Helping immigrants pay bills back home safely and cheaply
What we do: Regalii makes it easy for immigrants to pay their family’s bills back home. Merchant partners in the US use their API to offer remote bill pay at over 40,000 locations nationwide. Immigrants can pay their family’s bills without the inconvenient intermediate step of transferring cash, and at a fraction of the cost. Why it's a big deal: $34 billion in remittances each year goes to pay for utilities like electricity, cell phone bills, or fresh water. But the current methods for sending money are expensive, unsafe, and there is no way to monitor how money is spent back home. Regalii is 40% cheaper and allows immigrants to pay utility bills directly rather than just send cash that might be stolen or spent on liquor or tobacco. Immigrants are skeptical of any service they don't know, and slow to adopt online solutions. Regalii has found the perfect way to acquire these customers by partnering with familiar brick and mortar retailers that immigrants shop at every day. They've proven this model in the Dominican Republic, now are scaling that success to all of Latin America and Asia.
$652,000 annual recurring revenue in 1st market (DR).
31% month / month growth since pivot to B2B.
930 active point of sale remittance locations.
Regalii is 39% cheaper than other remittance services.
$3 flat rate for any bill.
$34 billion is sent abroad to pay family bills every year.
Why investors us
$3,746,600 since our founding
The founders founded Regalii to solve the frustration they personally felt sending money to their families back home. They all come from immigrant families, and it’s that intimate understanding of what remitters want that has given them the edge. Regalii is cheaper and more secure than just sending cash, and remitters get updates via text when bill payment has been received. They work with recognized money transfer brands because they know immigrants are skeptical about trusting companies they don’t know with their money, and are slow to adopt online solutions.
Working with established brands has also given them distribution at 40,234 locations that immigrants already use to send money home. Basically, they have solved the customer acquisition problem that plagues other direct to consumer remittance companies. By splitting revenue 50/50 with their merchant partners, and offering them a service that brings immigrants back to pay bills that recur monthly, they have a value proposition that incentivizes partners to onboard as many existing customers as they can. They’ve already signed on 18 of the biggest brands that immigrants frequent in the US (including Ria the third largest remittance service), all of whom solicit Regalii in every single checkout line. It works so well, that 2 out of every 100 of their partners customers send money via Regalii every month, and they are just starting to focus on increasing that number. With a tested and scalable method to acquire utility companies in the developing world and partnerships in place with companies that represent 40% of the established remittance market, Regalii has built a moat that will be difficult for any competitor to supplant. The larger the network, the harder it is to displace.
A lot has changed for Edrizio De La Cruz in the 20 years he has been sending remittances to his aunt and grandmother in the Dominican Republic. The Regalii co-founder has gone from community college student to mechanic to J.P. Morgan investment banker to Wharton MBA, but in the meantime, the problematic process of transferring money has stayed the same.
“When I sent my money back home, I had no idea how the money was actually being spent or even when it got there,” De La Cruz says. “I also knew that my family faced real danger of withdrawing and carrying cash in really bad neighborhoods. They were inconvenienced by having to go pick up money in one place and then travel to another place to pay their bills.”
The traditional remittance process also comes along with hefty transfer fees, hours-long waits at agencies and a frustrating lack of transparency. De La Cruz developed Regalii to safeguard and simplify the transaction.
How Regalii works
Each year, Latin Americans receive $69 billion in remittances from family members in the United States, 64% of which is spent on groceries, medicine and household bills, according to the World Bank. Regalii’s “social gifting platform” provides a direct payment gateway that enables immigrants living in the U.S. to pay for—and family members in Latin America to purchase—all the basic necessities from local retailers.
With Regalii, what you send is what they get. The startup partners with the same major pharmacies, supermarkets and utility companies that family members already use. Once money is deposited into the Regalii system, a code is texted to the recipient, who presents it at the store selected by the sender. A text comes back to the U.S., showing that the itemized purchased items are paid for in full. “People love the fact that they know where their money is going,” De La Cruz says.
Building something impactful
De La Cruz sees Regalii as a way to give back—solving a common problem in the immigrant community while serving as a role model for other young people who lack Hispanic technology entrepreneurs to look up to.
“I feel like I was given this voltage, this great opportunity to be exposed to all these great places like J.P. Morgan and Wharton where I gained all this knowledge,” he says. “If you’re given the energy and the knowledge that I’ve been given, you have to pay [society] back for that.”
