Across the world, it’s estimated that one in ten people send or receive money transfers on a regular basis. According to the World Bank, these international money transfers totalled over $300 billion USD in 2014 alone. Up until recently, money transfers were handled by behemoth organisations like Western Union, but with the rise of FinTech smaller players are making their way to market, and with impressive results.
International money transfers: a lucrative business model
Here’s how it works: people who travel for work abroad send money to their relatives back home. These workers are grateful that their secure, well-paying jobs allow them to help their families. Much of this money goes to helping their families survive day to day, and in some cases, this money will go to medical treatments and education costs.
Many of the people using international money transfers to send money to their families are women who work 2-3 low-paid jobs to cobble together small sums that enable their parents, siblings and children to survive.
Traditional international money transfer companies charge high fees despite knowing that this money is most often heading to developing nations. Sending $25 can cost an extra $10, which is a lot of money to waste on fees.
Liberac hopes to put an end to this.
The system is broken
The main problem here is that the traditional pricing model for international money transfers is opaque - so people who use the service don’t even realise they’re being overcharged.
Thanks to FinTech it’s becoming clear that the traditional international money transfer system is broken. Too many companies are charging exorbitant fees. Liberac know that people work hard for their money and want to help their families. Their objective is not to make money but to bring down the cost, hopefully inspiring other companies to do the same.
Remittances are vital for recipients no matter where they are in the world. Unfortunately, this over-charging is seen as an accepted part of the deal. But governments are starting to pay attention. For instance, Kofi Annan demanded an investigation by UK financial regulators into the operations of certain international money transfer companies. Some of these companies are charging a whopping 20% on payments from people sending money to the world’s poorest countries, like sub-Saharan Africa. The G8 had set a goal five years ago to cut the average cost of money transfers to 5% - but they missed the deadline.
Liberac: a new way of getting money where it needs to go
You may have seen Sulu and Adi out in the community talking to people about sending money to the Pacific Islands. They’ve been doing plenty of legwork in the Wellington, Porirua, Lower Hutt, and the Hawkes Bay. Through interviewing people first hand, Liberac hope to drill down on the exact problem they’re trying to solve. This is UX at its finest: interviews and conversations influence the decision making and design of what Liberac is building, which is essentially a better, cheaper way for people to send money back home to their families.
Sulu and Adi met shortly before the Kiwibank FinTech Accelerator got started. They came together in the shared interest of creating a company that would help their people. No strangers to adversity themselves, both Sulu and Adi faced some challenges just getting into the KFA. Sulu came up with the idea for Liberac, but after he was accepted into the programme his two partners pulled out, leaving him in the lurch. Adi had applied to the programme without success. Luckily, about a week before the KFA started, Adi was at an MBIE event and someone he met there mentioned Sulu’s situation. Soon, they were tweeting to each other, and they decided to put together a pitch for Adi to join the Liberac team as partner on the Monday. The next day they were signing contracts with Kristen.
Both Sulu and Adi have extensive experience in software engineering and development, and sending remittances abroad. They plan to change the face of international money transfers in New Zealand, and frankly, we believe they can do it.
Interested in backing New Zealand’s best and fairest international money transfer company? Get in touch with Sulu and Adi.