Money Transfer Goes Social: What the Facebook Land Grab Means

By Drew Sullivan,

This month MoneyGram and Western Union announced the launch of “sendbots” that use artificial intelligence (AI) to bridge the gap between digital and brick-and-mortar transactions. The expansion of Messenger “bots” at the F8 Facebook Developers conference was just one of the areas of focus for the two-day event. However, this technology has now created quite a buzz in the money transfer world as the two largest international remittance companies have entered the fray.

What does this mean for the industry?  Well first let’s understand what Facebook Messenger is and why this technology is important.

Facebook Messenger is a communication tool spun out of the traditional Facebook app. It enables a user to reach out directly to other users and provide text, voice and video files. With more than 1 billion active users, it represents a vast network of interconnected people around the world. But it’s more than just messaging—it also automates conversations.

“Bot” is a generalized term used to describe any software that automates a task. The most common are chatbots that automate the beginning of conversations. Now money transfer companies are building sendbots that automate the beginning of a transaction that is then transitioned to the money transfer digital platform. The actual transfer happens on their compliant, secure platform and then the notifications are pushed back to Facebook Messenger. It is all seamless to the user who enjoys the same familiar interface they expect from Facebook.

These bots use Facebook’s Bot Engine, which can turn natural language into structured data. It is a form of artificial intelligence that helps the bot get smarter with each interaction. That type of functionality is exactly what digital money transfer services have been seeking and now  have a way to access it to the social network.

But What Does This Mean for the Industry?

While there are constant press releases from both organizations touting their online expansion and commitment to digital strategies, the sendbot announcements signal a few important changes.

First, exclusivity is coming to an end.

WU and MoneyGram have dominated the brick-and-mortar world with exclusive contracts with large networks. They have effectively elevated the cost of entry into the market and limited competition to regional players. When Ria signed Walmart for the retailer’s in-house domestic money transfer service, that was the beginning of the end for retail exclusivity.

In the digital environment, exclusivity is rare given the Internet’s distributed and open access, but both traditional and upstart money transfer companies have strategies to reap similar benefits. Because integrations historically have been time consuming or costly, online partners have tended to choose one provider at least initially. That gives the money transfer company a period of exclusivity. However, with both Western Union and MoneyGram announcing sendbots on the same day, exclusivity is effectively over. I don’t envy the strategic account director who has to negotiate the next major network renewal.

Second, the company with the best user experience wins.

If you are a sender on Messenger, you now have choices. WU, MoneyGram and Mastercard all have sendbots. Which one will customers choose to use and why? Well price, corridors and foreign exchange always will be considerations, but ease of use wins in the digital world. So if the underlying money transfer platform is more difficult to use than the competitors, you are going to see high abandonment rates. Companies like Amazon have dominated e-commerce because they remove the friction from checkout. The money transfer provider that can remove the friction from a transaction while remaining compliant and mitigating risk will win.

Third, what was old is new again.

Money transfer as we know it has been around for more than 160 years and it is still the Wild, Wild West. Social networks have changed the way people interact with each other and have bridged the miles between New York City and Manila. With Google Translate, a store owner in Denver can converse with a buyer in Romania in their local language. And with Skype, a content provider in Indonesia can attend a staff meeting in Los Angeles. In this interconnected world, you will see a proliferation of money transfer hybrid business models and an uptick of overall remittance volumes.

As money transfer providers increase their focus on newer markets like Facebook, Snapchat and Pinterest, there will be renewed effort on speed to market and share. Like the race to connect the U.S. continent with telegraph wires, Western Union is seeking to use social networks to connect global remittance users. But they are not alone.

The land grab is underway and industry disruptors like Xoom and Venmo may get the press, but don’t rule out the old guard just yet. Consumers still value a strong retail network and access to cash. Executing on a strong social strategy is the key. Let’s see who does it best.

Drew Sullivan is the founder and president of a consulting firm focused on prepaid, remittance, bank products and cross-border payments. Drew has more than 25 years of experience in business development, account management, business strategy, compliance and product management in the payments industry. He may be reached at This article originally appeared

In Viewpoints, payments professionals share their perspectives on the industry. Paybefore presents many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.



How to Grow Prepaid through Financial Well-Being

By Kristen Berman, Wendy De La Rosa and Mariel Beasley, Common Cents Lab

If there is one thing that unites people around the world, it’s a lack of trust in the financial services industry. And it’s getting worse. In a recent survey just 8 percent of respondents reported having faith in their financial institutions, down from 13 percent in the prior year.