For De La Cruz, giving back has started by going home. After moving Regalii headquarters to New York City’s Washington Heights—near where he grew up—De La Cruz and his four-person team of long-time colleagues and Wharton friends took to the streets, handing out fliers and talking to immigrants about what they really need. The team discovered Regalii’s $3-per-transaction fee wasn’t a sticking point for potential customers, according to De La Cruz.
“People are not cost sensitive,” he says. “As a matter of fact, free can actually be a deterrent. People don’t mind paying a fee for the certainty of knowing where their money is going.”
Instead, Regalii found out that immigrants are motivated by a streamlined process that allows them to skip standing in line at a Western Union Office, filling out forms and making long-distance calls to confirm that money was received. They also like knowing that their good deed doesn’t inconvenience their family or put them at risk.
“People give me very nice phone calls and tell me that we’re doing something very good for their family and that they love how they can now put food on the table,” De La Cruz says. “It means the world to me.”
Providing an enriching experience for all
Now operating between the United States and the Dominican Republic, the company is currently focusing on building alliances with big retailers in Mexico as the next step to expanding globally. The progress is exciting for De La Cruz, who wants to make the process of sending money to loved ones abroad just as gratifying as the gesture itself.
“I want function ultimately to be married with form—beautiful form, and a great experience,” De La Cruz says. “When you think about remittances, it’s very mechanical, like standing in line at the DMV. It should be something enriching.”
How did you get started?
I moved to the US from the Dominican Republic when I was 11, and like other immigrants, we started wiring money back home to grandma and other relatives. But the process was cumbersome and expensive and required my aunt in the Dominican Republic to get on a bus, stand in long lines, fill out forms and walk through dangerous neighborhoods with hundreds in cash. To send money, I had to walk with cash in the Bronx, wait in line, use a calling card and pay high wire transfer fees.
When I graduated from Wharton 20 years later nothing had changed, and I was inspired to start Regalii. The company initially focused on remittances in the New York market, allowing people in the US to pay for families' most basic necessities like utilities, mortgages, credit cards and college tuition instead of just cash. We’ve since focused exclusively on utility bills because it is a bulk of the expenses and it is a much more recurring expense on a monthly basis.
How big is the Latin American remittance market?
$4 billion is sent to the Dominican Republic every year, $22.5 billion to Mexico, $5 billion to Guatemala, $3 billion to Honduras and $4.5 billion to Honduras. Those top five markets that we’ve targeted first send $39 billion in remittances every year.
What percentage of expenses are typically devoted to utilities?
$534 billion are remitted to families in developing countries. Typically between 10 and 20 percent of the household expenditures are spent on utilities. The lights, the water, the phone bill—these are the most important expenses back home. Regalii focuses on the basic necessities that need to get paid every month rather than just cash that may be spent on trivial items
Why did you decide to pivot from sending money for general consumption to focus on bill pa
Regalii used to handle money transfers for all sorts of expenditures, groceries, utilities, cash, etc. We believed that we could get a lot more customers by offering more services, but the retention rate proved to be highest for utility bill pay. Over 50 percent of all transfers were for utilities and they happened every month. Everyone has two to three utility bills each month that need to be paid, and we were the first to make it super cheap and equally as convenient.
We focused on utilities, partnered with brick and mortar stores for easy transfer and account access, and now Regalii has found it’s niche with a sticky recurring transfer market.
Why are the brick and mortar relationships so important for you business?
The biggest driving factor behind us partnering with brick and mortar stores is trust. We deal with a consumer segment that's largely new to the United States, with a new culture and language, so they're a little more apprehensive about trusting new financial services. Trust is a big issue.
The brick and mortar shops that these customers use everyday have already built trust. Families know the guy at the corner store, they’re familiar with the grocery store, they trust these people and these brands much more than a website for sending and handling their money.
We are also in the process of partnering with digital money transfer brands. We partner with these brands and piggyback on the trust they’ve already established with their customers. By co-branding we automatically receive trust built over years of business with brick and mortar stores.
Customer acquisition in money transfers must be difficult, how has your customer acquisiti
When we started customer acquisition was very difficult because our customers are often very poor and naturally very cautious with their money. We started as a B2C business, we’d advertise to potential customers online and have them sign up for Regalii. Customers were able to transfer money in a similar way, but we were only selling the Regalii brand which nobody was familiar with. There was zero trust.
