Mobile solution meant to facilitate remittances

Mobile solution meant to facilitate remittances

By Bronson Pettitt

Saldo is a solution meant to facilitate remittances to Mexico and it’s aimed at people in the United States with family in Mexico. The project is still in its beta phase, and will allow people with smartphones to make payments of certain utilities (such as electricity and water), telecom and financial services.

According to Marco Montes, CEO of San Francisco-based company, utilities and services make up a large share of the US$22 billion in remittances sent south each year. Saldo will not charge costly fees typical of wire transfers, and users can make payments directly from their mobile phones, which will save their relatives a trip to the bank.

This interview was conducted during San Francisco’s Venture Capital Day, held on October 30 and organized by the Mexican Association of Private Equity (Amexcap).

Can you tell us more about your project?
It’s a service mainly for immigrants to be able to pay utility bills for their family members back home in Mexico instead of sending money. By doing that, they save a lot on the commissions in the process.

Is it only for people in Mexico?
Right now we enable payments in Mexico, but probably in the future there will be other countries as well. But the market we’re doing is big enough…we want to be focused on it. Mexico receives more than US$22 billion per year in remittances. And more than 60% of that money goes to pay utilities.

What services can one pay besides utilities like CFE (electricity) and water?
People can pay things that are more complicated or sophisticated, such as mortgages and life insurance.

How many users do you have right now?
We have been doing a control pilot test. We started with ten users and we are continually talking to them and asking for feedback. We plan to release before the year ends.

How would you make your money for this project?
We’re getting paid from the telco companies. They’re finding a distribution channel in Saldo. It’s not based on an extra commission for the end user.

Have you seen any obstacles or challenges with this?
Our demographic is not tech savvy, which is good because it’s a good opportunity. But it’s also hard because it’s a slow process. Basically the challenges aren’t on the product side or not even with the regulatory matters, but definitely the adoption process has been really challenging. Only about half the population of Mexico uses the internet and a very small fraction has a bank account. This is mainly for people in the U.S. My target audience all has smartphones, and it’s a really good thing. A lot of people in Mexico don’t have mobile phones. They’re receiving the money, and they don’t need an internet connection.

What do you hope to accomplish today? Do you have any specific goals?
Marketing is a challenge. The more distribution channels for us, the better. We’re planning to find partnerships — people involved in the immigrant-focused institutions and to get some help. Maybe our future investors could be here.

Has anybody approached you yet after your pitch?
Yeah, there have been at least four investors saying they’re really investing in …financial services, underbanked communities.

How much investment are you hoping to get?
We will be closing at around $500,000 in the coming months. I don’t know if it’s a single firm or if multiple firms will invest.

How much has been invested in the project so far?
We’ve been self-funded so far. About $150,000 so far.

When did you start the platform?
In January. It’s been about 10 months.

Are there any similar platforms?
There’s competition. Big companies, like Western Union, are looking into this model. I see competition, it’s a good sign because the opportunity is huge.

What are some of the concerns of the investors here who are going to invest in projects in Mexico?
The legal framework isn’t going to help if you’re a startup based in Mexico. We have Silicon Valley investors now, but the company is based here. Every investor that I’ve met they really care about this. For early stage startups, I think it’s going to be hard being based in a foreign country. Not just Mexico.

Along those same lines, what are US investors looking for in Mexican entrepreneurs?
They’re looking for untapped opportunities. A lot of these underbanked and underserved communities actually don’t have services. There’s no American companies solving those problems because they probably don’t understand the main problem or they don’t understand the need. The company coming from Mexico or a Mexican entrepreneur like my case — we probably have more insight on the needs and on the problem side we’d probably have a better understanding of these underserved communities. So it would be a potential advantage to have.

Anything else you’d like to mention?
For our case, one of the cool things about Saldo is it’s a financial service. In the past it was very impossible for an early stage company to innovate in that space. It was only for incumbents playing there. I would say that the barriers in general are lower and that’s exciting in general. I think we’re going to see a lot of new financial services for the community. Not just ways to pay for stuff but more complex things, more sophisticated. I think it’s a very cool trend now.