From Ponzi schemes to bank scandals, Americans’ relative mistrust of financial institutions is understandable. In fact, it has led many consumers to exit the banking system and opt for alternative banking products such as prepaid cards. As a result, prepaid cards are a growing business. From 2012 to 2014, prepaid card usage increased by more than 50 percent and is forecast to grow to $3.1 trillion globally by 2022.

As they command a larger and larger share of the market, prepaid providers are at a crossroads. They can follow the path of some alternative financial providers that create products that end up costing low-income users between $1.8-4.5 billion each year, or they can be consumer-friendly products that change behavior for the better. Prepaid card providers have massive potential to expand financial inclusion and increase financial well-being by unlocking features typically provided by banking institutions and then executing them better. In this way, we believe they can actually increase their appeal and expand into new market territory.

Here are three features backed by social science evidence that our team at Common Cents predicts can help prepaid card providers increase the financial well-being of its fast-growing user base.

Integrating Savings

It may be counterintuitive that people with very little income want to save. However, research finds that people do choose to tuck away some of their hard-earned cash—you just have to ask them to do so.

Consider this experiment with the Latino Community Credit Union (LCCU), in which we helped to increase the number of members depositing some of their check into an account versus cashing the entire thing. By simply asking members coming in to cash a check to fill out a check cashing slip first, and then suggesting they deposit some of the money, about 10 percent of check cashers deposited an average of $167. When fully scaled, this simple piece of paper, acting as a gentle nudge, has the potential to increase deposits into accounts at LCCU by more than $2 million each year.

So, how can saving features help prepaid card providers?

To take advantage of this finding, prepaid card providers could simply re-design their direct deposit sign-up flow to ask people if they want to automatically transfer a percentage of their deposit into a savings account.

Most prepaid card providers already have some savings features but it is cumbersome, not integrated with the onboarding flow or direct deposit forms, and requires the user to take the initiative to set it up. By helping to create simple automatic transfers that help people ‘pay themselves first,’ providers can make saving money a routine part of getting paid.

This feature helps prepaid card providers differentiate in two ways. First, most banks don’t offer features that time savings transfers with deposits. This is critical for lower-income consumers. Second, savings may be the retention magic bullet that will help providers keep consumers active on their cards. By holding money in an account and tagging it for the longer term, we hypothesize that consumers would view their provider with that same longer-term mindset. 

Smart Reminders

We all need reminders, even for things we really want to do.

A study of more than 10,000 participants conducted by researchers Catherine Rodriguez and Juan Saavedra found that savings balances were 43 percent greater for those receiving semi-monthly savings reminders than for those in the control group not receiving any reminders. People who received financial education text messages about the importance of saving with no reminders saw no difference.

Similarly, our team ran a study with fintech company Digit to help people save a portion of their tax refunds. One simple text message reminder to save prompted 15 percent of the sample set to commit to saving some of their refunds. In another study we ran with a different partner company, a reminder message actually doubled engagement.

So, how can reminders help prepaid card providers?

Banking institutions typically send alerts for potential fraudulent transactions, but few banks default customers into notifications that proactively help manage their finances. Imagine if prepaid card providers stepped up and filled this gap with bill pay, loan or rent reminders. Providers could even send reminders to trigger savings for holidays, school fees or car repairs.

There is infinite potential to help people remember to do the things that are important to them, but that can be forgotten amid the complexity of life. These are cheap features to build that could not only differentiate a prepaid card but create the often-elusive stickiness.

Couples Cards (aka Honey Money)

While money can make us happier, it can also tear us apart. Money is the primary cause of relationship stress for 44 percent of respondents, according to a survey by SunTrust. Despite this, most financial service providers treat us as if we’re managing money for one person, which perhaps exacerbates the money conflicts.

How should couples share (or not share) their finances? Research from Elizabeth Dunn and Mike Norton published in the book Happy Money shows that couples that pool more than 70 percent of their money are happier than those that keep their finances separate. The research also found that the more transparent members of a couple are with one another about money, the better their relationship. These principles of sharing and transparency could be the building blocks for a couples’ card.

So, how can designing for couples help prepaid card providers?

A Honey Money experience would have to include basic infrastructure for two people. For example, the couple would need one account that allows for two people to direct deposit to it. The couple would also need two physical cards attached to this one account.

To help the couple successfully manage their money without the fighting, a couple’s prepaid card also needs clever financial management reporting. For example, there could be separate and joint expense summaries and joint spending “rules” that enable the couple to agree up front about their spending expectations.

By crafting a card that helps reduce conflict over money, the prepaid card provider is destined to benefit from the increased users and usage. This is an instantly viral solution—acquisition of one person automatically means acquisition of another. And, as an added business benefit, the couples card may translate to high retention rates given both parties activate their cards. (It would swing drop-outs too, no?)

