You can send money all over the world. But can you do it with blockchain tech?
David Lighton, CEO and founder of SendFriend, is betting on it. BlockTelegraph caught up with the Techstars-backed company to learn more about the $45 billion-dollar remittance market.
- SendFriend uses blockchain for remittances. Isn’t that a crowded field?
While several firms have attempted to use the blockchain for remittances, including Abra and a number of other bitcoin-oriented remittance startups, the technology was wanting during the activity of these companies. Furthermore, in Abra’s case, there were a number of regulatory missteps that landed the company in hot water with the states, finally resulting in millions of dollars of fines that caused the company to pivot out of payments altogether. At the moment, there are no U.S.-based remittance companies successfully using the blockchain for remittances.
- What makes you so different?
What makes SendFriend different is that we are harnessing a more mature iteration of blockchain technology for payment, clearing, and settling for cross-border use cases. Leveraging blockchain also allows us access to market-making capabilities in the U.S. and overseas through digital asset exchanges with whom we receive the very best rates in market. In fact, we will be reimbursed in full if there is any movement in the rates between the time transactions start and end.
Our model allows us to offer many advantages to SendFriend customers, and I’d like to highlight 3 in particular: 1) we can process payments from accounts into cash for only 2.5% in fees, while the next cheapest service is at least 4% 2) we can process payments instantly, 3) we no longer need to engage in the difficult practice of disbursement pre-funding, where we would buy big batches of foreign currency and deposit that money into a foreign account where we’d draw down as we process transactions and of course, run the risk of the currency depreciating. In our model, we process transactions on the blockchain one by one, which capital efficient, and inexpensive.
- What are your offering’s biggest security vulnerabilities?
Every firm in international remittances takes some risks around insufficient funds and AML/KYC; however, our onboarding process upholds industry best practices. At the transaction level, payments using the rails of our blockchain technology have reported a lower failure rate than using the traditional rails. Therefore, we’d say if anything our system has fewer security vulnerabilities than others.
- You have an interesting team. What are the highlights?
David Lighton was the Country Analyst for Haiti in the World Bank from 2013-2016. During that time, he had exposure to a range of projects on financial inclusion, including co-authoring the National Financial Inclusion Strategy in conjunction with the Central Bank of Haiti (BRH). David fell in love with remittances and the power of these payments but was shocked by just how expensive they were. When he went to MIT to pursue his MBA in 2016, he devoted most of his studies to remittances and how technology might make them less expensive, by creating alternatives to the outdated correspondent banking architecture.
After winning a few awards from MIT, David L. cross-registered for a class at Harvard Business School where he serendipitously sat next to David Anderson. They immediately became friends and began long conversations about startups and bonded over how technology can help to solve social justice issues like remittances. After graduating from HBS, David A. officially joined the team. The two interviewed Joel Kosloski who came highly recommended by another friend in May/June, before Joel joined the team as the CTO. Joel’s background includes 13 years in the cross-border payments business including time as the Chief Architect at MoneyGram.
The whole team has a strong passion for using technology to put customers first and to allow heroic, hard working people in America to hang onto more of their money. We also believe we can get a foothold in a competitive market with a better product which reduces fees.
Our advisors are worth mentioning as well and they include Sandra Ro, major blockchain and crypto influencer and CEO of Global Blockchain Business Council, Satwik Seshasai, the CTO of Spring, John Beccia Former General Counsel and CCO of Circle Internet Financial, and Fred Marcusa, long-time Partner at Kaye Scholer Arnold Porter
- Blockchain is inundated with conferences. Are you going to them? Why or why not?
We are going to conferences right now and are really enjoying the networking it provides us. As a small team looking to hire in the near future, conferences are a great way to talk with engineers, blockchain enthusiasts, and other potential hires about our product and get them excited about our future. It’s also a great place to learn from other leaders in the industry and how they think about the future of blockchain and cryptocurrency, which can inform the next steps we choose to take as we build SendFriend. Obviously we also want to build more awareness of our brand and our product and the more we talk, the more people get to know us.
- Are companies just putting “blockchain” in their name or description for attention? Is that such a bad thing?
For us, blockchain isn’t just a buzzword- It’s about impact. Blockchain is the power behind our platform that truly enables us to give a real financial benefit to our customers. There is a real opportunity using the blockchain to enable wealth creation and to cut unnecessary costs. For SendFriend’s customers – Overseas Filipino Workers – our blockchain technology helps us process seamless, friction-free, global payments that “trim the fat” out of remittances. That means $25 billion can be put back in the pockets of migrant workers every year.
Even better for our customers, the app is designed so they never have to interact with the blockchain function while sending or receiving money. We don’t use blockchain as a marketing ploy to gain traction with customers. We use it to provide transparency into our process so that customers who want to understand our technology can have the opportunity.
- How do you intend to market SendFriend?
We are excited to launch our product in the New Jersey market first. New Jersey happens to have a strong and thriving Filipino community where we’ve been very focused on taking an on-the-ground approach to learning about this market. Our local team has been able to engage directly with members of the community and learn a lot about how potential customers might use our product.
We have had a warm reception with potential customers by hosting events with local Filipino groups where we have discussed the challenges of living and working abroad and supporting families from afar. We think it is important to get to know the heart of the communities we support and to be a real partner for the community going forward. As a broader strategy, we will be introducing more digital marketing tactics including a referral program, targeted paid marketing, influencer and affiliate campaigns, and social media as well as grassroots campaigns and partnerships.
- How big is your market?
There are approximately 4 million Filipinos living in the US and they send home about $10 billion per year to the Philippines. 80% of Filipino adults don’t have a bank account so we’re generally talking about people who are underbanked. That means sending money usually involves cash on the send and/or receive side. However, the space is rapidly digitizing with more and more users coming online every year, giving customers more choice in how they send home their money. With SendFriend as the cheapest, easiest, and most flexible way to do this, we believe we’ll capture a large percentage of the market that is coming online.
In New Jersey alone, the Filipino population is approximately 125,000 people sending on average $3,000 per year in remittances, creating a total remittance flow from New Jersey-Philippines of approximately $375 million. Worldwide, we believe the market opportunity to be upwards of $45 billion.
