Innovation makes remittances easier
This is the question that 31-year-old Choi Seong-ouk hoped people would no longer be asking when he co-founded Sentbe with two of his Yonsei University alumni.
Through Sentbe, an overseas remittance company, Choi attempted to address three chronic problems with sending money overseas - lengthy delivery times, high fees and complicated procedures.
Now, three years after its founding in September 2015, Sentbe remits to 14 countries including the Philippines, China and the United States, and has around 8,000 to 10,000 users sending 30,000 remittances from Korea every month.
Altogether, Sentbe has remitted over 100 billion won ($89.8 million) as of this month.
Sentbe’s transfer fees are “up to 95 percent cheaper than banks,” he says, and rarely exceed $5 per transfer. Remittances take a maximum of one working day to be delivered, if they aren’t completed within minutes. Registration is simple for foreigners.
On Aug. 29, the Korea JoongAng Daily sat down with Choi at Sentbe’s office in Seocho District, southern Seoul, to hear what he had to say on Sentbe’s journey, upcoming challenges and future plans.
Q. Who are Sentbe’s main customers and the main destinations for their money?
A. Most of our customers are foreign laborers who work in Korea. Until the beginning of this year, 90 percent of our remittances went to the Philippines. But now, as more people from other countries use our service, only 40 percent goes to the Philippines.
Fees are charged at a flat or percentage rate depending on the destination country, with Sentbe taking 1.5 to 2 percent of the remitted amount on average.
Remittance volumes are rising for almost all destinations every year.
How did you come up with the idea to start an overseas remittance business?
When I was in high school and university I wanted to be a musical actor. Circumstances didn’t allow it, however, so I decided to be a regular office worker after graduation.
I had four jobs before founding Sentbe. The first full-time job I had was at a consulting firm. Then I worked at JYP Entertainment for three months, where I did marketing and other activities for artists like Wonder Girls and San E.
For my third job, I worked as a foreign exchange broker at the Korea Money Brokerage Corporation. I decided I wanted to start a start-up, so I quit.
In 2015, me and two of my university schoolmates - Jung Sang-yong and Park Cheong-ho - began brainstorming business ideas. Around March 2015, Jung suggested that we should do something with bitcoin, and after some research, we realized that a bitcoin-financed remittance or payment service could be a good idea.
At that time, however, only banks were allowed to do foreign remittances, so we put the idea on hold.
When the Ministry of Economy and Finance relaxed regulations and made it possible for non-bank financial institutions to do overseas remittances in June 2015, we jumped at the opportunity. By February 2016, we launched our first remittance service to the Philippines using bitcoin.
Is Sentbe using bitcoin to fund remittances now?
Currently we are not. We have previously used bitcoin, as cryptocurrencies are useful in funding remittances since they can be sent instantly across borders to be received and converted into local currencies by foreign partner companies.
Late last year, however, bitcoin prices were especially high in Korea, making it impossible for us to settle remittances with bitcoin without suffering huge losses. Also, the government warned us not to use cryptocurrencies in our services because of extreme fluctuations.
Now, we are using the pooling method instead of bitcoins, which means that we send a large amount of money overseas to save on currency exchange and processing fees.
If regulations on bitcoin relax and prices stabilize in the future, however, I think we will use both the pooling and bitcoin methods.
Sentbe recently signed a memorandum of understanding (MOU) with ORCA Alliance, an Estonia-based firm that provides an open banking platform where users can manage their crypto and normal currencies at the same time. Does this mean that Sentbe is planning a bitcoin-related service?
ORCA Alliance provides two types of services. The service you mention refers to its new service, which they are still developing.
ORCA’s original service and the one we are currently interested in is its remittance service.
From this year, the European Central Bank ordered all major banks in the European Union to comply with the revised Payment Services Directive and open up their API (application programming interface) to third parties to encourage non-bank financial firms to participate in payment services.
Since the new law, ORCA has partnered with some of the biggest banks in Europe, allowing users to access their banking data on the app directly. We partnered with ORCA in hopes that it will help us send money to Europe.
