With New Web Service, Xoom Targets the Giants of Money Transfer

Armed with $15 million in new venture capital, San Francisco-based Xoom Corp. is embarking on the next phase of its growth plan: selling Internet-based money-transfer services to banks, retailers and smaller money-transfer operators (MTOs) that can put their own brands on them and sell them to consumers. Founded in 2002, Xoom lets consumers carry out Web-based money transfers to 20 countries, including Mexico, India, Vietnam, and the Philippines. Xoom, pronounced “zoom,” uses banks and other firms as distribution points, some 5,500 in all. Xoom recently raised $15 million from Fidelity Ventures, a private-equity subsidiary of Boston-based Fidelity Investments. In all, it has raised more than $35 million from several venture-capital firms, president and chief executive officer James Joaquin tells Digital Transactions News. “We hope to use that war chest to grow our business,” he says. The private company doesn't disclose its transaction volume or other financials. Specifically, Xoom is working on technology systems to move money faster and more safely, and also for product development, sales, and marketing. Some of those development efforts were unveiled this week with the launch of Xoom WebAgent system, which allows financial institutions, retailers, and MTOs to offer their own branded money-transfer service without investing in the infrastructure to make it happen. “It's really a zero-cost, quick deployment to immediately offer money transfer to their customers,” says Joaquin. Some of WebAgent's first clients include Storm Lake, Iowa-based Meta Financial Group Inc.'s MetaBank; Chequepoint, a big United Kingdom-based money-transfer firm with 1,000 locations across Western Europe; and Equitable PCI Bank, a large Philippines bank. Xoom hopes to cash in on the increasing effort by banks and retailers to service immigrants and others who don't have traditional banking relationships, including those who want to send money to their home countries. “More and more retail banks are finding the demographics of their customers are changing,” says Joaquin says. “A lot of banks are looking at money transfer as a customer-acquisition service.” He adds that the customer using WebAgent is likely to be quite different from one who already uses Xoom's Web-based service. MetaBank launched a WebAgent-based money-transfer system in some branches after an employee noticed long lines of workers from a meat-packing plant in Storm Lake formed every payday at local money-transfer offices, according to a Xoom release. If a customer requests a wire transfer, a MetaBank teller will use her computer terminal to connect to a secure WebAgent site to complete the transaction. Besides cash, the customer can fund the transfer with a Visa, MasterCard, or Discover card, or use the PayPal Inc. online payment service. In fact, Xoom's Web site used only PayPal when it launched in late 2002, says Joaquin. Foreign recipients of cash transfers typically go to a Xoom partner in their country, show personal identification and a transaction identifier than can be sent by telephone, including text messaging. Some of Xoom's partners include major banks; in Mexico the partner is London-based HSBC Holdings plc, which has 1,400 locations there. Recipients also can have money transferred into a bank account, or even have it delivered at no charge, Joaquin says. Xoom is trying to differentiate itself from industry leaders such as Western Union Financial Services Inc., which parent company First Data Corp. is spinning off, and Moneygram International Inc. by its convenience and lower pricing. WebAgent's banks, retailers and MTOs pay wholesale per-transaction fees to Xoom, but set their own retail pricing. “In general you'll find our fees to be at least 30% lower than those firms charge,” Joaquin claims. MetaBank charges consumers only $8 for transfers to Mexico, the Philippines and India, he says. Xoom has signed partnerships to add service in 49 more countries in the near future, says Joaquin. On the marketing front, the firm late last year added commercials on ethnic-based cable and satellite television programs to its advertising mix. Until then, it advertised mainly on ethnic-oriented Web sites. Joaquin believes there's plenty of room for growth in the money-transfer market. Citing figures from research firm Celent LLC, he says $250 billion in remittances were sent last year and that despite their massive size Western Union and Moneygram have less than 20% of the global market.