September 30, 2013
Tapping into the market for enabling cross border transactions, blueKite has come up with something helpful. As we know there is a huge immigrant population in the US today and a lot of them send money back home to their families. BlueKite claims to facilitate cross-border payments and allows immigrants to better take care of family members back home.
The Miami–based company was founded in April 2012 and has raised 1.5 Mn in seed funding led by PeopleFund, which contributed $1.3 Mn of the total funds raised. The remaining amount was provided directly by BlueKite’s founders in January this year. BlueKite was created by Bobby Aitkenhead (CEO), and two of PeopleFund’s co-founders Jose Vargas and Matias de Tezanos, who were involved with the startup before PeopleFund really took off. The fund, emerged out of the founders' independent investments over the years.
So now let us take a look at their value proposition. They offer a proprietary cross- border payment platform that allows people to safely and accurately pay utility bills—electricity, gas, water, Internet, cable, and phone—from abroad. All the customer has to do is
· Walk into a BlueKite cash store
· Request up-to-date balance information on the account in question.
· Pay the bill of their family member in the native country directly and instantly
No follow up is required.
For the purpose of cash stores, BlueKite is currently targeting Mom n Pop stores and also allows people to become BlueKite agents for free. The business model is interesting, because it’s fully prepaid. That is, the affiliated stores have a positive balance with BlueKite – they basically buy inventory from BlueKite. And BlueKite has a positive balance with the utilities served. The consumer pays the cash store a flat $4.95 fee to make the payment, which is split 60/40 between BlueKite and the cash store. The company also negotiates fees with utilities for helping them with collections.
It is an important part of our model, because we target those who are unbanked and underbanked. This is often the case among immigrants who send money to their family abroad, so they usually visit cash stores and money business services. Now they can also pay a bill for their relatives at the same time, says CEO Bobby Aitkenhead.
Although, all this this looks simple, a whole lot of technology as well as permissions and legal issues have to be taken care of, in the background. There is a great deal of regulation for AML (Anti Money Laundering) around cross-border payments and anything that is cash receipts and cash transfers abroad. In order to operate in most states in the U.S., BlueKite needed to get a special permit or a money transmitter license. Both of these are issued per state with applications and requirements varying significantly from state-to-state. Money transmitter licenses are not easy to come by. BlueKite received its license from Florida’s banking regulator, and is currently applying in other states, including Illinois, New York, New Jersey, California, and others.
BlueKite faces competition from startups operating in the space such as TransferWise. TransferWise claims to allow foreign students, expats and businesses move money world wide. They charge a flat fee of £1 for transfers under £200 and 0.5% of the amount for larger payments. TransferWise was founded in 2010 and has received $7.37 Mn in funding from investors including Seedcamp, Index Ventures and Valar Ventures among others.
LTP View: According to the World Bank statistics, more than $120 Bn was remitted from the U.S. in 2012, and these money transfers are growing at a CAGR of 8%. This shows a good market potential for companies like Bluekite and TransferWise. The only foreseeable hindrances could be legal/permission issues which may pose problems in terms of scalability.