is an agent of CBW Bank, based in the U.S. Boom sustains itself based on these yearly fees and the fees incurred when money is changed from dollars to pesos, for example. Initial funding for the service comes from angel investors, venture capital, financial services, and corporate investors in Mexico.
Rural Versus Urban Populations: Mobile Money Agents are Key
Barhydt says he spends just as much time working in Mexico and Haiti as he does in Los Angeles, where m-Via is based.
In more rural communities in Mexico, the service depends on Boom merchants. m-Via works with the Mexican government’s retail operation of over 25,000 owner operated village stores in rural areas of Mexico -- these retail stores are Boom mobile money locations, meaning that the merchants enable people to use money received via Boom at the retail store or to withdraw cash. They are, Barhydt explains, the equivalent of mobile money agents.
In more urban settings like Mexico City, people can use a Boom debit card to withdraw money from ATM machines. “They don’t need a mobile money agent. Instead, they need access to ATMs or point-of-sale systems to make a purchase from their account,” Barhydt said. Here, m-Via will ship a Boom debit card to the user. In rural areas, these cards are available at the merchant locations.
In Haiti, where U.S. remittances account for a significant percentage of the country’s GDP, Boom takes an entirely agent-based approach. Barhydt explains that are are very few ATM machines in the country, and, coupled with poor infrastructure and effects of the earthquake, automated or electronic banking is difficult. m-Via works with partners on the ground in Haiti to set up Boom merchants -- often at existing bill-pay locations -- where people can withdraw cash. “If you get a text message that you have money in your boom account, you can text that money to someone else, or you can withdraw it at a Boom agent.”
Challenges and Next Steps
When asked about challenges, Barhydt has a laundry list, including legal and foreign exchange issues, integration with banks and ATM networks, technology, and U.S. regulation and compliance. Yet one the biggest remaining challenges for his team is the training and deployment of Boom merchants around Mexico. “Getting all of these thousand agents live and trained is not a technical challenge, it’s a logistical challenge,” he said.
Currently, m-Via is not supported outside of the Americas. Instead, it is focusing on expanding its selling network outside of Los Angeles, to immigrant populations in Chicago, Miami, New York, and Dallas. Existing Boom users can sign up to be liaisons and earn several dollars for each new customer they sign up to the service. "We find that this referral based model of users selling to users is the single best method for spreading the word about Boom and represents 100% of our news customers being added," Barhydt said. The The exact amount paid to liaisons depends on agreements with local community centers.
“The combination of mobile banking, money transfer, and on-the-ground multi-level marketing service -- all these moving parts have to work together really well,” Barhydt said.
Cheaper and Easier Remittances in the Americas? Boom Mobile Banking Locations
When it comes to mobile money, the hype is on these days. There are more and more mobile money services in an increasing number of countries. Success is highly dependent on many factors, including: reach, reliability, user retention, ease of use, the availability of agents, number of customers, geography, mobile infrastructure and landscape, technology used, language, cost, and banking and telco regulations. Here, we hear from Bill Barhydt, CEO of m-Via, the company behind the new mobile banking service Boom. Boom allows people in the U.S., Mexico, Haiti, and Guatemala to create bank accounts, and send and access money via a basic mobile phone.
While Barhydt did not disclose numbers of Boom users, transactions, and total amount of transactions since the service formally launched in November 2011, we do learn more about how Boom works across the Americas.
What is Boom?
Boom taps into a market of remittances sent from the U.S. to Mexico, Haiti, and Guatemala. Traditionally, remittances - payments from diaspora back to the home country - are often made via wire transfer, check cashing, or payday loan services, all of which incur additional fees for the sender. Boom enables people in the U.S. to send any increment of money via a mobile phone. “To my knowledge, it’s the first cross-border mobile banking service in the U.S,” Barhydt says. “We’re replacing this cash-based world with a bank-based world, and the right way to do this is via mobile phones.”
Barhydt says that Boom addresses a number of problems associated with remittances currently: It lowers the cost of sending money between immigrants and their families, and it improves their safety by reducing the risks of handling cash. It also creates new commerce capabilities, as users can receive payment for signing up others for the service.
Users include both those in the U.S. who often create the accounts and send money, and those elsewhere who receive funds by activating their own accounts. “We look at this as a single social network that transcends the border,” Barhydt said.
How does Boom work?
To use Boom in the U.S., you can purchase a membership kit at participating 7-Eleven stores or by calling Boom customer service. To activate your account, you load money at the same stores, and then call Boom with the load receipt, an ID, and the membership kit. Barhydt says that the “Know Your Customer” information necessary to create the account is the same information already being asked by wire service agencies and others.
Once you have a "loaded account", you can begin sending money. On a basic phone, you enter a local short code (there are codes for each country Boom operates in) then use SMS commands to either load money, check your balance, or send money. Say I want to send $100 to my cousin in Mexico. I send an SMS to my local short code, with her mobile number, so I type: “SEND 100 5215555555” to send $100 to the mobile number 52+1+555+5555. You can assign names to recipients, too, so in the future you can send money via the SMS message, “SEND 100 COUSIN.”
