Chat apps were once for digital p2p1 communication—chatting.
Now chat apps have become the media for news, faux news, entertainment, memes, commerce, and more. They are a combination of, for old school web-ers, a portal, a usenet or yahoo group or bulletin board, and mass email (with everyone in cc).
With chat apps no longer primarily the medium for p2p digital communication, what is the new chat app?
In corporate environment, this p2p role is partly fulfilled by Slack DMs and email. Which app will fulfil this role in personal use case?
What is it? An online currency exchange. Simply a place where you can go to convert your Euros into Pounds and vice versa.
Why should customers love it? Pricing and Transparency. TransferWise promises to charge the mid market exchange rate (usually 2-3% better than your bank’s exchange rate) and charges a low, flat, per transaction fee (£1 per transaction) instead of a % commission that your bank charges. Most importantly, it puts this information – exchange rate and fees – right up front.
What’s special about the business? The huge opportunity size & stiff-stagnant competitors. I can see two sets of users directly and immediately benefitting – individuals requiring money transfer / remittances, and small businesses requiring cross border payments. Currently, individuals use costly services from their banks or slow money transfer agents like Western Union. The bigger businesses work on long lines of credits, but for SMEs who can rarely negotiate good exchange rate contracts with banks, forex charges can be a big drain on the bottom line.
There is further opportunity to tap if they can provide online retailer integration. This opens up the option to make online purchases in foreign currency without suffering bad exchange rates that banks / credit card companies would apply.
No Hurdles? There are plenty – the biggest being web of regulations governing foreign exchange transfers in different countries. If they start to see any sort of success, the other big hurdles might soon emerge – be lobbying by banks, money transfer companies and currency exchangers and me-too offerings by bigger web players, specially Amazon & PayPal.
Another issue that can turn up is a blind spot for me – the scaling ability of their current ‘skype-like’, p2p matching model. How well will this matching model cope with multiple currencies and a much greater number of transactions is something that needs more thought (by me, I’m sure they’ve already figured this piece out).
Way forward? Initially, just expand the currencies available – at the very least to USD, EUR, GBP, JPY, CNY and INR. It may be hard work, specially working with the central banks to gain trading permission. But in this game, just two currencies is too few.
Also, if they wish to tap in more widely into the small consumer market, develop relations with and integrate payment to online retailers.
Opportunity size? Hard to say at this early stage while I’m unsure which markets they’re going after, but here are a two relevant numbers:
Acc. to world bank, in 2010 India and China alone were expected to receive $106 billion in remittances. Not all of it was individuals sending money back home, but at even 10% of that opportunity size, it’s a sizable sum.
Acc. to EU, in 2007 businesses with less than 50 employees had €300+ billion of intra-EU cross-country sales. Expand that number to all small enterprises in just the top 6 currency zones and it’s already a market to lust after.