- Moneychangers represent a huge market of ‘asymmetric knowledge’
- Challenges in understanding a market that only works in cash
TAKING an overseas trip involves making sure a number of things are lined up, from flight tickets to accommodation. Then there’s making sure you have enough cash in hand, which means dealing with moneychangers.
And while just about every part of the travel experience has gone online, moneychangers and information on their rates remain stubbornly stuck in the offline world.
Singapore-based fintech (financial technology) startup 4xLabs wants to even out what it describes as the ‘asymmetric knowledge’ in the moneychanging market, helping consumers find the moneychangers with the best rates.
It all began when chief executive officer and cofounder Julien Labruyere was having lunch with a friend.
“I was looking to change a significant amount of money before a trip and I asked my friend if he knew of any good places,” he says.
“I thought there must be a website like Skyscanner for moneychangers or something like that, but I couldn’t find anything,” he adds, speaking to Digital News Asia (DNA) in Singapore recently.
Labruyere did further research and found out there was nothing like that anywhere in fact, and it puzzled him that nobody had thought of filling such an obvious market need.
“I called the Monetary Authority of Singapore to get a sense of the market, and talked to moneychangers to understand how the business worked,” he says.
“I came to the conclusion that this is a big market – we’re talking about millions of dollars going through these moneychangers alone, and that’s huge if you can be in the middle and capture that flow.
“The business is similar around the world as well,” he adds.
The spread between rates means one can save up to 10% in the amount of money you change if you know where to look, according to Labruyere.
“We try to move people from inefficient channels … because we know the banks and airports are more inefficient than moneychangers,” he added.
But it is not just about the consumer side of the equation, says Labruyere, who spent hours trying to understand the pain points of the moneychangers themselves.
“They have quite a specific business – they don’t sell anything physical, it’s a live thing with a tight spread and regulation.
“In Singapore, only five moneychangers out of 400 licensees have a website, which is another puzzling thing, as there is no other industry where only 1% has an online presence.
“The main challenge is really understanding the market drivers, what their environment is, how they get their supply of notes, the interactions between moneychangers – all of which are not obvious to an outsider.
“This industry is very secretive, and even MAS does not have an accurate idea of how much volume there is – a lot of it is just cash and may not be always registered.
“Uncovering the mechanics of this business was the most challenging part,” he adds.
4xLabs started off by developing a point-of-sale (POS), compliance and market data solution for moneychangers.
“In just over six months, we captured 25% of the moneychangers here on our platform, and this is how we make money,” says Labruyere (pic).
“Eventually, we may start charging for bookings but right not it is not a focus at all – we sell SaaS (Software-as-a-Service) subscriptions to moneychangers,” he adds.
On the consumer side, the startup has a website as well as an app for the Android and iOS platforms which help people find out the best rates from the moneychangers it has on its network.
“It is a very simple price discovery platform, just like Skyscanner,” says Labruyere, referring to the travel and accommodation search site.
“The vision is to make the market transparent and subsequently more efficient,” he adds.
4xLabs currently claims over 700 moneychangers on its network, and more than 12,000 unique users every month.
4xLabs has already ventured outside of Singapore and into Bangkok, Mumbai and Hong Kong, with more than 100 moneychangers in each of those cities, according to Labruyere.
“The plan by the end of this year is to be in any significant travel hub in the Asia Pacific region, not just the capital cities but big cities as well,” says Labruyere.
“By the end of next year we want to be global,” he declares, adding that the startup will be using airport traffic rankings to plan the next cities to go into.
It is also looking to raise a new round of pre-Series A funding.
“We are confident that all our metrics are growing pretty fast, but we would rather get a smaller round for a runway of 18 months, then get a good valuation for a Series A – rather than raise Series A now,” says Labruyere.
In the meantime, the company is looking to strengthen its marketing and technology development teams.
“Now we have about 29 people and are looking to hire 15 more – five for marketing and 10 for technology development,” says Labruyere.
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