Every year, Filipino workers spread out across the globe send more than $30 billion back home. Over 40% of that comes from the US, as employees send regular money transfers, wires, and deposits to the other side of the world.
This remittance process is slow, expensive, and in some cases, even dangerous—but necessary. Family members, loved ones, and the Philippines economy rely on this money to function.
Pomelo, a startup based in San Francisco, is trying to change the game with a brand-new model. Let’s dig into it.
The Problem with Traditional Remittance
Traditional remittance services have several issues that affect both the senders, usually overseas Filipino workers (OFWs), and their recipients back home in the Philippines:
- High fees: Traditional services often come with hefty fees for currency conversion and the transfer process. This means that a significant portion of the money that OFWs work hard to earn is taken by service providers rather than reaching their intended families.
- Slow transaction speeds: Remittance through banks or traditional money transfer services can take days or even weeks. This can be problematic when funds are needed urgently for emergencies, bills, or other time-sensitive needs.
- Inconvenient pickups: Collecting remittances can mean traveling to a physical pick-up location, which can be a hassle and time-consuming. It may also not be safe to carry large amounts of cash in certain areas.
- Fluctuating exchange rates: With the regular delay between sending money and the recipient collecting it, fluctuations in exchange rates can mean the received amount might be less than planned.
- Lack of transparency: Sometimes, senders and receivers find it hard to track the money, leading to anxiety about whether the funds have been lost or stolen.
- Limited accessibility: People living in remote or rural areas might not have easy access to traditional banking or remittance services.
- Regulatory hurdles: Regulatory red tape can be involved in sending large sums, which can further delay the process and contribute to additional stress and uncertainty.
There is also a significant issue with fraud or scams targeting individuals unfamiliar with the intricacies of international money transfers.
A new immigrant may be particularly vulnerable due to unfamiliarity with the banking system, language barriers, or being part of a community that traditional financial institutions underserve. This can make them prime targets for fraudulent schemes that promise quicker transactions or lower fees but ultimately aim to steal their money.
How Pomelo Works
If you understand a credit card, you understand Pomelo. The process is very similar and uses a technology-driven approach, leveraging modern fintech innovations to streamline and secure remittance.
It’s a three-step approach: Remit, Repay, Relax.
Remit
A user in the US simply applies through the Pomelo site or mobile app, providing identification, banking information, and their SSN. After the application is approved, Pomelo sends out a primary card to the user in the US. At the same time, up to three companion cards are issued for their designated recipients in the Philippines.
These recipients can then use the cards immediately to make purchases anywhere Mastercard, Google Pay, or Apple Pay are accepted, eliminating the need for cash pick-up and waiting times associated with traditional remittance.
Repay
Each month, the US-based sender simply pays off the balance that the recipients have spent. This operates much like a credit card billing cycle, giving the sender flexibility over repayment and the ability to track exactly where the money is going.
Relax
Once the repayment is made, both the sender and the recipients can relax knowing that the funds have been securely transferred and are conveniently accessible. This eliminates the stress and potential risks that come with traditional remittance services.
Benefits of Pomelo
The Pomelo platform aims to provide several benefits that significantly improve the remittance experience for OFWs and their families:
- Cost savings: By eliminating transfer fees, users save a significant amount of money. There’s also a zero APR on the balance, meaning as long as it’s paid every month, families back home are getting every cent.
- Instant access: Recipients can access the funds immediately, enabling them to use the money for urgent needs without the waiting periods tied to standard remittance processes.
- Convenience: The hassle of traveling to pick-up centers or banking institutions is removed, as recipients can now make transactions anywhere Mastercard is accepted, including online purchases, which is particularly useful in the current digital age.
- Transparency and control: With the Pomelo app, senders can track where the money is going, how it’s being spent, and even set budgets, providing greater transparency and control over their finances.
By addressing the pain points of traditional remittance methods, Pomelo aims to make financial support from abroad easier, more secure, and more beneficial for all parties involved.
Final Thoughts
Pomelo’s innovative remittance approach is a potential game-changer for the American-Filipino community and their families back home.
The platform reduces the economic strain on senders by maximizing the amount their families receive and brings financial inclusion to recipients who may have previously been unbanked or underbanked. This could encourage a broader move into formal financial services for populations that traditional banking systems might overlook.
If you, or someone you know, is sending regular remittances to the Philippines, Pomelo is waiting to bring you into the revolution.