Under the Wire

A San Diego startup has launched what it says is the first international shopping card — allowing immigrants to send money home without getting socked with high wire-transfer fees.

Quippi, which recently raised $2 million in venture capital, has developed technology that lets users buy shopping cards good in Mexico on its website, quippi.com. Quippi cards also can be purchased at certain wireless outlets, neighborhood grocery stores and liquor stores in California and Texas.

The cards can be redeemed at two large grocery and department store chains in Mexico — Coppel and Chedraui — which have hundreds of locations countrywide.

Quippi expects to announce a third Mexican retailer in January, said founder Michael Aleles. Because Quippi gets paid by the retailers, it doesn’t charge fees to people who buy the shopping cards.

“We don’t charge a commission. We don’t charge a fee to exchange your money,” Aleles said. “We make our money because the retailers who we represent in Mexico, they pay us.”

Fees vary for wire-transfer services — which is how many U.S. immigrants send money back home. But the charges are rarely less than 5 percent, Aleles said. He thinks Quippi can disrupt the way U.S. immigrants share their hard-earned money with family abroad.

“We’re selling to the consumer who is getting abused by the financial services system,” said Aleles.

Sending money back home — or remittance transfers — is a major source of wealth to countries such as Mexico. An analysis of World Bank data by the Pew Research Center estimated that remittances from U.S. migrants to Mexico will reach $22 billion in 2013.

While that’s down from the peak in 2006 of nearly $31 billion, Pew attributes the decline mostly to the weak U.S. economy following the 2008 financial crisis.

Total remittance transfers sent from the United States to other countries across the globe are estimated at close to $100 billion a year, according to World Bank research.

The average cost of sending remittances to Latin America was 7.3 percent in late 2013, the World Bank said, a decline from past years. The growing role of technology, especially mobile banking and online money transfers, has made it easier to send money.
Origin of idea

A fluent Spanish speaker, Aleles spent 10 years working in Latin America. He held management positions at PriceSmart, the San Diego-based owner of Costco-style warehouse stores in Latin America. He also held senior management posts at Intel Capital, the venture capital arm of the computer chip giant.

Aleles said working in Latin America sparked the idea of how to help U.S. immigrants who support families back home but pay too much in fees to transfer money.

While Quippi is only available in Mexico today — which receives 98 percent of remittances from the U.S. — Aleles plans to expand it to other countries with large immigrant populations in this country.

Getting the word out about Quippi — and convincing users that using it is worth their time — could be a hurdle for the company, said John Francis, an professor of International Management at San Diego State University.

“There is a social value because they are taking out one of the middlemen,” Francis said. “That’s great. It’s the point of communicating that you added value to the end user so they see it. That is what the challenge is going to be for this company.”

Francis said U.S. immigrants who are computer savvy probably are more likely to use a service like Quippi.

“It would fit a certain demographic of international people,” he said. “It’s not going to be people who came up here to work in agriculture and are shipping money back to their families. So I think there is a business model, but they are going to have to pinpoint their target customer and then show how it adds value.”

Aleles thinks Quippi can convince users of its benefits, particularly as it adds more retailers. He envisions shopping cards for pharmacies and transportation services down the road.
Investors optimistic

Quippi employs about a half-dozen people in San Diego. It started in the nonprofit EvoNexus incubator program.

Avalon Ventures of San Diego led Quippi’s venture capital funding round. It was joined by Accion Venture Lab, a Washington, D.C., fund that focuses on underserved and emerging markets.

Several angel investors also participated, including Gaston Luken, chairman of GE Capital Mexico and Angel Losada, chairman of a major Mexican retailer.

To purchase an international shopping card on Quippi’s website, users must register online. They can load the card using their personal debit or credit card. After that, they get a PIN code that can be redeemed at Coppel or Chedraui stores. They can email or text the PIN number to relatives, or phone them with the number.

For those without debit cards, Quippi has a deal with PayNearMe that lets users purchase shopping cards online and then pay for them with cash at 7-Eleven or ACE Cash Express stores in California and Texas.

In addition, users can buy Quippi shopping cards to mail to Mexico at roughly 1,000 independent wireless stores, liquor stores and mom-and-pop grocery stores in California and Texas, said Aleles.

Getting the word out is a hurdle for a startup such as Quippi. But Aleles is confident that its shopping card program will become known in the immigrant community because it’s free.

“We see a lot of excitement for it,” he said. “We think this has huge potential.”

Source: U.T. San Diego
By: Mike Freeman

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