Remittances are a big deal – from an economic standpoint, a development standpoint, and a business standpoint. A lot has been written about the magnitude and impact of cross-border financial flows here Worldchanging as well as the innovation of sending goods instead of services. I believe that Bal Joshi, AnnaLee Saxenian, and Bill Kramer are right when they describe productizing remittances as economically and socially more powerful than traditional cash flows.
I think Nils Johnson would agree. Nils is the founder of Gorilla Mobile, and CEO of Gorilla’s new subsidiary, Aryty (as in "All righty" in text-message lingo.) His is an interesting story; he founded Gorilla, an international telecom firm, at the height of the tech boom. Soon after starting the company, the market crashed, and Nils was forced to find his niche: US mobile subscribers’ international calls.
A few years later, Gorilla Mobile had developed a big customer base, including many Filipino expatriates who used the service to keep in touch with family and friends back home in the Philippines. When Nils visited the Philippines for work, he couldn’t help but notice that the country truly was "the text message capital of the world." Filipinos send, on average, seven texts per day, and the big domestic carriers (Smart and Globe) were eager to grow their market share, including a reach downmarket to the BOP. So they developed a way for people to transfer tiny increments of pre-paid airtime between each other, creating the capacity to consume. (My project at WRI produced a business case study of the Smart Communications BOP business model in 2004.)
Nils quickly realized that a highly valuable market was right in front of his eyes. If his Gorilla Mobile customers want to call the Philippines, wouldn’t they want to receive calls or text messages too? And wouldn’t they want to send prepaid airtime? So Nils looked at Thamel Dot Com as a model – productizing the remittance – and went from there. Instead of creating a remittance platform centered on locally-produced and delivered gifts, as Thamel did, Gorilla created Aryty to serve as a platform to send and request prepaid airtime.
Aryty allows expats to remit pre-paid airtime, or "load" as the industry refers to it, to friends and relatives back home. Aryty users are not sending money; they simply send pre-paid airtime to the recipient's phone in the Philippines.
Sending load is a meaningful gift from the US to the Philippines. With communications, there’s an urgent need – families back home are constantly running on empty when it comes to the phone, just topping up only what they need. So $10 worth of airtime per month is a significant gift, and very meaningful. Furthermore, there's no transaction cost because Aryty buys airtime at wholesale prices and then re-sells at retail; the difference is their profit.
What Aryty does is technically simple. They built a comprehensive IT platform to conduct real-time international transactions. Their differentiator is customer service. According to Nils, "No one wants to be in the small transaction business because customer service costs are exorbitant. So our strategy is to build a great product and make it properly, and not to cheat customers with hidden fees. If you do that, then there aren’t any complaints or needs for assistance." It sounds simple, but in the world of international phone calls, hidden fees and poor service are the norm.
The model is classically BOP – low cost and high volume. Their biggest challenge is customer education – building awareness about the value of sending load. By offering free trials (you can send up to 150p for free) and instant verification on the receiving end, they’re on their way. Aryty is building credibility through a partnership with Globe Telecom, with whom it shares TV ads. As remittance recipients trust Aryty, they ask their relatives in the United States to send load. This bottom-up approach keeps marketing costs down and builds trust. As Nils told me, "People won't be comfortable sending $20 worth of load if they’re not comfortable sending $3."
Aryty TV Spot on Vimeo
Aryty also reaches a younger demographic than its more traditional competitors. They've gone Web 3.0, building a Friendster widget. A what? A widget: Aryty's got a button that users can install on their Friendster pages (in the Philippines, Friendster is the leading social networking site, with over 4 million Filipinos on the site). Called the "A-List," the button allows Friendster users to send load to their contacts through the site’s existing interface, along with a quick note or comment. This is an innovative way to reach the younger demographic through a credible partnership, building customer trust along the way.
As of December 2006, the average Aryty recipient receives load worth about $10 per month. So we're talking significant transaction volume and size – and the company is still growing.
Nils and Aryty understand that mobile phones are a killer application with huge growth potential. What sets Aryty and Thamel apart from other remittance systems is their steadfast, almost cultish commitment to customer service. And it is precisely this commitment that leads me to believe that productizing remittances is here to stay.
You should also check out other innovative services within mobile companies here in the Philippines are offering.
Since most Filipinos don't have credit cards, many are using their cellphones for banking and cash transactions. Many small businesses (or virtual retailers on websites like Ebay, etc) accept G-Cash (from Globe) or Smart Money as payment.
Smart also has remittance services for actual cash sent from Japan, US, HK, Europe, for a percentage of what they would pay to physical remittance centers. http://www.smart.com.ph/SMART/Value+Added+Services/SmartPadala/
This article is completely hermetic. I did not understand at all what you are talking about. Something about cell phones, I guess.