Remittances through SMS, an innovation from Regalii

According to World Bank by 2015, an estimated $515 billion will be transferred by the US immigrants to their respective countries. Remittances market is big and growing. Entrepreneurs and VC’s are taking a note of the growth opportunities in this space and are establishing startups.

One such startup which has been listed out by YCombinator in the Top 5 consumer startups list is Regalii. Regalii was found in 2011 by Edrizio De La Cruz. Regalii is backed by investors like Zac Zaetlin who is a Board Member at Zipongo, Hiro Maeda founder of Open Network Lab, Tom Van Laan, Ex-CEO of COADE, Inc and Funders Club. They have recently picked up funding of $350,000 from Maverick Capital and YCombinator.

The business model of this startup is to allow migrants to send money for food and bills to their families through SMS. Regalii charges $3 for every SMS sent. According to Techcrunch, their business has been growing at '67% week over week'. It comes with no surprise as a lot of immigrants in the US send money home. AngelList reported that Regalii is generating gross sales of over $60,000 per month. Regalii has approvals to operate in 8 countries and are tied up with 7,200 retailers. Their partners include Benavides (largest pharmacy in Mexico) and Elektra (largest electronic retailer in Mexico). Over 1,100 customers used their services in one of the weeks in August 2013, according to Techcrunch.

Regalii’s business model is such that it competes with Western Union. While addressing an audience of VC’s at YCombinator, Edrizio De La Cruz stated that Every time I send money, they have to pay for a bus, go to an agency, wait online for hours, or face the dangers of carrying cash in a really bad neighborhood, and Western Union taxes them 10 percent. Regalii is so hard-working immigrants can send credit to their family’s cellphones in Latin America that can be used instantly. This is the future of global remittances.

LTP View: Remittances market in the USA has been mostly dominated by Western Union. With the onset of Mobile Payments firms like Buttercoin and Regalii are capitalizing on technology and innovation to capture market share. Regalii is charging a flat transaction fee whereas Buttercoin splits the net income on transaction fees. Both the firms are competing on lower transactions fees and have brought in innovation (transactions through Bitcoins and transactions through SMS) to appeal to their respective user base to compete against Western Union. It will be interesting to see how US or Asian companies help India, China and Philippines remittances which are also huge in size.