Online forex transactions can be an alluring business model, if you get it right. In some ways, Kochi-based ExTravelMoney has managed to crack that code by keeping expenses low. This has helped the company to break-even and explore high-velocity growth in less than 3 years. Co-founder George Zachariah talks about different aspects with Pankaj Joshi.
Can you give an idea of what you deliver at the buyer’s end and where do you currently stand?
We have created a forex marketplace, which today partially represents our vision. We aim to be a solution provider for NRIs and foreigners, as well as to help travellers from India who are going abroad for tourism and education purposes. These are our main transaction areas, with minor transactions originating from medical tourism, small businesses and movie shoots.
We save people’s money by getting them good deals because we provide comparative rates. Today our tie-ups are with major industry players like banks, travel companies and exchange houses. While we have yet to complete two years of operations, today we provide access to 4,500 points on the ground. Beyond price and location, our tech platform gives the convenience of home delivery, payment gateway and travel card solutions (via banks) on which 18 currencies can be loaded onto a single card.
What was the strategic reason behind selection of Kochi as operation’s base?
To start with, all the founders hail from Kochi. Our business proposition was pitched first to fellow Keralites—you would be aware that Kerala has a strong overseas remittance inflow. On the expenses side, Kochi works out cheaper in terms of both rental and manpower costs, which are around 60-70 per cent of our total outgo. We understand that we are in a business where tech presence is more important than the geographical location. We anyway have a practice of regular visits to our partners for maintaining communication in all important locations like Mumbai, Delhi and Bangalore. Today our total staff is 12, with five as outside support.
What is your value-add for the forex seller side?
We have our fees entirely from the money changers’ side, so our value proposition there has to be strong. Any of the moneychangers whom we have on boarded, has the advantage of a functional and accepted platform with all the technology benefits, without attendant hassles of a capital outlay and a maintenance team. They have no client acquisition costs because our charges are transaction-based. To quote one instance, we have had a tie up with Cox and Kings for more than six months. This has resulted in 500 transactions, across 30 branches, with an average transaction value of USD500-600. You must appreciate that travel businesses do not have the experience, technical knowledge and relationships to be able to duplicate our model. For them, as for the other industry players, it is better to partner with us.
Can you elaborate on your database and stickiness quotient?
We have a registered user base of 25,000 people where average transactions are twice a year. As of now, 85 per cent are new users, reflecting our recent growth. Our stickiness is 30 per cent which we are aiming to get above 40 per cent. About 70 per cent of our transactions are tourism-based and 20 per cent based on education requirements. Most of the database has been built on word of mouth, with little spend on promotions. A good part of our rejections come from lack of user awareness of RBI regulations for specific transactions.
Where does your transaction numbers stand?
In our operations period, we have clocked an aggregate of 10,000 transactions. In the last few months, we have seen a velocity of over 1,000 transactions with the average size of USD 500-600. We are cash positive as of now on monthly basis. We are targeting an investment for adding new products and for greater coverage. We would aim to associate with the online travel companies etc, wherein we access their databases for cross-selling purposes and offer our basic USP of price discovery. We are a lean team already and in the scale-up our dependence on manpower will be of lower proportion.
What is the future for this segment?
The overseas leisure travel segment is big—the Finance Minister had quoted around three crore people in a Budget speech. Add to that around two crore overseas visitors coming to India—NRIs, foreigners—and the market potential is clear. On remittances, we understand that the overseas NRI diaspora is around 20 lakh and there is an annual traffic of two lakh travelling on student visas for higher education.
The potential is not to be doubted—even with 1 million transactions we would have tapped only 3-4 per cent of the market. On the compliance side, most of the RBI and FEMA stipulations are attended to by our partners wherein we are just the double-check mechanism. The challenge is to create goodwill. The financial aspect is not under discussion. The saving we offer is 1 per cent against a pure money changer, around 2 per cent compared to a bank walk-in transaction and around 8 per cent against the airport forex conversion counters.