Differentiate by Features, Not Fees

In the current environment, prepaid cards have revenue models that are similar to banks. They make significant revenue from the fees they charge to customers. Many prepaid providers are also under pressure to reduce those fees.

By focusing on the opportunity to fill the financial well-being gap left by banking services, prepaid card providers could end up discovering a new revenue model—one based on value-added features. The above three concepts would provide users a substantial amount of value and would be a start at unlocking the latent demand for nonbank financial services. By delivering value and advancing financial well-being, innovative prepaid card providers can differentiate based on features instead of fees, all while growing market share.

Special thanks to MetLife Foundation for supporting Common Cents. MetLife Foundation believes that everyone should have access to the right financial tools and services to build a better tomorrow.

Kristen Berman is a co-founder of Duke’s Common Cents Lab with Professor Dan Ariely. Common Cents is generously supported by MetLife Foundation. Kristen was on the founding team of Google’s behavioral economics team, and was previously the founder of Irrational Labs, a behavioral economics non profit focused on health and happiness. 

Wendy De La Rosa is a co-founder and Head of Research of Duke’s Common Cents Lab with Professor Dan Ariely. Wendy was on the founding team of Google’s behavioral economics team, leads two monthly behavioral economics book clubs in San Francisco and New York City, and is a PhD at Stanford in consumer behavior. 

Mariel Beasley is a co-founder of Duke’s Common Cents Lab and a Senior Applied Researcher at the Center for Advanced Hindsight. Mariel holds a Masters in Public Policy from Duke University where she also co-teaches a course on applying behavioral insights to municipal policy. 

In Viewpoints, payments professionals share their perspectives on the industry. Paybefore presents many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.


‘Mythbusting’ Payroll Cards

By Thea Garon, Center for Financial Services Innovation

Payroll cards are valuable financial tools that employees, particularly those in low-paying or hourly jobs, can use to manage their hard-earned money. But despite the many benefits of payroll cards, the product has gained a negative reputation in recent years. High-profile lawsuits, negative press, and a wave of state regulatory actions have contributed to a lack of dialogue and understanding among industry stakeholders, policymakers, regulators, and consumer advocates.

CFIS has drawn upon its Compass Guide to Payroll Cards for our first-ever “Payroll Industry Scorecard.” In it, we assessed the level of quality of the payroll card industry by collecting information about eight of the largest program managers in the industry, including ADP, Comdata, First Data, Global Cash Card, Netspend, Transcard, UniRush LLC and U.S. Bank.  These program managers collectively represent approximately 75 percent of the payroll card industry.

For the payroll card industry as a whole, core features (standards for a high quality payroll account) earned an A- grade. Stretch features (best practices for providers to stretch beyond the basics) earned a B+ grade. Next Gen features (additional services that improve consumers’ lives) earned a C- grade.

What we found was encouraging: The payroll cards in our sample offer many of the basic features and functionality to be considered high-quality products. But opportunities remain for program managers to stretch beyond the basics by offering additional features that can help cardholders build long-term and lasting financial health.

To advance the dialogue around payroll cards, CFSI is eager to “mythbust” a few misconceptions about payroll cards:

MYTH: Employees routinely incur fees when accessing their wages on a payroll card.

BUSTED: Despite a few high-profile missteps by individual employers, the payroll cards in our sample allow employees to access their full net wages without incurring any fees. As required by certain state wage and hour laws, all of the programs in our sample offer employees at least one free withdrawal of their full net wages each pay period at any bank or credit union in the Visa or Mastercard network. And all of the programs we looked at go beyond the legal requirements by providing employees unlimited free withdrawals at select merchants that offer cash back with purchases. None of the programs charge fees, such as monthly maintenance fees, that deny employees a chance to access their full net wages.

REALITY: Payroll card programs should more effectively communicate fees to cardholders.

We found significant room for improvement when it comes to helping cardholders avoid fees and gain the most value from their cards. While all of the programs in our sample provide fee schedules to employers to pass along to employees, some are lengthy, confusing and challenging to understand at a glance. There is also significant variation in fee schedules across programs, which can make it challenging for employers to assess the apples-to-apples costs of different programs. Few program managers offer additional tools, such as online videos and tutorials, which can help cardholders avoid fees and gain the most value from their cards.

MYTH: Customer service is expensive and inaccessible.

BUSTED: All of the programs we looked at offer free interactive voice response (IVR) service in both English and Spanish, allowing employees to access important information about their accounts. All of the programs in our sample also offer access to a live customer service agent during business hours, and nearly all of the programs allow employees to speak with a live agent for free. More than half of the programs in our sample provide access to live customer service assistance beyond regular business hours.