We did a brief test for this article. If the SMS recipient is new to Boom -- as I am -- the system recognizes this, and the sender, in this case Bill Barhydt, receives a call from an IVR system, asking him for his PIN code to approve the transaction. This information is not requested via SMS, Barhydt explains, “because text messaging is not secure. No PIN codes or confidential information is shared via SMS.”
As Barhydt received the IVR call, I received the following text messages:
22334: Welcome to Boom! Since your phone is not yet registered, there is one more step to start freeing your money. Please call us at 888-880-6842.
22334: William saves a lot of money by using Boom to send and receive money, and thought you’d be interested. Want to know more? Please call 888-880-6842.
22334: William has sent you 1.00 USD using Boom! Your new balance is 1.00 USD.
To access this $1, I will need to call Boom customer service, provide my name, mobile number, address, and form of ID (drivers license, government-issued ID, Social Security or Passport number) to complete the account registration. Boom then sends me a welcome kit in the mail. Once I have this, I can load money at participating locations, and call Boom to verify and start the account. Because the Boom system does not know who I am until this moment, the funds remain in escrow until I activate my account.
What About the Fees?
While Barhydt notes that Boom significantly lowers the cost of sending remittances, the service is not without fees. For the person (typically in the U.S.) who joins as a sender of money, he or she pays an annual fee of $25. Boom account holders and recipients outside the U.S., like my cousin in Mexico from the above example, pay no annual fee. There is no fee for sending person to person transfers (via SMS), regardless of the amount, so I am free to send any number of remittances to her, via mobile phone. In the U.S., if you are receiving money from another user to open your account, the $25 annual fee is waived for the first year, regardless of the amount you receive.
A recipient can access cash at an ATM machine, with 3 free such transactions per month. After this, fees are $2 for each withdrawal. If you want to make a purchase at a retail location using Boom, the merchant is allowed to determine and charge a fee. Currently, Boom does not charge merchants or agents a fee to accept Boom accounts, but may do so in the future.
Additionally, when a Boom user converts money from one currency to another, m-Via charges a fee to cover the cost of the foreign exchange conversion.
At the end of the day, m-Via is not a non-profit organization, and Boom is an agent of CBW Bank, based in the U.S. Boom sustains itself based on these yearly fees and the fees incurred when money is changed from dollars to pesos, for example. Initial funding for the service comes from angel investors, venture capital, financial services, and corporate investors in Mexico.
Rural Versus Urban Populations: Mobile Money Agents are Key
Barhydt says he spends just as much time working in Mexico and Haiti as he does in Los Angeles, where m-Via is based.
In more rural communities in Mexico, the service depends on Boom merchants. m-Via works with the Mexican government’s retail operation of over 25,000 owner operated village stores in rural areas of Mexico -- these retail stores are Boom mobile money locations, meaning that the merchants enable people to use money received via Boom at the retail store or to withdraw cash. They are, Barhydt explains, the equivalent of mobile money agents.
In more urban settings like Mexico City, people can use a Boom debit card to withdraw money from ATM machines. “They don’t need a mobile money agent. Instead, they need access to ATMs or point-of-sale systems to make a purchase from their account,” Barhydt said. Here, m-Via will ship a Boom debit card to the user. In rural areas, these cards are available at the merchant locations.
In Haiti, where U.S. remittances account for a significant percentage of the country’s GDP, Boom takes an entirely agent-based approach. Barhydt explains that are are very few ATM machines in the country, and, coupled with poor infrastructure and effects of the earthquake, automated or electronic banking is difficult. m-Via works with partners on the ground in Haiti to set up Boom merchants -- often at existing bill-pay locations -- where people can withdraw cash. “If you get a text message that you have money in your boom account, you can text that money to someone else, or you can withdraw it at a Boom agent.”
Challenges and Next Steps
When asked about challenges, Barhydt has a laundry list, including legal and foreign exchange issues, integration with banks and ATM networks, technology, and U.S. regulation and compliance. Yet one the biggest remaining challenges for his team is the training and deployment of Boom merchants around Mexico. “Getting all of these thousand agents live and trained is not a technical challenge, it’s a logistical challenge,” he said.
Currently, m-Via is not supported outside of the Americas. Instead, it is focusing on expanding its selling network outside of Los Angeles, to immigrant populations in Chicago, Miami, New York, and Dallas. Existing Boom users can sign up to be liaisons and earn several dollars for each new customer they sign up to the service. "We find that this referral based model of users selling to users is the single best method for spreading the word about Boom and represents 100% of our news customers being added," Barhydt said. The The exact amount paid to liaisons depends on agreements with local community centers.
“The combination of mobile banking, money transfer, and on-the-ground multi-level marketing service -- all these moving parts have to work together really well,” Barhydt said.
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