This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.theguardian.com/world/2014/oct/01/new-xoom-service-migrants-pay-family-bills-home-country-directly

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
New Xoom service lets migrants pay family's bills in home country directly New service allows migrants to pay bills for loved ones back home
(about 5 hours later)
Every month, millions of migrants across the world make their way to the nearest Western Union or MoneyGram branch to collect the money sent by loved ones living overseas. For many, these monthly payments help keep their heads above the poverty line by paying for basics such as food, rent and school fees.Every month, millions of migrants across the world make their way to the nearest Western Union or MoneyGram branch to collect the money sent by loved ones living overseas. For many, these monthly payments help keep their heads above the poverty line by paying for basics such as food, rent and school fees.
Last year, migrants sent home £250bn ($404bn) in remittances to developing countries, according to World Bank figures. Almost a third was sent from the US, where 20% of all international migrants live.Last year, migrants sent home £250bn ($404bn) in remittances to developing countries, according to World Bank figures. Almost a third was sent from the US, where 20% of all international migrants live.
But the cost of sending money across borders remains very high, and collecting cash can be inconvenient and time-consuming, especially for people in rural areas.But the cost of sending money across borders remains very high, and collecting cash can be inconvenient and time-consuming, especially for people in rural areas.
Soon, however, migrants living in the US will be able to directly pay utility bills and top up mobile phone credit for loved ones, rather than just send money.Soon, however, migrants living in the US will be able to directly pay utility bills and top up mobile phone credit for loved ones, rather than just send money.
Xoom, a digital money transfer company based in San Francisco, is set to launch a pioneering cross-border bill service, giving migrants control over how their money is spent back home.Xoom, a digital money transfer company based in San Francisco, is set to launch a pioneering cross-border bill service, giving migrants control over how their money is spent back home.
The idea and technology has its roots in Guatemala City. RedCycle Networks, a tiny tech startup company, introduced a bill-payment service in shops frequented by Guatemalans in Florida in 2012.The idea and technology has its roots in Guatemala City. RedCycle Networks, a tiny tech startup company, introduced a bill-payment service in shops frequented by Guatemalans in Florida in 2012.
Guatemala received more than £3bn ($5.1bn) in remittances last year, representing 10% of the country’s GDP. At least a quarter of the population rely upon remittances to survive, 90% of which are sent from the US.Guatemala received more than £3bn ($5.1bn) in remittances last year, representing 10% of the country’s GDP. At least a quarter of the population rely upon remittances to survive, 90% of which are sent from the US.
On average, migrants send home £125 ($200) each month, enough to attract the attention of Guatemala’s criminal gangs and opportunistic muggers hanging around outside money transfer offices. In rural areas, people often walk miles for the nearest branch.On average, migrants send home £125 ($200) each month, enough to attract the attention of Guatemala’s criminal gangs and opportunistic muggers hanging around outside money transfer offices. In rural areas, people often walk miles for the nearest branch.
RedCycle charged $5 for every bill paid, but was instantly popular, attracting people worried about sending cash. The company was bought by an investment company in 2013, and then sold to Xoom in February 2014 for £9.3m ($15m).RedCycle charged $5 for every bill paid, but was instantly popular, attracting people worried about sending cash. The company was bought by an investment company in 2013, and then sold to Xoom in February 2014 for £9.3m ($15m).
Kyle Passarelli, 35, the computer programming brain behind the original system and now director of engineering at Xoom, told the Guardian: “There is no reason why cross-border bill payments should be any more difficult than sending a tweet, they are all just electronic messages in the end.”Kyle Passarelli, 35, the computer programming brain behind the original system and now director of engineering at Xoom, told the Guardian: “There is no reason why cross-border bill payments should be any more difficult than sending a tweet, they are all just electronic messages in the end.”
Passarelli leads a team of 40 local computer programmers in Guatemala City, with plans to expand to a hundred by the end of 2014.Passarelli leads a team of 40 local computer programmers in Guatemala City, with plans to expand to a hundred by the end of 2014.
They have developed a bill intelligence service that will allow US-based migrants to instantly pay gas, electricity, water, cable and telephone bills using their tablet or mobile phone, for a flat fee. Xoom currently operates in 31 countries including India, Mexico, Colombia, the UK and Australia.They have developed a bill intelligence service that will allow US-based migrants to instantly pay gas, electricity, water, cable and telephone bills using their tablet or mobile phone, for a flat fee. Xoom currently operates in 31 countries including India, Mexico, Colombia, the UK and Australia.
The cloud-based service involves synchronising electronic information with thousands of utilities and phone companies, so that payments are instantly guaranteed.The cloud-based service involves synchronising electronic information with thousands of utilities and phone companies, so that payments are instantly guaranteed.
It’s a welcome new innovation in an industry where innovation has traditionally been weak and slow.It’s a welcome new innovation in an industry where innovation has traditionally been weak and slow.
