Uber, But For ATMs

FinTech Disruption

It is a cliché in Silicon Valley that every start-up seems to call itself the next Uber of something. If not, Uber, then it is “AirBnB, but for __________ “.  However, a Philippine startup Coins.ph might be on to something that is a combination of both of those disrupters. “Teller,” Coin.ph ‘s new smartphone app allows users to get cash from other users in a secure and convenient manner. Now we are not sure it will catch on, but the concept of a distributed banking experience is intriguing.


How It Works


Using the app, any person looking to help others or any business looking to generate foot traffic can sign-up to be a “Teller.” Should a user need to send money, they would open the app, find the nearest “Teller” using the app’s GPS locator and then escrow funds. The recipient would then go to a Teller to complete the transaction, sign off on getting the cash and then the funds are automatically credited / debited to/from a mobile wallet and the transaction is completed. 


Bank Innovation

Now the most interesting thing about the app is that it is Bitcoin based, in that all transactions that are “at rest” or “in transit” are transacted using Bitcoin’s Blockchain technology. Remittances can be liquidated from Bitcoin through selected banks, door-to-door delivery by logistics firms, or cash pick-up designated Tellers.


Tellers get to set their own fees or the amounts they are willing to accept for deposits. The maximum amount each Teller can accept will depend on his track record and background information that is tracked similar to Uber in that each Teller is rated. In addition, Tellers are screened for background and identity verification. While anyone can be a Teller, largely Tellers are retail establishments that just want additional traffic into their store.


What It Means


There are a couple dimensions banks need to think about. The concept of using a distributed network is interesting for a variety of reasons. Like Uber, pricing is set by supply and demand, so if you are at a concert and there is no ATM and you need cash, then knowing that there are 25 Tellers around you solves your problem. If you live in a rural area, you don’t have proper documentation and/or you are unbanked, then the network holds promise. The network expands or contracts to fill the need so if more people need cash in a particular town, more Teller’s would be incented. The end result is an adaptive ATM network – a heady concept.


In contrast, a rigid and costly ATM network may seem archaic in a few years. The cost of security, new cash cartridges, crime, access and the fact that it is in a fixed geographic location are all long-run constraints. Last year we highlighted a new start-up called Nimbl that has a team that runs cash to you, but Teller may hold more promise due to its variable cost structure.


The fact that the network is Bitcoin based is also potentially disruptive. Bitcoin is a real-time store of value. Unlike the batch process of card companies and banks, a Bitcoin based network can move money to anyone, anytime. Thus, not only is the Teller network cheaper than traditional means to maintain, but operational risk is next to zero and credit risk is zero. That is another huge advantage compared to the traditional bank or remittance network. Many users pay 5% to 8% to move money between countries. Now, the cost can drop to a fraction of that.


Finally, consider that one limitation to Bitcoin is that both parties need to be conversant with using the crypto currency. Using the Teller network, just one party needs to be. That is a geometric improvement. Coins.ph smartly brought on a set of banks that were comfortable with Bitcoin in order to help with exchanging the remittances into currency. Given that strategic move, the sender or the receiver doesn’t have to worry about Bitcoin.  


Mobile Payments


The Future


In 2013, a taxi medallion cost $357k and was actively traded. In 2015, the market has dried up and the last offer was around $270k. With no buyers, the price is likely to be substantially below that. We fear that bank charters might one day follow a similar path. We are not sure if the Teller will catch on, but we are intrigued by the concept and execution. Money transfers and remittances are very profitable areas for many banks and Teller represents yet another way banks are being disrupted or Uber-ized.  Further, if Teller or its competitors become popular, not only will branch traffic continue to slow but so will ATM usage. Banks will not only lose business, but they will also be left with a more expensive infrastructure that makes competing impossible.