Thursday, December 9, 2004
Money-Transfer Firm Marketing to Recipients
By David Breitkopf
A few large banks have used card-based approaches to enter the money-transfer business, only to encounter problems in making sure the cards get to the correct recipients.
Now a nonbank is hoping to overcome that barrier by marketing the cards directly to the recipients of transfers.
MapCash Holdings LLC said Monday that it has started offering a card-based remittance program called the “gkard.” It was introduced last month in the Caribbean, and the New York company hopes to eventually expand it to about 70 countries.
Though banking companies, including Bank of America Corp., U.S. Bancorp, and Wells Fargo & Co., market similar products to people who send cash to friends and relatives, J. Chesky Malamud, a MapCash cofounder, said he is courting the recipients.
“What we’ve found in our research is that the hardest hurdle to get over is getting the card in the recipient’s hand,” he said in an interview Wednesday.
Mr. Malamud and his partner, Eli Popack, said 70 government post offices have agreed to market the Visa-branded cards to people who might receive remittances. Global Bank of Commerce, which is based in Antigua, will issue the cards. The Visa logo will let them be used at a wide variety of locations and automated teller machines.
MapCash had first worked with an American bank that issues MasterCard products, but the bank said it could issue cards only in the United States , Mr. Malamud said.
When customers sign up to use the card to receive funds, they must provide the name and address of one or more senders. MapCash will conduct an Office of Foreign Asset Control check to make sure the parties are not tied to criminal or terrorist organizations. This check satisfies the USA Patriot Act provision that requires money-transfer companies to know their customers.
Once the customers are approved, senders can initiate a remittance at more than 3,500 U.S. merchant locations, including convenience stores and check-cashing outlets. The recipient can access the money at ATMs or at merchants that accept Visa. Senders can remit up to $1,000 per transaction, and the receivers can have up to $2,500 in their account.
The cards sell for about $3, and there is a $9.95 fee for each transaction.
Mr. Malamud said one person initiating multiple payments at a time would be “red-flagged automatically, and we hold the transaction up and investigate” to prevent money launderers or terrorists from using the system to move large sums.
Some U.S. banks that have entered the market in the last 18 months have concentrated on Mexico , but MapCash has no plans to market its cards there. Instead, it is focusing on the Caribbean now and plans to move into Africa next.
“We’re taking the road less traveled,” Mr. Popack said. “The Caribbean islands may not be as large as Mexico , but still there’s an opportunity.”
Gwenn Bezard, a senior analyst for Celent Communications LLC of Boston, called MapCash’s strategy of marketing through foreign post offices a good idea.
“So far the most successful card-based money-transfer programs I have seen were marketed by banks on the recipient side, instead of on the sender side,” Mr. Bezard said. The marketing arrangement “enables MapCash to leverage the post office employees as salesmen, and thus gives a greater level of comfort to the recipient.”
MapCash’s strategy also solves delivery problems, Mr. Bezard said. Some companies have found that as many as 20% of the cards sent out are returned because the shipping company could not find the recipient’s address, he said.
He also noted that MapCash does not require senders to open a bank account. “The reason the banks are going after the money-transfer business is they want to open more accounts,” he said. “They want to turn unbanked consumers into banked consumers.”
MapCash is betting that a lot of immigrants do not have a bank account and do not want one, Mr. Bezard said.