June 21, 2010
RegaloCard money transfer service comes to Canada
By Robin Arnfield, News Editor
U.S.-based RegaloCard has signed a distribution deal for its gift card-based money transfer service with Canadian prepaid card network operator SelectCore. The deal marks the first time that RegaloCard’s service will be available in Canada.
RegaloCard’s business model involves migrants in the U.S. or Canada loading money onto a gift card, with the minimum value being $10. Once the card is activated, a PIN for the associated stored-value account is sent via SMS text message to a relative in the migrant’s home country in Latin America. There is no physical gift card involved at the recipient’s end. Instead, the recipient is merely required to give their PIN and cellphone number to the merchant to make a purchase from their gift card account. To accept RegaloCard payments, merchants need a special wireless point-of-sale terminal supplied by RegaloCard.
Greg Keough, RegaloCard’s chairman and CEO, says that the problem about using traditional money transfer services is that the sender has no control over how the recipient spends the money. “Given that most remittances end up being used at supermarkets or department stores, it makes sense to adopt the gift card model,” he tells Payments Business. “We offer people gift cards for well-known brands in their home markets, for example Almacenes Siman, the largest department store chain in Central America. We have 35 brand names in Latin America where recipients can use our cards.”
“We have a retail distribution network across Canada and the U.S. enabling merchants to sell prepaid cards, and long-distance and cellphone airtime via our proprietary platform,” SelectCore president Ryan Deslippe tells Payments Business. “We currently have 4,000 locations in the U.S. and 6,000 in Canada. By end of 2010, we will have a further 6,000 locations in the U.S., making 16,000 in total.”
Deslippe says that SelectCore wants to partner with RegaloCard because Canada is so multi-cultural with immigrants from many different countries. “RegaloCard plans to aggressively expand into other markets apart from Latin America, such as Africa, Europe and the Middle East,” he says.
“The RegaloCard product is really a closed-loop gift card, not a money transfer card, since it can be used only for the purchase of merchandise from a specific retailer (i.e. Burger King, pharmacy chain, supermarket chain, etc.),” David Lott, Senior Vice President at U.S. consultancy Speer & Associates, tells Payments Business. “The distinguishing factor about RegaloCard is that there is no charge to the consumer purchasing the card or to the recipient when using the card, so 100 percent of the value of the card is delivered to the recipient.”
The “fees” are paid to RegaloCard by the retailer branded on the card with the expectation that the retailer will often get a sales lift from the person using the card, Lott says. “Either the cardholder will buy things they wouldn’t have otherwise purchased, or they will combine some of their own funds with the gift card to make purchases exceeding the total value of the gift card,” he says.
“There are some infrastructure issues associated with the RegaloCard product that will pose some limitations. First, the sender must be sure that the retailer they have selected is conveniently located near the recipient. Second, the recipient must have a cellphone capable of receiving SMS text messages.”
Convenient redemption points are a key element to a successful gift card program, Lott notes. “RegaloCard must be sure it has a significant number of retailers participating in its program to make the RegaloCard product attractive to potential purchasers in Canada,” he says. “One of the challenges in Latin America is that, outside some major fast food brands and big box retailers, the market is dominated by local and regional supermarkets, pharmacies and general retailers. Securing card acceptance agreements with these local/regional players is time-consuming and increases operating costs.”