MoneySwap CEO Richard Proksa outlines AIM newcomer's big plans

While micro-cap resources stocks seem to pop up on AIM on a daily basis, every now and then something a little bit different comes along. 

One such listing was financial software firm MoneySwap (LON:SWAP), which came to market at the end of August.

The company was formed when a group of private investors bought out a software firm that was still in the embryonic stages of development. Since then it has developed a robust and scalable web-based software platform, and now it is poised to begin its most exciting phase yet.

At its core, MoneySwap is a web-based currency exchanging service called MSEx. This exchange is linked to the group’s proprietary clearing house, known as MSPCH.

MoneySwap currently plays an active role in each transaction, assuming the role of a market maker. But the group has much bigger plans as transaction volumes increase and it adopts a more passive role as its users swap currencies among themselves.

Speaking to Proactive Investors, chief executive Richard Proksa explained how the group’s push to become a peer-to-peer exchange will transform the group’s revenues.

Like most other retail currency exchanges, MoneySwap acts as a market maker – basically it obtains a favourable exchange rate, adds a margin to take its cut and then gives that rate to its customers.

But once MSEx goes ‘peer-to-peer’ – meaning that MoneySwap will no longer be a ‘middle man’ in the deal and the users will exchange currencies with each other - the revenue group’s model will change dramatically. 

At that point MoneySwap will no longer be taking a cut out of the exchange rate. Instead the company will simply charge a transaction fee to each customer. This transaction fee is likely to be tied to the exchange value, as a percentage of the amount of money ‘swapped’, Proksa explained. 

Growing volumes towards ‘critical mass’

Initially MoneySwap has to add more volume to the MSEx before it can step out of these transactions.

“At the moment we are still building up our volumes to the point where we can switch to a peer-to-peer business model.

“The point where volumes reach a ‘critical mass’ and we make the switch will be down to two things. Firstly the total volume across the exchange and secondly the number of transactions across the currency pairs themselves.

“For the major G7 currencies it will come much faster than some of the other currencies available on the platform.”

Just shy of 3,000 active participants currently use the service. The majority of these users are individual users, but according to Proksa, around 60 corporate and SMEs (small-medium sized enterprises) also use the service frequently.

Proksa explained that many of the transactions involve ‘fairly small amounts’ – with individuals swapping currencies to make specific payments or to cover them as they travel abroad – however the corporate business on the MSEx involve much larger deal sizes.

The group’s primary focus has been on technical development prior to joining AIM. “So far we’ve been focused on the technology so that we can deliver on the services we’re offering our customers,” Proksa said.

“We’ve streamlined and automated many of the processes. We’ve made the system secure and robust. We’ve been focussed on the infrastructure, not just the technology side of things but also the banking infrastructure that stands in the background.”

MoneySwap’s clearing system is backed by a number of major financial institutions. The group’s principal banking relationships are with Barclays in Europe, DBS Bank in Singapore and with Standard Chartered, Hang Seng Bank and HSBC in Hong Kong. All payments into and out of MSEx are made through the MSPCH clearing house, which is connected to the global SWIFT network. 

“We also worked hard to prove the concept and now I think we’ve done that.  Now we want to roll out our service and add real scale.”

Secondary products to pull in users

Central to the group’s big push for volumes is the integration of a number of other products and services. While the currency exchange and the clearing house sit at the core of the MoneySwap business, it is through two other products that MoneySwap plans to draw users, and therefore transaction volume, into the exchange.

Already in circulation is the MoneySwap pre-pay currency card, which is a bit like a travellers check for the 21st century. While the service is by no means unique it is a very useful way to pull in business from retail users.

“These are debit cards, linked via our partner banks,” Proksa said. “As a user you can transfer money into your MS account, exchange it into another currency and store the money onto your MoneySwap Card.

“Then as you're travelling you can either withdraw money from ATMs or use the card as payment in stores or restaurants. They can be topped-up at anytime online via a MoneySwap account.

Beyond the tourist market Proksa and his team have already identified several other markets for the pre-pay card, and perhaps the most exciting involves Asia’s upwardly-mobile youth. Hundreds of thousands of international students, largely from Asia, flock to study at European and American universities every year. 

The majority of these globetrotting academics are supported by their families back in Asia and, according to Proksa, the MS pre-pay debit cards are an ideal way to handle both the money transfer and the management of the accounts.

“The parents get a pre-pay debit card for the son or daughter and top-up the card from their accounts back in Asia. By using the debit card and MS system the parents can save time and money. Importantly it also gives them the flexibility and control to manage the account.

“We think we our prices are very competitive. Doing a wire transfer in Hong Kong, you can pay around US$20 in transfer fees and then you still have the foreign exchange costs. The cost and time savings would stack-up very quickly if you were using our service instead.”

QuickPayIt: Swapping money in the social network

As we’ve discussed many facets of the MoneySwap business already exist in the market place but with its new product, QuickPayIt, the company thinks it will be able to offer a new and innovative angle to a tried and tested type of payment processing system.

QuickPayIt’s launch is targeted for September, this year.

“We’re very excited about this new service. It is new way for our users to make online payments, across currencies, without the users having to exchange banking details. On the face of it the service is not that different to paypal, but what we think will set our product apart is that it can be ‘white labelled’. 

“That means that organisations, particularly ones that have a community of users, for example, can offer these payment services under their own branding. We believe that this will present exciting opportunities.”

The service will be targeted at online SME’s who can integrate QuickPayIT into their existing e-commerce systems, but more intriguingly, Proksa’s plans to target the new wave of network marketing firms that have sprung up in recent years.

In recent years tens of thousands of entrepreneurs and marketers have taken to ubiquitous social marketing networks. And Proksa reckons his new product will provide these network marketers with an ideal way to address the challenges of doing business in this vast international arena.

“These network marketing firms operate with a very large number of associates and agents that are spread all over the world. 

“With QuickPayIt these kinds of organisations will be able to use a white label payment system, carrying their own branding, to pay all their various commissions and wages across their network of agents.

At the moment these firms use a number of separate systems. With QuickPayIt they could manage it simply and we would automatically credit each of their agents with the money right into their own QuickPayIT accounts, which would carry the marketing firm’s branding. 

Proksa points out that “Effectively this would be a series of peer-to-peer payments, made between the network marketing company and each of its agents.

These network marketing companies are ideal businesses for us to target. They have a lot of employees/agents and they have a real need for online payment processing services.

But it is still just one example of people we could target with this new product.

Armed with its scalable currency exchange and these two bolt-on business units MoneySwap now plans to use the £3 million it raised through last month’s IPO to help it build its presence in Asia by targeting new markets and for working capital

“We plan to roll out the service to new countries and that will help us add more volumes to the platform and increase our revenues,” Proksa added.

“Through this strategy we are looking to substantially grow the business.”

Big plans in a big market

It is clear that Proksa and his team are not short of ambition, particularly given the amount of competition in its markets.

“Admittedly the online payments sector is very competitive but it is also a very large, and growing, market,” Proksa said. “What we’re trying to do is focus in on a target region and differentiate ourselves from our competitors in those target markets. 

“We’ve worked hard to localise the product and this is a very key differentiator for us.”

As the company pursues this ambitious growth strategy MoneySwap promises to be very interesting new additional to the London market.