Our customers don’t use the internet everyday. Often they’re in the US illegally and are afraid of having their information online. We realized that no matter how hard we tried we couldn’t build trust for our online brand on our own. But brick and mortar merchants have thousands of people walking through their door every single day.
We pivoted from online acquisition to storefront acquisition. We placed fliers, partnered with brands so cashiers would solicit customers for us. Our conversion rate is 1%-2% in most merchants, which is huge given how many thousands of people walk into these merchants every day. When we started co-branding with brick and mortar stores our CAC fell from $70 to about $10. By contrast, public online remittance company Xoom.com has a CAC of $43.
How does the partnership network work?
Our partners include IDT (NYSE: IDT), Ria (Nasdaq: EEFT), La Nacional and others. Our customers can go to any of our partner brands and pay bills in countries all over the world.
We’ve started our pivot with a network of merchants here in the US and the Dominican Republic that give us direct access to thousands of customers. We already have three partner merchants that allow customers to send money to the Dominican Republic and 15 more onboarding right now. But it’s not just the number of partner brands we measure.
What’s more important is the number of point of sale systems that we’ve integrated with Regalii. When all 18 partner brands are fully operational in a few months, 41,700 POS systems will be able to send money to the Dominican Republic. That’s 41,700 checkout lines that customers pass through everyday where they can also pay for relative’s bills back home.
Given our current numbers, these 18 partner brands will account for $15 million in gross sales volume by next year which will yield approximately $7 million in revenue.
How many POS systems do those three current partners represent?
The three partners we have fully operational only represent 930 POS systems, and $652,000 in ARR. Once we onboard those 15 other partners we’ll have 41,700 POS systems in the Regalii network with plans for many more.
How long is it gonna take for you to be live with the next 15?
We’re limited by our resources as a team, every single merchant and ramp up takes a lot of time from our technical team. Our technology is completely proprietary, these partners have never done this before, so it takes a little while to integrate. Our goal is to close this round in July, bring on some more engineers by the end of the summer and really speed up the process. We should be live with all of them Q1 2016.
What KPIs do you measure?
Our most important numbers are numbers of POS systems, numbers of partners, countries, transactions per month, and net revenue. Shortly we’ll have 41,000 POS systems on board, 18 partner retailers and 30 partner utilities, and 8 countries. Right now, with only three partner brands we handle 13,000 transactions per month which nets $60,000 per month.
What about utilities on the other side, how does that work?
The Dominican Republic is our first test market and we’ll have 18 sending partners signed up by early 2016, but we also need utilities partners to receive the bill pay on the other side. In the Dominican Republic alone we’ve partnered with 30 utility companies that serve gas, electricity, water, telephone, and cable.
But we’ve already begun to expand in our other seven countries. We have a direct deal with SKY, the largest cable company in the Americas and with Telmex, the largest telephone company in the Americas. Regalii is the first international payment processor these huge conglomerates have ever had. They’ve never done international payments like this, so we’re able to handle 100% of their international transactions. Once we sign on the biggest national utility brands it’s easy for us to convince the smaller brands to sign on too.
How hard is it to sign up these utility partners?
Initially it was difficult because we didn’t have a proven test case for our B2B remittance market. But now that the Dominican Republic has proven our model it’s gotten a lot easier to replicate that model and convince utilities in other countries to sign up. Next we’re concentrated on Mexico because it’s the largest corridor for remittance from the US.
How many utility partners do you need to have sufficient coverage in a new market?
In every country that we operate we aim to have at least 80% coverage of the entire country before we open the market to bill pay, and we've reached that with all five corridors. We’re just waiting on our point of sale partners to finish the onboarding process before opening these new corridors.
Why do merchants want to partner with Regalii? What’s the value to them
Utilities love us for obvious reasons, they’re getting more bills paid on time, all without the mess of cash or check payments.But merchants love us too because we keep business coming back.
Utility bills recur every month, and once our customers establish a brand partner as their means of sending money they’ll come back at least 2-3 times a month. Every bill requires a visit to the store which likely means they’ll also do some shopping. Regalii is just one more reason for customers to keep coming back to their local market. We drive a lot of foot traffic to our partner merchants.
Have any merchants approached you for exclusive partnership?
