The U.S. dollar may not be a universal currency, but there are some who would prefer to be paid in the currency anyway, even if it’s not the coin of their home country.
That’s because some developing economies are so unstable that workers are losing money by accepting and keeping their earnings in local currencies.
“People in certain countries around the world can’t preserve their wealth because they’re trapped in a money system where the local currency is always losing its value,” Ruben Galindo Steckel, co-founder at AirTM, told Karen Webster in a recent interview.
It may seem that modern technology has already solved this problem. There are plenty of mobile apps that let people send money to anyone, anywhere in the world, in any currency.
But in developing nations, Steckel noted, getting those methods to connect to the local banking system can be another story. A payment can be sent from the U.S. to a PayPal account in Colombia, but it’s useless to the recipient if he can’t get it from there into his bank account. And the same problem is present for freelance workers who are getting paid on such platforms.
“It’s like a half solution for developing nations,” Steckel said.
He refers to these challenges as “trapped money silos.” To get their money out of these silos and into a format that can be saved or spent, Steckel said, everyday people are forced to perform complex financial gymnastics to convert, transfer and access funds – a process that loses them a large percentage of those funds in service fees at each step.
AirTM’s response was to create a two-sided marketplace where people can buy and sell the currencies they want to use for saving or spending. Steckel explained how it works and how it’s creating access to basic financial services in a stable currency for many who have never had the luxury.
Say that a worker has been paid in Venezuelan Bolívars (VEF) – a currency that is so unstable today that it has essentially lost all utility. Bloomberg reported last week that hyperinflation in the country was so bad it had “broken the stock market.”
This is the foundation on which AirTM decided to build its venture, and where the majority of its business is conducted today. Holding onto VEF does workers absolutely no good, said Steckel – they’re better off converting it into a currency like the USD, which will retain the value they put into the system.
A customer can go on AirTM to be matched with someone somewhere in the world who is willing to accept Venezuelan Bolívars, explained Steckel.
Once the user creates an AirTM account, he can post a deposit and select his Venezuelan bank account from the payment method dropdown menu. From there, the transaction is broadcast to the network and someone who is willing to sell dollars for Bolívars will accept it.
Money is then escrowed from the seller’s account and held securely by AirTM until the customer transfers the money from his bank account to the seller. As soon as the seller confirms receipt of funds, the dollars in escrow are released to the buyer.
With the advanced dashboard, Steckel added, customers can see all transactions broadcast to the network to figure out who is accepting what types of payments and what commission they’ll charge.
All transaction information, including funds in escrow, is stored on AirTM’s immutable ledger, Steckel said, a record that shares aspects with blockchain – although it is not decentralized like blockchain.
Steckel said the primary use cases for AirTM are preservation of wealth, receiving payments from PayPal and other processors that could not otherwise be accessed in the local currency, remittance to family members back home from users in the U.S. or Spain, online shopping, cryptocurrency buying and speculating, and peer-to-peer (P2P) transfers.
Spread across 125 countries, AirTM’s 300,000 customers use the platform twice a month on average, totaling $5 million to $6 million in monthly transaction volume. Steckel said the platform processes 4,500 transactions per day from an average of 2,600 people. About 14,000 users are doing transaction bridging, where they collect a 6 percent commission for exchanging different types of money.
Steckel said the company plans to introduce a debit card soon, and is looking into more ways to facilitate remittances, including establishing a banking connection in Europe.
People in Venezuela have had to get creative about managing and saving their money, even if they are getting paid in dollars. Steckel said it’s a hard-working culture, with many participating in freelance and gig-type work – thus getting paid on a variety of different platforms.
If they get paid via PayPal, said Steckel, there are many ways and places they can use those funds – on the PayPal network, and for services like Uber or subscriptions like Spotify. However, if they want to use that money to eat, there is no cheap or easy way to download it into their bank account.
Transforming money in PayPal into money in the bank costs 30 percent, which for customers is basically like getting taxed twice on that money. Steckel said cheaper, easier transfers from PayPal to bank accounts is something AirTM offers at a much more modest fee of 3 percent.
But until now, those customers have used Facebook and Instagram groups to connect with others who say they are willing to help them cash in – an informal and unregulated version of what AirTM now delivers through its marketplace.
Once the customer connects with someone who agrees to make the trade, he transfers his PayPal balance to this random person, and as soon as it’s received, the other person (in theory) transfers the agreed amount into the customer’s bank account.
In its first iteration, AirTM was a bitcoin startup with an API that allowed consumers to access their money from anywhere in Bitreserve. However, in 2013, the use case wasn’t quite there yet. The company pivoted to create a platform where people could access basic financial services in a stable currency.
It used the same API and the same concept as LocalBitcoins, an over-the-counter platform for buying and selling bitcoin by any payment method the customer chooses: PayPal, money transfer, even gift cards.
Fast forward and AirTM is once again turning its eye to bitcoin, and to cryptocurrency as a whole. Although its purpose is to give users access to stable currencies, which bitcoin is not, Steckel said that the company has an even greater mission: Giving people freedom to do whatever they want with their own hard-earned money.
“We try to give users access to whatever currency they want,” Steckel said. “Money should be free to move around however the person who owns it wants it to move.”