“I hope this is the start of a whole new generation of remittance services, which give migrants much more power to target their money for specific uses back home,” Dilip Ratha, head of the World Bank’s Migration and Remittances Unit, said.“I hope this is the start of a whole new generation of remittance services, which give migrants much more power to target their money for specific uses back home,” Dilip Ratha, head of the World Bank’s Migration and Remittances Unit, said.
“This is a good way to go, a good step forward,” added Ratha.“This is a good way to go, a good step forward,” added Ratha.
The idea of targeted remittances isn’t completely new. Several small companies have introduced country-specific services that allow international money transfers to be exchanged for food or fuel vouchers, but many have struggled to survive.The idea of targeted remittances isn’t completely new. Several small companies have introduced country-specific services that allow international money transfers to be exchanged for food or fuel vouchers, but many have struggled to survive.
The market is still dominated by relatively few big companies such as MoneyGram and Western Union which often have exclusive deals with post offices and banks, making it difficult for newcomers to compete.The market is still dominated by relatively few big companies such as MoneyGram and Western Union which often have exclusive deals with post offices and banks, making it difficult for newcomers to compete.
Many companies are also put off by the cumbersome anti-money-laundering regulations, applied with the same vigour against small remittance companies as the big banks, according to Ratha.Many companies are also put off by the cumbersome anti-money-laundering regulations, applied with the same vigour against small remittance companies as the big banks, according to Ratha.
The lack of competition has been bad for migrants who on average pay 9% in fees for sending money. Some companies also charge a “lifting” fee upon collection.The lack of competition has been bad for migrants who on average pay 9% in fees for sending money. Some companies also charge a “lifting” fee upon collection.
Xoom’s cross-border bill payment service is the first to offer migrants an alternative to sending money on such a large scale.Xoom’s cross-border bill payment service is the first to offer migrants an alternative to sending money on such a large scale.
The service is not without drawbacks. It excludes millions of undocumented migrants who only deal in cash or cheques and do not have a US bank account. The flat fee, which is yet to be announced, could be proportionately quite high, if bills are relatively low.The service is not without drawbacks. It excludes millions of undocumented migrants who only deal in cash or cheques and do not have a US bank account. The flat fee, which is yet to be announced, could be proportionately quite high, if bills are relatively low.
But Jessy García, 22, from Honduras, is attracted to the idea of bill payments.But Jessy García, 22, from Honduras, is attracted to the idea of bill payments.
García travelled to California as an undocumented migrant six months ago, and recently paid a £5 ($8) fee to send her parents £32 ($50). They travelled half an hour to collect the money.García travelled to California as an undocumented migrant six months ago, and recently paid a £5 ($8) fee to send her parents £32 ($50). They travelled half an hour to collect the money.
“It would be a big relief for me to know their phone and electricity were taken care of,” García said.“It would be a big relief for me to know their phone and electricity were taken care of,” García said.
Passarelli said: “Migrants have enough to deal with, so sending money home should not be yet another hassle. We’re modernising the archaic international money transfer industry, which we hope will have a real social impact for millions of migrants who depend on remittances.”Passarelli said: “Migrants have enough to deal with, so sending money home should not be yet another hassle. We’re modernising the archaic international money transfer industry, which we hope will have a real social impact for millions of migrants who depend on remittances.”
About the transactionsAbout the transactions
• Around 232 million people currently live outside their country of birth. In 2013, they sent home a record £340bn ($542bn) to family and friends in remittances, three-quarters to developing countries.• Around 232 million people currently live outside their country of birth. In 2013, they sent home a record £340bn ($542bn) to family and friends in remittances, three-quarters to developing countries.
• India and China are by far the biggest beneficiaries, between them receiving more than £80bn last year. Ukraine received around £6bn ($10bn) from expatriates in 2013, the only European country in the top 10 of recipients.• India and China are by far the biggest beneficiaries, between them receiving more than £80bn last year. Ukraine received around £6bn ($10bn) from expatriates in 2013, the only European country in the top 10 of recipients.
• Remittances to developing countries have more than quadrupled since 2000. Official figures do not include the billions thought to be sent using informal methods such as sending cash with friends or family travelling home. It is an important source of income for millions of families and plays a major role in the economy of many small countries. For example, in Nepal remittances account for around 25% of GDP. The World Bank expects an 8% year-on-year increase in 2014.• Remittances to developing countries have more than quadrupled since 2000. Official figures do not include the billions thought to be sent using informal methods such as sending cash with friends or family travelling home. It is an important source of income for millions of families and plays a major role in the economy of many small countries. For example, in Nepal remittances account for around 25% of GDP. The World Bank expects an 8% year-on-year increase in 2014.
• The cost of sending money home is falling very slowly, especially for sub-Saharan African migrants who on average pay 12% in fees. Sending money from one developing country to another (South-South remittances) is either banned or very expensive.• The cost of sending money home is falling very slowly, especially for sub-Saharan African migrants who on average pay 12% in fees. Sending money from one developing country to another (South-South remittances) is either banned or very expensive.