Yes. Actually Western Union, the largest remittance brand in the world has approached us to be their exclusive provider. But we already have 18 partners and contracts that we’d have to drop so we can’t do that. Most of the big players realize how significant our technology is and are trying to find a way to work with us.
How big is Regalii when you’ve locked down all of Latin America?
Growth is about partnerships for us, the more utility companies we have, coupled with partner brands here in the States means more users, more transactions, and more revenue. Our product is easier and much cheaper than the alternatives which haven’t changed in decades. We just have to scale so that it’s convenient for any immigrant to pay family bills anywhere in Latin America.
Bills recur consistently, 71%of our customers send money with Regalii every month, we have an incredible recurring revenue stream. We anticipate hitting $15 million in gross sales volume next year, $7 million in revenue and that’s with only a small percentage of the potential Latin American market opportunity. Once we do we’ll be set to raise our Series A.
How do you guys think about scaling outside of Latin America?
India and Philippines are the next big remittance corridors, they’re definitely on our immediate horizon. The Philippines send $10 billion in remittances from the United States each year. So that's a very strong corridor. India is even higher than that, around $12 to $14 billion. Starting next year we’ll focus heavily on those two markets.
You’ve partnered with 18 merchant partners, how much of the market does that represent?
We measure coverage by point of sale systems, essentially places where our customers can send money. With those 18 partners brands we’ve captured 40% of the remittance footprint in the US. The rest of the market consists of micro merchants with just a few locations (ten stores or less).
What is so new about your technology?
Over the past two years we’ve built a one-of-a-kind RESTful API which allows real-time bill payments throughout the world. Before Regalii utilities companies had no way to accept foreign currency. Before Regalii families would send cash back home with no way to know how it was being spent. Now families have control, they can dictate exactly how the remittance is spent.
This entire business is built on trust. These immigrants are all in a tenuous situation and trust is paramount. Our technology is the first completely transparent international transfer system. Everyone knows where their money is, how it’s being spent, and how much it’s costing them to send it.
What are the variables that might get in the way of your success?
My biggest fear is that we won’t move fast enough. If we can close retail and utility partners faster than our competition we can win, if we can’t and they find a way to copy our technology we’ll be in trouble. The more deals we can close, the better or API, the wider we dig our moat. We’re raising this round to dig faster.
How are you actually making money on each transaction?
The customer usually pays a $3 transaction fee, plus a small percentage fee which is between 2 and 3%. Which usually amounts to ~$4 in revenue for per transaction which we split 50/50 with the partner merchant. So we wind up with a $2 in gross margin for every transaction that we do.
Who is your competition?
There are many remittance players, starting with Western Union and MoneyGram. We were the first to set up direct bill pay, and a handful of competitors are trying to build similar technology. Xoom has launched bill pay in some countries. They’ve actually been quite successful, which is a great validation of our business. But we are the first and only to build an API for worldwide bill pay so any partner if they’re interested can send or receive money.
How are you similar to Western Union, and where do you see the future of remittances?
When we started we were very similar to Western Union and MoneyGram, we all did direct-to-consumer remittances (international cash transfers). But we’ve since found our model to work much better. Our customer acquisition strategy is far cheaper, we have much better recurring revenue, and families in the States like our service better because they know exactly how their money is being spent.
We understand our consumers far better than our competition. Our office is located in Harlem so we can constantly interview and get feedback from our users. Our users are refugees from their home countries. Often they’ve come to the US out of necessity, to seek a better opportunity.
Their lives are risky as it is, and they’re all super nervous about their status in the US. Many don’t even have bank accounts here, most don’t use any internet services, they’re all afraid of screwing up the biggest opportunity in their lives. This is why 90% of remittances are still done offline at the Western Unions of the world. These consumers want to stay anonymous, they only trust a few brands, and they’re entrenched in safe practice.
Brick and mortar remittance isn’t going anywhere for a while. We know this, but also realized the market was ready for a massive technology overhaul. Our brick and mortar model keeps that critical trust alive but adopts the old school model to technology which finally makes remittances cheap and transparent.
How do the economics work with your merchant partners?
Many of our merchant partners have actually started paying us up to $15k to partner. We bring these merchants so much recurring business (every customer visits our partners 2-3 times per month to pay bills), that they’re now knocking on our door to sign up. Many of them write a check without handling a single transaction. Then once they’re onboarded we split the transaction revenue 50/50, so retails make approximately $2 per transaction plus the surplus from recurring regular business.
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