Money pools aren’t new. The idea of collecting together a group’s earnings, and maximizing its purchasing power by letting one person at a time spend the pot has been around for centuries. In India, these pools are called “chit” funds. In Mexico, they’re “tandas” or “cundinas.” In the Caribbean, they’re “susu.”
Brothers Francisco and Luis Cervera have a few twists on the model, though. The two are moving the idea of money pools online, making them easier to organize, and putting in controls to reduce fraud and free-riding. Importantly, they also hope to improve their customers’ access to the mainstream financial system by helping them build credit histories as they pool their money.
Their site eMoneyPool came out of beta in January, and aims to automate the pooling process as much as possible, taking out some of the complexity from traditional pool organizing.
“It takes a lot of time to organize money pools,” says Francisco Cervera, whose family regularly used pools to buy big-ticket stuff (cars, computers, furniture) when he was growing up. “You have to call people and meet them at different locations. They have to drive to the bank and cash a check. Sometimes everyone agrees to exchange money on Friday and sometimes someone doesn’t get paid until Monday or Tuesday.”
With eMoneyPool, payments are linked to bank accounts, allowing automatic withdrawals and deposits. And members get regular reminders when payments being made, for example. There’s also an eBay-like rating system, to engender confidence. When members pay on time, their rating goes up; when they’re late, it goes down. The pool is rated as well.
“Nobody likes to be embarrassed. You will go to lengths to make sure you’re not late on your payment, just so people won’t know about it,” Cervera says.
There’s one other key feature. In return for a $5 fee on each payment, pool members are guaranteed that if someone skips town, eMoneyPool will fill in the missing amount, and make the rest of the group whole. So far, it has had to do that only once. The company minimizes the risk by capping the pool at $1,000 and running checks on members’ identities when they sign up.
It’s still early days. About 380 people have signed up so far, pooling a total of $280,000. But Cervera says mainstream lenders have been in touch and are potentially interested in taking on reliable pool participants for larger loans.
“Banks say if you can make 10 payments into a money pool, we’re willing to start you off with a small loan even though you have no credit history. We’re acting as a bridge, getting people onto a path where banks can tap into this data,” he says.