Our Unexpected Tale Of Stumbling Into A Trillion Dollar Market In Fintech
Posted on Jun 30, 2015 by Edrizio De La Cruz
It was magical. I got off of the Techcrunch Disrupt stage - we had nailed it! Our team was wrapping up Y-Combinator, we had a chart which was up and to the right, and we were going on to the TC Disrupt finals!
Weeks later, we had $2.7 million in our bank account and a clear mandate to revolutionize remittances.
I knew that sending and receiving remittances was a real pain. My family had been sending cash back home since I arrived in the US about 20 years ago.
Receiving money in the developing world is like receiving a present wrapped in poison ivy. Walking around with big chunks of cash means having to worry about getting robbed, plus it takes time and money just to get it.
Moms, the biggest recipients of remittances, often send cousins, uncles or other family members to pick up the funds on their behalf. When this happens, the funds usually don’t make it to their intended target. Even if they do, many times they aren’t spent like you intended. Receiving money, especially money they haven’t worked for, causes people to party. From personal experience, I know a lot of remittances end up being squandered on alcohol.
Our plan was to dramatically improve the remittance industry through 2 things:
- Make receiving remittances easier
- Making it easier for the sender to control how his or her funds are spent
We made deals with the biggest retailers in our test market, the Dominican Republic, and planned for remittances to be sent via SMS messages.
A SMS received represented a cash credit with our retailers. A recipient could go to a retailer to redeem it for products. This gave the sender a quick way to get money to recipients and allowed them to control how it was spent. It seemed like the perfect solution, and man, were we excited about it.
The Customer Trumps All
Our team was extremely lucky to be selected to go through Y-Combinator - the most well respected startup incubator in the world. In Y-Combinator, each of us became convinced of the incubator’s mantra “Know Your Customer” and solve their problems and everything would fall into place.
With a firm belief that the customer trumps all, our team decided to move to Washington Heights, the upper part of Manhattan where close to a million Dominicans call home. We would launch our SMS-for-remittances product from here.
The Dominican Republic is supported heavily by remittances. Take any taxi in the city and you’ll hear a tale from a cab driver who moved over here years ago from a little island and still sends money every month to his family in the DR. The little sums add up to $2.7 billion dollars, flowing every year from the US to the DR. That’s a lot of hard working cabbies supporting their families.
While we started by encouraging our customers to change up the way that they were sending money, we kept talking with customers about their kind of financial responsibilities in their home country. We were surprised to learn that many wanted to pay their family’s bills in the DR.
Unexpected Demand For… Bill Payment
Though I was skeptical of demand at first, with about a month of work, we launched a beta product to allow users to pay Dominican bills from the US. While our emphasis was on having users send money through SMS, our beta bill pay product started seeing a big uptake – sales for the bill payment product began to double every month!
This was all pretty confusing to us. We did some research and discovered just how antiquated and frustrating it was to pay international bills from the US. Many customers reported that just paying a bill in another country took a whole day’s worth of effort. It required sending the money, monitoring the pickup, guiding a friend to pick it up and getting them to go to the office to pay it. In addition to actual physical capital, paying a bill required social capital as well – having people millions of miles away do you a favor.
There are a lot of reasons why customers want the ability to pay for bills in other countries. Some wanted to pay them because they were actually living in two different countries and needed to pay bills in both. Others had older parents in their home country and wanted to take care of their parents in any way possible.
Since utility companies in the developing world tend to be trigger happy about shutting off the electricity with any delay in payment, many customers found it extremely comforting to be able to monitor, and take care of the responsibility of keeping the lights on for their parents, all from the US.
Becoming A Platform
We were surprised to learn that we were able to actually create a better bill payment experience in international locations than existed in the country itself. With direct relationships and a solid tech culture in the US, we could provide customers with their account balance and a due date for payments and even send them a SMS reminder.
With all this info, we were able to develop a method for customers to make payments by replying to SMS messages with a single word, which would pay the bill instantaneously. Regalii’s bill pay service greatly reduced the friction – reducing the time it took to complete the entire process from over a day to merely a few seconds.
As our bill payment product grew, we realized that Regalii would achieve our mission better by enabling these types of transactions for every company all over the world. We created Regalii to make it faster and more transparent to support people anywhere in the globe and it just didn’t seem right to block the service from anyone who might want it. While it is unsexy, utilities like telephone and electricity are what keep us connected and stable. When they get cut out, it can be catastrophic.
We therefore made Regalii a platform, which is now integrated into many of the largest money transfer companies in the world. These companies are now processing thousands of bills each day for their customers, all using the Regalii platform.
A Trillion Dollar Market
With a product that customers really wanted, we decided to leave the vision of SMS remittances behind and focus entirely on being a cross-border bill payment platform.
It is convenient that just paying bills themselves is a trillion dollar market depending on how you add it up. It is dominated by large, slow moving companies, which haven’t invested in the space in centuries. Most bills in the US are fulfilled by actually sending a check in the mail!
Cross border bill payment is a massive and untapped market with next to no competitors. Out of the $585 billion remittance market, an estimated 10%-20% is used solely for bill payments. There hasn’t been a product available for that market at all, until Regalii.
Our new product helps make our customers lives much easier, and is changing the way immigrants interact with their friends and family back home. As the world gets more connected and more people pursue new, exciting, opportunities in foreign lands, this market will only continue to grow.
Regalii is on the forefront of this massive shift and much of the change is still to come. It’s an exciting spot to be.