PREMIUM – BBVA-backed Azlo has created a way for small business owners and gig economy workers to access the ACH payment network, which banks have traditionally monopolized. And now it will add cross-border payments to its offerings.
“Starting next month, we will offer realtime cross-border payments without a fee in Mexico,” Brian Hamilton, Azlo’s CEO, told Bank Innovation.
Neobanks like Azlo are carving a niche for themselves by offering technological solutions to modern problems that some traditional banks have overlooked or ignored, such as giving consumer access to API keys, free cross-border same day payments, access to the ACH network, credit solutions tailored for the gig economy, and especially in today’s climate, digital account onboarding for resident aliens. Opening things like API keys to see transactions provides more transparency around data.
As for Azlo’s free cross-border feature, Hamilton said this:
If you go to Wells Fargo to do that there’s about a $35 wire fee. I’ll let you push money, and it will get there today, and I won’t charge you $35. We’ll give you a competitive foreign exchange rate, at or better than what you would pay for that same foreign exchange transaction at Wells Fargo.
The bank hopes to offer this free same-day cross-border payment service in about 20 more countries by fall.
Why Mexico first you ask? Because it’s aimed at foreign business owners.
“It can be harder to start a business if you’re a green card holder, and the team was excited to try to fix that problem,” said Hamilton. “That’s a very specific market of people for that corridor, which is good because it lets us focus.”
This service is a part of a two-step plan to offer more services to the underbanked.
“In combination with free cross-border payments we will begin digitally onboarding resident aliens,” said Hamilton. “As far as, we know, we’ll be the only soup to nuts, digital onboarding experience for a resident alien.” Through this service, such users will also be able to avoid fees charged by other banks.
“God forbid somebody sends you money from another country — it’s a $10 incoming wire fee, which we also don’t charge.”
The payment system will utilize established ACH rails until RTP rails are available.
WHY THIS IS SIGNIFICANT
“It’s hard to bootstrap banking, there’s so much regulatory overhead, and that’s one of reason it’s so hard is because banks really hold that stuff close to the vest. You don’t get access to the ACH network, or the card network without going through this core bank, back end,” said Hamilton.
Banks hold on, in part, to continue to monopolize on a monetized transaction, according to Hamilton.
“You could send me that money for free, but with traditional banks, the day it becomes a small business account, ‘I’m going to make you sign up for these complicated treasury management services to push me that same money,’” he said.
Because ACH is a treasury management product with a business account, “you probably have to pay $10 a month for that and ¢50 a transaction, but if it was a consumer account and you banked at JP Morgan Chase, and I bank at Wells Fargo, now they call it Zelle, it used to be clearXchange, and they all have their own names for it, but it’s the same system on the back end,” Hamilton said.
Based in San Francisco, Azlo is a digital first bank backed by major Spanish bank BBVA. It provides banking services including domestic and international payments, billpay, mobile check deposit and digital invoicing to small businesses and freelancers. Azlo does not reveal how many customers it has.