Canadian firm cashes in on the 'unbanked' overseas


When its prepaid credit card business in Canada dried up, Mint Technology packed up and found a lucrative niche in the Mideast electronic payment market

For Mint Technology Corp []., success meant giving up.

For years, the Canadian electronic payments company ran a decent business, supplying prepaid credit cards for Canadian Tire and MuchMusic.

But there was a problem: Most Canadians already have bank accounts, which come with perks such as debit cards and access to bank-tied credit cards. Room for growth in the prepaid business, it seemed, was minimal.

That's why, in 2005, Mint's executives decided to try an entirely new strategy. They packed up and left the Canadian market altogether, their sites set on the other side of the world.

In a four-part series, the Globe will look at companies that have made massive bets on new technologies. In some cases, such as that of Mint, those bets entail an entire overhaul of the business model.

Chris Hogg, the company's executive chairman, said the company noticed a few years ago that the situation in many Middle East nations, such as the United Arab Emirates, is almost the exact opposite of Canada.

Thanks to the high number of foreign labourers - primarily from India and Pakistan - in the UAE, about 90 per cent of the country's population had no access to a local bank account. Mr. Hogg refers to that demographic as the "unbanked."

Mr. Hogg adds that, for a company specializing in electronic payment cards, "it's not a difficult decision to move from a country where 90 per cent of the population has bank accounts to a country where 90 per cent doesn't."

At the same time, many of those foreign labourers were still being paid in cash – a process that lent itself to late or missed payments.

Around 2005, the local government attempted to clamp down on the practice, issuing a law mandating that all payments be made electronically.

That's when Mint saw an opportunity to act as a middleman.

The company started out working with a couple of construction companies, where much of the Arabian Gulf's foreign work force is employed (today, Mint works with 10 of the 12 biggest construction firms in the Middle East).

Because the average Mint customer in the region only makes about $500 a month, the company doesn't take any deductions from employee salaries.

Instead, it charges companies a fee to manage payments, issuing electronic cards to employees and automatically topping those cards up on payday. The employees can withdraw cash from any one of Mint's 150 ATMs.

Very quickly, the Canadian firm found a lucrative niche in the UAE electronic payment market. It bought out two local firms to establish a presence in the country, and quickly grew.

Today, Mint manages electronic payments for some 500,000 employees, and has expanded into nearby Qatar and Jordan, with plans to target other countries such as Egypt, where the foreign worker population isn't as high, but a huge number of local employees are still paid in cash.

Having bet the company's future on a very different market than the one it started in, Mr. Hogg says Mint is now working on "following the money."

The company quickly noticed that many employees were taking their monthly payments to the nearest convenience store to top up their cell phone cards and send money back home.

So, this fall, Mint began offering both those services from its own electronic card.

Next, the company hopes to get into the microfinance business, offering loans to the foreign workers, who are otherwise unable to get bank loans within the Gulf countries.

"The market is huge," Mr. Hogg says. "We're the biggest non-bank prepaid card processor in the region."

This series continues next Thursday.

Other stories can be found on the Web Strategy [] section of the Report on Small Business website [] .

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