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Monday, August 1, 2016, 22:59

Forex mobile app to slash payment costs

By Oswald Chan
Forex mobile app to slash payment costs
A woman stands at a currency exchange store in Hong Kong. A newly launched FinTech (financial technology) app in Hong Kong said it is able to offer its users more transparent foreign exchange reference rates when they pay by credit cards. The startup aims to fight inefficiency and non-transparency regarding making credit card payments in overseas countries, its founder said. (Xaume Olleros / Bloomberg)

Startled to find out that you have paid too much for your credit card expenses made in overseas countries? The new mobile app Valoot can help.

Freshly launched in July, the establishment of the new financial technology (FinTech) startup Valoot is a response to various stories of inefficiency and non-transparency regarding making credit card payments in overseas countries.

Ovidiu Olea, founder and chief executive officer of Valoot, recalled how he paid 5 percent more in Hong Kong dollar terms when he used his Hong Kong-issued credit card to purchase baby clothes in Japan.

“The actual foreign exchange (forex) rate used to settle my credit card account is much higher than the reference rate quoted by the credit card issuing bank. Usually there is a two-day time lag between the adopted reference rate during the purchase and the actual exchange rate used for account settlement,” Olea said.

“Besides the exchange rate difference, card-issuing banks usually charge 2 to 3 percent based on the transaction amount in forex commission,” he added.

Recent forex market volatility unleashed by Brexit makes credit card payment in overseas countries more prone to forex rate risk. After the shockwaves from the UK decision to break away from the European Union (EU) spread across financial market, the British pound exchange rate against the US dollar has plunged to three-decade lows.

Olea said one of his female friends ended up paying 12 percent more in Hong Kong dollar terms when she made Hong Kong-issued credit card purchases in the UK on June 24 evening – one day after the UK referendum to leave the EU.

When the lady made her purchases, the reference rate was 11.8 Hong Kong dollars per pound. But the exchange rate further slipped to 10.5 Hong Kong dollars in a couple of hours, meaning she had to pay 12 percent more in Hong Kong dollar terms.

“The Valoot credit card payment solution is transparent, and gives customers a sense of control, cost-saving for both customers and merchants. It is not only poised to be just an app but wants to change credit card usage behavior. We strive to be the Uber of finance, delivering the ordinary consumers forex privileges that are normally reserved for the banks,” Olea told China Daily.

Valoot sources the core forex rates directly from the forex market and gives quotes to customers immediately when customers use the app for making credit card payments overseas.

It charges a service fee of 2 percent whereas the company will rebate 1 percent to merchants to encourage merchants to adopt the new payment solution. The profit margin is less than 1 percent as the FinTech startup has to pay for obtaining quotation of forex rates from service providers, marketing and office expenses.

“We believe that tremendous business volumes can fuel profitability for the company and our target is for the company to be profitable in 2018,” Olea said, adding the initial funding solicited from angel investors is sufficient to support the company’s operation for the coming two years.

The company plans to conduct a Series A funding in a bid to support business expansion into the UK and Japan markets. The second phase market expansion will include the US, the European continent, Latin America and Canada.
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