You may have seen signs displayed at various cafes businesses around town informing you that the local currency “Florentin Shekel” is accepted as payment and powered by “Colu“. What the hell is a Colu, you ask? I’d been seeing these signs for a while now and was wondering the same thing myself, so I finally decided to take the plunge and download the app.
So what is it? TL;DR: Colu is basically a virtual wallet you can charge with a real credit card onto your phone, then use the app to pay at participating businesses in your area. It’s run not by a bank, but by a friendly Tel Aviv based fintech startup with around 45 employees. Having started as a local currency for a couple of neighbourhoods in town (namely Florentin and Jaffa), Colu is now accepted all over Tel Aviv and there is a separate community also active in Haifa, as well as a couple in the UK – one in East London and another one in Liverpool. At the moment, you can’t move currency between different communities, which is somewhat annoying for someone like me who spends a lot of time in both East London and Tel Aviv. Still, I was keen to give it a go.
You get a handy 25NIS credit just for signing up to the app. I christened mine at David’s juice stall in Levinsky Market, having looked up participating juice stalls in my vicinity via the app’s search facility when I was on my way home from Pilates class without any change in my wallet. David’s somewhat ramshackle juice cart probably wouldn’t be the first thing to come into my mind when I imagine the future of financial transactions, but the man turned out to be a proud advocate of the app and how it allows him to accept non-cash payments without resorting to expensive credit card processing facilities. Having pointed at the Colu sign on his counter and inquired (somewhat apologetically) whether he really did accept the magical cyber-coin, I got a very enthusiastic yes. After that, all I had to do was type the amount into the app and click the “pay” button. I suppose this is what Apple Pay users feel like all the time, but as an Android gal, it was all exciting and new to me. Plus, I literally just got some free juice.
Having actually used the app to buy something tangible, I wanted to find out more about this venture. I spoke with Vala Vaintraub who manages the Tel Aviv community about the app, the startup’s community minded vision and what’s in it for us as users and / or business owners.
DIY: I’ve had a play around with the app, but I’d like to hear the official description. What exactly is the point of Colu?
VV: “Colu is a digital wallet that can only be used at small businesses. We chose to include only small local businesses rather than big chains because of a social agenda – we want local money to stay in the local community. When you buy something from a big chain, the money you pay leaves the community. The owner is based somewhere else, usually even out of the country. On the other hand, if the money is kept in the local community, you create the need for more local jobs. That’s not just us saying this. It’s been proven by research. When money is spent locally, 60 cents out of each dollar is kept in the local community. As small businesses grow, they require more local staff than a national chain would to do the same sort of jobs. It helps the local economy grow.”
How does it work?
“We use blockchain technology that ensures money is transferred directly from one user to another, bypassing banks and other financial institutions. It’s a technological tool that offers a real alternative to what exists in the financial world today. Without going into too many technical details, we use what’s called colored coins. That’s how Colu got its name.”
(If you want to nerd out about this, here are the Wiki articles – blockchain, colored coin – DIY)
Tell me a bit about your community. How many users do you have? What sort of businesses are involved?
“We have over 430 participating businesses in Tel Aviv alone. That’s not bad, considering the digital wallet in its current form has only been active here for around a year and a half. Overall, we have over 700 businesses around the world. Mostly it’s places people shop or go to on a daily basis – local grocery stores, cafes, bars, gyms, yoga studios. We do have other businesses too – quite a few fashion designers, for example. I’m not sure exactly how many users we have in Israel specifically, but overall we have around 70,000 users worldwide.”
What do businesses get out of it? Do they have to pay a commission?
“It’s an easy pay to receive payment. Cash on the whole is on its way out. Around 90% of businesses accept credit cards and Colu empowers small businesses to accept non-cash payments. We charge a small commission and only when the merchant transfers the money from their Colu wallet to their bank account, not per transaction. If they don’t, they don’t pay a commission on the money. In this way we encourage people to keep the money in the community and use it locally.
The Colu app is also a great way to advertise your business to people in the area, offer discounts and deals and then track the results. We offer tools that allow businesses to see exactly what impact each promotion had, discover shopping trends and more. We also organise meetups and events for business owners to help them grow their business. We want to create a real community, rather than act like a faceless bank. We really want our businesses to thrive.”
Is this taxable money? Or only when they draw it out into their bank account?
“It’s absolutely taxable, from the moment it’s paid. It’s basically a conversion. 1NIS is equal to 1 Florentin Shekel or other local Colu currency. It’s the same as being paid in any other currency. ”
What’s in it for users?
“Digital wallets and virtual currencies are the global trend. Credit cards took over from cash for many transactions, now digital wallets on your phone are going to do away with credit cards. More and more things are available as an app now so you can carry everything you need on your phone. We didn’t invent the wheel here, we just joined this trend. We are offering people convenience, a way to support the local community and also a way to discover what businesses are in the area. There are also perks, such as the joining bonus, etc.” (at the moment you get 10% extra credit whenever you top up your Colu account – DIY)
What are Colu’s plans for the future?
“We’ve currently entered another funding round and are aiming for 50 million dollars. Our plan is to make Colu accessible to anyone all over the world and our challenge is to figure out a way of doing that even in places where we don’t have a local office. We’re aiming to expand our network of both users and businesses globally so people can pay and transfer money anywhere without having to rely on banks.”
Do you plan on connecting the local communities into a global network? I’m asking for a friend…
“This is something we’re discussing as an option for the future, so it could very well happen at some point, although there are no immediate plans. We’re still working out what defines a community and the line between local and global. Is a community a city? Could each country or national currency be a community? Could the whole world of Colu users count as a community? Time will tell.”
If you’re thinking “OMG! I must get in on this thing!” then I may have some bad news for you. At the moment, the Tel Aviv and Haifa communities, apart from each being a separate wallet, only allow top ups with Israeli credit cards (and no Israeli direct cards, either). Not a problem if you live and bank here, but if you’re only visiting – sucks. Also, unless you sign up with an Israeli sim card in your phone, you won’t get the 25NIS joining bonus, either. Will this change? Probably not in a hurry, so you’d better hope they link up the communities at some point.
On the other hand, if you’re in Tel Aviv, London, Liverpool or Haifa and have a credit card issued in the appropriate country, Colu can be a very fun and useful thing that also helps support local businesses.
Here are some download links aimed at each. They all live in the same app, but you get to choose which one you join (and switch between the different communities at will, just not move funds between them). Full disclosure: if you follow any of these links, use the app and top up your account at some point, I get a little bit of extra juice money (you can then invite your friends and get some free juice money too).
