Little Rock-based startup LumoXchange, one of the first tenants of the city’s Technology Park and an initial graduate of the Venture Center’s FinTech Accelerator program, laid claim Wednesday (June 6) of being the world’s first currency exchange operator in a market now dominated by industry giants Western Union and MoneyGram.
LumoXchange CEO Maf Sonko, before a Little Rock Chamber of Commerce audience that included Gov. Asa Hutchinson, Arkansas Economic Development Director Mike Preston and Little Rock Mayor Mark Stodola, said his financial technology firm created the first monetary marketplace that lets user pick their exchange rates and send money anywhere across the globe.
Sonko, a native of Gambia, said his idea for the early stage FinTech firm came out of his personal experience of sending money back to family in the West African country. Under the company’s concept, LumoXchange will partner with banks in host countries, and those banks will in turn bid for U.S. dollars by offering competitive exchange rates, he said.
“What I set out to do was to find a way of providing more options for people to send money abroad with more transparency at a lower cost. One of the ways to do that is to create a marketplace where you can comparison shop and regulations were always a stumbling block to a lot of FinTechs,” said Sonko.
Formerly based in Atlanta, Sonko said he moved his company to Little Rock because of the state’s legacy in the financial technology and banking sector, including early FinTech innovators like Systematics, Arkansas Systems, ABC Financial, Stephens Inc., Mainstream Technologies and Acxiom Corp.
As one of the original 10 startups in the 2016 FinTech Accelerator sponsored by the Venture Center and Fidelity National Information Services Inc., the Gambian entrepreneur said LumoXchange is now poised for future growth. FIS, the publicly traded, Jacksonville, Fla.-based financial technology giant, was borne out of Systematics and Alltel Corp.’s Information Services subsidiary.
Under the company’s cloud-based technology platform, Sonko said LumoXchange will be able to provide exchange rates from its international partner financial institutions in each approved country where it licensed to business by letting lets users compare rates, review customer ratings and select how their beneficiary will be paid.
Sonko said LumoXchange will be able to provide the FIS-powered payment service for half the cost it now takes to send money overseas. For example, on a $200 transfer from the U.S. to Gambia, the typical costs would be a $20 service fee and another $22 for the exchange rate margin.
“The way I always describe our company is that it is just like shopping for the best-priced hotel room on Hotels.com,” he said. “You can compare the exchange rates and convert your payment to local currency while saving up to 50% on fees versus the competition.”
According to Sonko, LumoXchange processed 2% of total inbound payments to Gambia and achieved a 95% customer retention rate during a six-week pilot of its currency payment marketplace. The successful trial period allowed customers to compare exchange rates locally and send money on the same platform, an action that was unprecedented in cross-border payments, he said.
Following the company’s successful pitch at the 2016 Fintech program, LumoXchange had partnered with the former Bear State Bank of Little Rock to help bring the startup firm’s technology to market. However, the company suffered a setback late last year after Fayetteville-based Arvest Bank announced plans to acquire Bear State in a deal valued at $391 million. After the Arvest-Bear State deal closed in the first quarter, First Security Bank President John Rutledge said his Searcy-based community bank saw an opportunity to step in and partner with LumoXchange to help “facilitate” the company’s dream of disrupting the global international current transfer market.
“We are excited to be a part of this. At First Security Bank, obviously, we got to play a small role in this announcement today,” Rutledge said. “What (LumoXchange) is going to be able to do (has) the ability to change the world literally through the opportunity to use technology to offer exchange rates and transfer money.”
For its initial launch, LumoXchange will be available first for payments to Gambia, Senegal, Mali, Ghana and Nigeria. Later this summer, LumoXchange will add payments to the Philippines, which is the fourth largest payments corridor from the U.S. This gives the company a total addressable market of $17.5 billion in cross-border payment annually by the end of 2018, said Sonko. The company is set to announce more partners to its money transfer marketplace as well as payments to more countries in the coming months, he said.
As an early stage startup with only three employees and more than $500,000 in seed investment from local partners, Sonko said LumoXchange hopes to “scale up” in the coming months with the hiring of digital marketing, customer service and technical staff. Sonko said First Security will also help the local firm with payment processing in the preliminary stages of its growth.
Sonko said LumoXchange is also seeking angel investors to provide capital for its next stage of growth in exchange for an ownership stake in the FinTech firm.
“Over the next 12 to 18 months, we will be looking to raise more capital and expand into new markets like India and Vietnam,” he said. “Our goal in the next two years is to have a total addressable market of an additional $19 billion that we can go after.”
At Wednesday’s event at the downtown headquarters of the Little Rock chamber, Gov. Hutchinson said he hopes Arkansas will be able to grow the state’s technology sector and talent pool by externally attracting tech companies like LumoXchange to the Natural State and internally through education and workforce initiatives such as his computer coding program at local high schools.
“What you represent is innovation, your ideas and technology being put to work,” said Hutchinson, speaking directly to Sonko.