But thinking ahead to our long-term plan of potentially using bitcoin again to finance our remittance services, it will also be useful for us to use ORCA’s new crypto banking platform service.
How much investment have you received?
Accumulated, Sentbe received nearly 4 billion won in investments from startup accelerators like SparkLabs and MashUp Angels, and we are collecting more.
I am thankful for the investors who invested in us at an early stage when we had nothing to show except for our business proposals. They believed in our vision of finding innovative solutions to make financial services more convenient and accessible for all.
They also believed in our goal of creating a payment service that will help Korea’s small and medium size enterprises easily accept payments from companies abroad at low costs. Though our plans have been delayed, we hope to launch the payment service before the year ends.
What is the work culture like in your office?
Around half of our 48 employees including part-timers are foreigners. All are good at English and many are proficient in Korean.
There were cultural barriers, however, and I had a hard time coming to terms with the differences initially when foreign colleagues would challenge ideas that Koreans would take for granted. To prevent conflict, I realized it was important to explain to non-Korean employees why we perceive things in certain ways while also listening to their opinions.
Sentbe recently opened a customer service center in Gimhae, South Gyeongsang. Do you have plans to open more in other cities?
Yes. We plan on opening another customer service center in Ansan, Gyeonggi, where many foreign laborers work. We are also hoping to open centers in Dongdaemun, eastern Seoul, and Hwaseong, Gyeonggi, where there are many foreigners as well.
Providing quality service is very important to us. For many of our customers, the money they send is used to cover critical expenses like hospital costs of recipients back home.
During the time we closed our business for six months while preparing to qualify for the remittance license, there were competitors who resumed business earlier than us. We are thankful for our original customers who came back to use our services after we relaunched our service late last year.
Why did you close for six months?
In July 2017, the Ministry of Economy and Finance revised the Foreign Exchange Transactions Act to regulate non-bank financial firms in the overseas remittance industry.
In the process, the ministry introduced a remittance license that non-bank financial firms had to attain before doing business, which meant companies like us who were already offering money transfer services had to put business on hold and apply for the license before resuming operations.
We attained the license late last year. We relaunched our service last December after taking around six months off to prepare to qualify for the license.
What kind of limitations do you face as a non-bank financial firm doing overseas remittance?
According to the current laws on foreign remittances, non-bank financial institutions like us are only allowed to send up to $3,000 per day and $10,000 per year for each customer.
Some customers, especially Koreans, ask occasionally about the limit because they want to send large tuition fees or business payments overseas.
There are currently 21 other non-bank financial institutions involved in the small remittance business, and I know that some take advantage of their status as a licensed company to send more money for customers beyond the maximum legal limit.
Though it would be great to have a higher sending limit, Sentbe’s attitude is to be the police ourselves. We believe that in order to gain greater freedom and trust from the government, we need to strictly follow the rules and show that we can be responsible.
Kakao began its own overseas remittance service one year ago through Kakao Bank. Aren’t you afraid of the competition that such a big company can bring?
No. Foreigners, who are our main customers, can’t use Kakao Bank at all because it requires them to have a Korean resident registration number.
Furthermore, I know that Kakao Bank has been using Citibank’s international money transfer network until recently to facilitate its remittance service. But Citibank has a weak presence in Asia, so it actually wasn’t a good service. If someone were to send money to the Philippines, it would have taken between three to five days and cost high fees.
What’s next for Sentbe?
We plan to facilitate small sum remittances coming into Korea soon.
There is a high demand for this kind of service from many Koreans living abroad, including middle-aged Korean immigrants currently living abroad who plan to retire in Korea, as well as young Koreans working abroad who send allowances to parents back home.
Besides launching the payment service for small companies by late this year, Sentbe is also planning to expand overseas remittance destinations to 24 countries by the end of this year.
Sentbe is not set out to do everything under the sun that will make us profit, but we hope to provide innovative financial opportunities to people who are usually neglected by traditional institutions.
BY KIM EUN-JIN [firstname.lastname@example.org]
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