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Eric Velasquez Frenkiel While visiting his family in the Philippines, he had a seemingly simple idea, and was surprised by the cashless economy that had developed. Instead of sending money to his family once a year – a costly affair – why couldn’t he just leave his credit card there?
As with many things in fintech, it wasn’t that simple. But the seed of the idea led the former CEO of the enterprise to turn his career into a bet on one of the most difficult problems in fintech.
Pomelo, Frenkiel’s new startup, launched today out of stealth, aims to make it easier to send money orders and make international money transfers, with credit.
To execute that vision, Pomelo has raised a $20 million seed round led by Keith Rabois at Founders Fund and Kevin Hartz at A* Capital, along with Afore Capital, Xfund, Josh Buckley and The Chainsmokers. The round includes a $50 million escrow, which allows Pomelo to provide upfront cash to those interested in transferring.
Venture investors aren’t the only groups showing interest; More than 120,000 people joined Pomelo’s waiting list in six months, Frenkiel said. (It’s important not to confuse this Pomelo with the other Pomelo, fintech as a service that has funded $9 million in Latin America.) Oh fintech.
Here’s how the startup works: If someone wants to send money abroad, they can open a Pomelo account with up to four credit cards. The account creator — let’s just assume they’re the one sending the money — can set limits, pause cards, and monitor spending habits.
Pomelo’s key adjustment is around credit. Senders can provide cash, in the form of loans, to family members – the startup hopes to help migrants who could use this money to get quick cash, prevent fraud and chargebacks, and send money back home. A person’s credit score with additional transaction history.
Challenges still await Any fintech, be it traditional or startup, is supporting the business of risk-averse individuals. For example, Pomelo doesn’t want to rely on credit scores when deciding whether or not to trust a lender, because the measure leaves out those who historically lack financial knowledge or access to spending.
Image Credits: Pomelo
“If you have a good credit score and good credit history, you can get up to $1,000 a month,” Frenkill said. But if you don’t have credit or need to improve your credit, we can offer you a credit builder. Customers are invited to provide a security deposit to ensure there’s a way to ensure loan eligibility down the road, and Pomelo said, “It can certainly balance the need to extend credit, but also ensure we stay in business for the long term.”
International money transfer continues to be an expensive affair for exporters. Unsurprisingly, that pain point led to many startups. Startups propose a sliding scale, meaning it costs more to send more money, or a flat rate proposal, with a $5 fee for all transfers regardless of size. At the World Bank, 6% of the total check is deducted for fees and exchange rate marks.
Rethinking the exchange sounds familiar. Frankiel thinks Pomelo’s closest competitors are Xoom and Remitly, but they differ in two key ways: their focus on lending and a “fundamentally new revenue model.”
Pomelo doesn’t make money from shippers through transfer fees, but instead grows its business on interchange fees paid by merchants. “You don’t have to pay money to send money,” Frenkil added.
While interchange payments have their own problems as a business model, let’s end with some insurance: both Visa and MasterCard were interested in partnering with the startup, but the latter won the deal.
“Mastercard allows us to operate in more than 100 countries,” Frenkel said. “Obviously, we’ll start with a few, but the idea is that instead of having a bank as a prerequisite to send money, there are many endpoints to accept MasterCard or Visa… Eventually we hope to deliver products everywhere MasterCard is accepted. the world. “
The startup is currently serving the Philippines, but plans to expand to Mexico and India as well as other geographies soon.
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