REALITY: Program managers have an opportunity to offer additional features that can help employees build financial health.

Few of the programs in our sample offer budgeting or personal financial management tools that employees can use to plan, budget and track their expenses. Only a handful of the programs in our sample allow employees to link their payroll cards to a separate savings platform. These types of features would help employees manage their spending and set aside money for a rainy day, enabling them to be resilient in the face of unexpected events.

With this latest Industry Scorecard, CFSI urges stakeholders, employers, consumer advocates, policymakers and regulators to consider these findings as the basis for a constructive dialogue about the quality and future of payroll cards. By adopting some of the features described above, program managers can design programs that help cardholders build financial health. Employers can use this report—as well as CFSI’s Compass Guide to Payroll Cards—to make informed decisions about which programs provide the highest quality and most affordable payroll solutions.

And isn’t that the kind of payday we’d all like to receive?

Thea Garon analyzes emerging trends in the financial services industry for CFSI, and is an expert on consumer experience and industry trends in the prepaid and payroll card industries. At present, she also leads CFSI’s Financial Health Measurement Project, an initiative designed to help financial service providers measure and improve their customers’ financial health. Thea’s expertise and passion for her work derives from a longstanding commitment to working with underserved communities. 

In Viewpoints, payments professionals share their perspectives on the industry. Paybefore presents many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore. She can be reached at



How Fintech Startups Are Transforming Retail Banking and Finance

By Amy Neale, Mastercard

Fintech startups around the world are designing a digital future by facilitating commerce that is centered on consumer choice and experience. In fact, in 2016 more than 1,500 of them applied to Mastercard Start Path Global—our effort to support later-stage startups that are reshaping the future of finance and commerce.

Three years of evaluating startup business models and listening to pitches has given us great insight to just how impactful fintechs will be in transforming banking and commerce. Here’s what we’ve learned.

The Future of Banking Is Mobile

Startups are cherry-picking banking services and offering consumer experiences that will appeal to early adopters and digital natives. The majority of the mobile-only banking offerings are targeting a generation that expects to manage their finances without having to step into a physical branch. Younger customers, through years of experience with online and self-service solutions, have grown used to the way technology can reduce the need for human gatekeepers to ensure accuracy and manage data.

A great example of this trend is Start Path participant Moneytree—the popular Japanese personal finance management app that enables consumers to manage personal assets and corporate expenses all via mobile. Beyond being simple to navigate, its sleek design contributes to a positive user experience.

Fintech Startups Have Eyes on Millennials

It will require more than convenience to engage millennials in banking. Of the 1.8 billion millennials worldwide, nearly 33 percent of them think banks may not be needed at all in the future. That’s likely because they’re jazzed by the savviness of digital giants and curious about what more can be done with advanced technology.

Start Path startup PayKey designed the world’s first payment keyboard that bridges the gap between applications and social networks to make banking easier and more efficient. With PayKey technology, bank partners can offer their customers a peer-to-peer payment option through any social or messaging platform.

Commerce Is Getting Chatty

The industry’s desire to make finance as easy as texting is rising quickly. So quickly that we are also seeing a surge in conversational commerce which allows consumers to directly interact with banks and merchants via messaging platforms. Nearly 60 percent of U.S. millennials said they have used a chatbot, according to a 2016 survey conducted by Retale. More than half of those who had never used a chatbot said they’d be interested in trying one.

Kasisto, the Start Path participant that invented the conversational KAI Banking artificial intelligence platform, is working with Mastercard to pilot a bot for banks that enables consumers to transact, manage finances, receive contextual offers and learn about benefits via Facebook Messenger. We expect that consumers—especially millennials—will enjoy the intuitiveness of finding out how much they’ve spent on food this month or when their phone bill is due within seconds of messaging the bot.

Though these fintech players are off to an impressive start in paving the way to a new generation of retail banking and finance, we think 2017 will be the year in which they will execute the partnerships they’ve been cooking up with banks over the past few years. They’re also just getting started. Mastercard recently announced the five latest fintech startups it will collaborate with on creating new experiences using a variety of technologies, and encourages qualified startups to apply for a spot in a future wave.

Amy Neale is the global lead for startup engagement at Mastercard who spends her time getting new technologies into people’s hands. More specifically, she leads a team of former founders, techies, financial services gurus and startup fans to identify, mentor and partner with startups from across the globe to build the future of commerce together.

In Viewpoints, payments professionals share their perspectives on the industry. Paybefore presents many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.