How U.S.'s Poni Card built a remittance network on Mexican ATMs

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Poni Card has signed up some big-name U.S. and Mexican partners for its remittance service enabling unbanked recipients to withdraw funds at any Mexican ATM. The U.S. fintech hopes its service will help encourage financial inclusion in Mexico, where 65 percent of the population is in the informal economy.

Poni Card has partnered with Comex, a Mexican home decoration chain, and with Circle K, a convenience store chain, to sell its cards. Comex has around 4,500 stores and Circle K around 1,200 outlets in Mexico.

On the send side, Poni Card is partnering with two U.S.-based money services businesses (MSBs), Dinex and Ria Money Transfer, a Euronet Worldwide subsidiary. It also hopes to partner with Viamericas, another U.S.-based MSB serving the Mexican market.

“We’re working with licensed MSBs which have physical branches, since migrants remitting money home to Mexico are comfortable with the agent channel,” said Gricha Raether Palma, Poni Card’s Mexican country manager.

Poni Card transfers can also be sent via its partners’ non-physical channels such as their digital apps and their websites. “We allow any means of sending money that our partners make available for their customers, including digital apps,” said Raether Palma.

MSBs in the U.S. can offer Poni Card to their customers as an additional cash distribution channel in Mexico to their existing cash pickup services. Despite widespread smartphone adoption in Mexico, Poni Card makes remittance receivers use their Poni Cash Card for ATM withdrawals at the receiving end.

“Mexican ATMs have to be accessed using cards, not via mobile apps, for regulatory compliance reasons,” said Raether Palma. “Also, while Mexican millennials are heavy smartphone users, the people who receive remittances tend to be older and afraid of new technology.”

Poni Card’s technology enables senders to buy a one-time transfer code and load funds to this PIN. They then need to send the PIN to the recipient, for example via SMS. One-time-use Poni PINs represent the traditional “order number” displayed on the purchase receipt of a remittance order.

“With our approach, no changes are required in the regular process flow at the point-of-sale in the U.S.,” Raether Palma said. “We’ve just decoupled our PINs from our cards, so no value is stored on the card. Due to anti-money-laundering regulations, each PIN is only valid for one remittance. All the funds associated with the transfer must be withdrawn in one transaction. The card can be used for multiple remittances, but needs a new PIN each time.”

Poni Card has a partnership with Mexican ATM processor Prosa (Promoción y Operación S.A.), which enables Poni Cash Cards to be used at ATMs free of charge. Poni Cash Cards carry Prosa’s Carnet ATM branding.

Prosa has interoperability with Mexico’s other ATM network, E-Global, which is owned by a conglomerate of banks formed by BBVA Bancomer and Citi Banamex. This means Poni Cash Cards can be used at all 52,000 Mexican ATMs. Poni Cash Cards aren’t debit cards, so can’t be used in stores at POS terminals.

Poni Card has changed its business model since it initially launched its technology 10 years ago. At that point, it was a regulated MSB entity in its own right. Now it is a financial technology services provider to established regulated money transmitters, which have an existing customer base, says Raether Palma

Poni Card funds are held in Mexico with Poni Card’s partner Ictineo Plataforma, a microfinance institution regulated as a SOFIPO (Sociedad Financiera Popular/popular financial institution). Mexican financial institutions are regulated by CNBV (Comisión Nacional Bancaria y de Valores/national banking and securities commission).

SOFIPOs offer financial solutions to low-income people and are more lightly regulated than banks. Ictineo, as a regulated entity, sent a ‘Request for Confirmation of Criteria’ to the CNBV in order to operate with Poni Card’s business model in Mexico.

“This basically asked the regulator to confirm that our business processes follow existing applicable regulation,” said Raether Palma. “The CNBV issued a response confirming that the model follows its regulation, enabling us — Poni and Ictineo — to operate.”

The Mexican government has encouraged financial inclusion to expand the formal economy. According to the CNBV, 56 percent of the population were unbanked in 2016. Around two-thirds of the population operate in the informal economy.

In 2011, Banco de México, the central bank, introduced regulations stipulating four different levels of bank account, with different limits on monthly deposits. The lowest level of account can only be accessed through prepaid cards. This account can receive remittances originating domestically or from abroad, but doesn’t offer a smartphone transfer capability

“SOFIPOs like Ictineo can offer two types of account: a fully-fledged bank account, and a low-risk account,” said Raether Palma. “Poni Cash Cards are regulated as low-risk accounts.

When the CNBV approved Poni Card’s technology, it was very interested in the company’s model. “They see us as providing a way to get people closer to formal banking infrastructure,” said Raether Palma. “A lot of unbanked consumers in Mexico are nervous of using ATMs, so our technology is a way to get them accustomed to ATMs.”

Raether Palma said the Trump administration’s advent led to a surge in remittances from the U.S. to Mexico. Migrants, particularly undocumented people, were concerned about their long-term future in the U.S. There were also concerns that the administration might tax remittances.

“Although remittances have slowed down somewhat, the U.S.-to-Mexico remittance corridor is still one of the largest worldwide, and Mexico is the largest remittance receiver from the U.S.,” said Talie Banker, an Aite Group senior analyst.

It’s economics on the send side, not politics, that influences money flows, said Daniel Canning, North America commercial director at digital remittance firm WorldRemit.

“As wages rise in the U.S. with higher employment levels, the volume of remittances increases. This is despite rumors about taxes on remittances or any political concern affecting the migrant community.”

Canning cited Banco de México data showing that the flow of money to Mexico from the U.S. rose by 8.7 percent year-on-year in 2016 and by 11.5% in 2017. “The growth rate for the first nine months of 2018 was 10 percent,” he said.

WorldRemit is a newer player in the North America-to-Latin America corridors, but it grew this business by 100 percent in 2018.

“We see an enormous opportunity to build WorldRemit’s brand awareness among Latinos in North America,” Canning said. “There’s a misconception that migrants in the U.S. are unbanked. They may just have a basic checking account. But that means they can use WorldRemit, which requires a bank account, a credit card or Apple/Samsung Pay for digital send transactions.”

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