ZenBanx will provide a cheap, mobile currency exchange
Startup looks to take a piece of industry that’s worth $24B
The man who introduced Canadians to online-only banking in 1997 is back with a new disruptive financial service called ZenBanx.
Arkadi Kuhlmann, who launched ING Direct Canada, is behind a new mobile-only bank account that can hold, transfer and send multiple currencies at relatively low cost.
“We think the time has come for that type of product,” Kuhlmann, who is chief executive officer of ZenBanx Holdings Ltd., said in a telephone interview Thursday.
Billed as cheaper and easier to use than existing remittance services, ZenBanx is aiming to grab a share of $24 billion a year that is sent outside of Canada by people who live and work here.
They’re first-generation Canadians, Filipino nannies, students from Hong Kong and engineers working on high-tech projects.
The service could also appeal to Canadians who travel for work or leisure. On July 1, ZenBanx customers can exchange up to $250 for U.S. dollars at par with no transaction fees, an appealing proposition when the loonie is trading at just 80 U.S. cents.
Billboards, bus shelters ads and transit wraps are heralding its commercial launch in the Greater Toronto Area, the company’s first target market.
“Anywhere your phone is, there’s a branch,” says one billboard along Lakeshore Rd. E. in Toronto. The ad campaign’s budget is modest, says Jeff Turner, vice-president of marketing for ZenBanx Canada, but highly targeted.
“You’ll see us at Dundas Square in downtown Toronto. You’ll see us in Brampton. You’ll see us in Chinatown.”
The social media campaign is helping drive business directly to the app stores on iTunes and Google Play, Turner added. “It’s our distribution arm. We don’t have any branches.” A ZenBanx account works like this: Customers sign up online. The account is held by a regulated financial institution, in this case Duca Financial Services Credit Union Ltd., and offers all the same deposit protection as a regular bank. But the ZenBanx account is managed through a mobile phone app.
Customers can choose to hold any five of nine currencies, including Canadian, U.S., Hong Kong, Singapore and Australian dollars, British pounds, euros, Japan’s yen and India’s rupee.
The money is transferred into the account from the customers’ regular bank account. It can then be converted to another currency at competitive rates with no transaction fees.
Its key feature is the ability to send money outside Canada at a maximum cost of $5.95 regardless of the size of the transaction.
Most people send remittances in small amounts, $200 on average, the World Bank found. Yet fees charged by mainstream banks and traditional online money transfer services can be as high as $40 per transaction.
“We’re trying to make it cheaper for people who send small amounts of money,” Kuhlmann said.
To access their own funds, ZenBanx customers will receive a debit card that can be used at ATMs and retailers both in Canada and other participating countries that recognize Interac. ZenBanx is addressing a relatively narrow niche, said David McVay, of McVay and Associates Inc., a company that monitors market share growth by consumer product offering for Canadian banks and trust companies.
However, it’s likely to resonate with a market that needs an easier and cheaper way to send money, he said.
“Many banks would have foreign currency accounts and ways to transfer money, but often they’re very expensive,” said McVay.
Kuhlmann says the ability to transfer funds in different currencies is just a start. He envisions a global mobile app that offers a range of financial services through local partners.
On June 3, ZenBanx announced it had launched a U.S. version through a strategic alliance with WSFS Financial Corp., a Delaware bank with $4.9 billion in assets.
ING Direct was sold to Scotiabank in 2012 for $3.1billion after European regulators ordered the Dutch parent ING Groep to divest its North American operations.
As part of the deal, ING in Canada was required to change its name within 18 months. It’s now called Tangerine.