The “Venmo Line” and Moving Cash More Cheaply

venmoNew Orleans     We are making progress on our Remittance Justice Campaign. A federal bill has now been introduced in Canada to cap fees and other costs at 5%. Provincial bills have now been introduced in British Columbia and Ontario. Reports from Honduras indicated that there is movement in Tegucigalpa at capping the fees finally. A report from France indicates that the giant telecom, Orange, has announced lowered costs for transfers to French speaking African countries. These may be baby steps though compared to what is possible with newer technology, startups, and other tools, if we could get our members over the digital divide.

A Wall Street Journal column recently began with a story about a US viewer of a news report on a demonstration in the Ukraine last year where a protestor held up a sign with their bitcoin transfer information and the savvy techie sent him $10 in bitcoin. That is NOT what I’m talking about, because even while repeating that story, I feel like I’m talking a foreign language.

On the other hand in Canada, we tried to figure out if Venmo worked there. Oh, you don’t know Venmo? Then don’t call yourself hip, though my tongue is solidly in my cheek, because I only know Venmo since one of my closest living relatives is on the proper side of what the company calls the “Venmo line,” which is people 30 years old and under. The cost of transfers through Venom is nada, zero, zilch! Venmo can do this for free because they are moving bits of data around with permissions from one bank account to another. Sadly, Venmo, when we checked, is no-go in Canada and only works in the USA now because of complicated banking regulations, similar to what is hampering us on remittances. Electronic payment methods using credit cards aren’t better. In fact we have a strange bedfellow ally in Walmart that is suing Visa for more than $5 billion “alleging the fees it charges when customers use plastic are unreasonably high.”

The Wall Street Journal agreed with ACORN as well, saying that Western Union, MoneyGram and the like charge fees that “run as high as 8%, not including the less-than-favorable exchange rates….” They cite some potential competitors like TransferWise that “matches pools of people in two different countries who want to send money to the opposite country, thus eliminating the need to actually transfer money at all.” What they seem to have done is apply technology and a matching service to the age old hawala system still popular in the Middle East and frequently used in South Asia, though technically illegal there. In fact a company with a similar name, Dwolla, has “built a federally approved payment network, called FiSync, that allows any connected institution to instantaneously send any amount of money.” And, yes, they also do this for free!

It’s hard to tell what the tipping point might be that stops the predatory money exchangers from muscling up on transfers from migrant workers and immigrant families back to their home countries, especially given the persistence of the unbanked, but the gap is closing on these rip-off artists whether politically or technically as they get driven to either change or die.

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Wang Feng In the Spring

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