President Barack Obama is in Cuba, and Silicon Valley is tagging along for the ride.
Executives from several technology companies are traveling with the U.S. president on his goodwill tour or introducing new business initiatives focused on the islandâ€”or both. Among the companies joining the Cuba parade this week are Google parent Alphabet Inc., Airbnb Inc., PayPal Holdings Inc., Priceline Group Inc., Stripe Inc., and Xerox Corp.
One main area of focus is money transfers. Lifting restrictions on moving money between the two countries was one of the first things the Obama administration sought to relax since relations began to warm. Dan Schulman, the chief executive officer of PayPal whoâ€™s traveling with Obama, said on Monday that his company would begin offering payments to and from Cubans this year through Xoom, an international money transfer company it acquired last year.
Americans send about $2 billion to Cubans each year, accounting for about 3 percent of the countryâ€™s gross domestic product, according to the U.S. State Department. Thatâ€™s about a 10th of what Americans transfer to Mexicans, the largest recipients of remittances from the U.S. Fees from payments to Cubans could total as much as $147 million. That works out to about 1.5% of PayPalâ€™s annual revenue.
Donâ€™t expect PayPal to get all of that money. The company sees Xoom as a way to compete with Western Union Co., which also plans to begin operations in Cuba this year. Bitcoin entrepreneurs, who have long seen remittances as an area ripe for disruption, recently celebrated the first transactions between the U.S. and Cuba. Schulman positioned his companyâ€™s move in humanitarian terms. â€œWith Xoom and the power of the Internet, Cuban Americans save on high feesâ€”which means more money going back to their families,â€ he said in a statement.
Stripe, a San Francisco payments startup, is also offering money transfers to Cubans but focusing on those looking to start businesses. Last week, the company said it would start offering Cuban entrepreneurs the ability to incorporate companies in the U.S., set up American bank accounts, and use Stripe to accept payments in Cuba.
Cuba isnâ€™t likely to be a big revenue driver for any industry immediately, aside for travel catering to tourists. The Cuban economy is the worldâ€™s 67th largest, slightly smaller than Sri Lankaâ€™s but still bigger than Belarusâ€™s. The American contingent seems to be planting the seeds of a capitalist culture that has been absent throughout Cubaâ€™s revolutionary period. In 2016, that means tech startups. Sheel Tyle, a principal investor at venture capital firm New Enterprise Associates who focuses on consumer technology in emerging markets, is also traveling with the Obama administration. The Treasury Department also recently lifted its ban on imports of software from Cuba, adding to an exemption that allowed Cuban apps into the U.S.
There are still major barriers to the emergence of a Cuban tech startup industry. Broadband penetration on the island is lower than most places on the planet, leaving locals to rely mostly on accessing the Internet in public places. Try coding the next Facebook from the sidewalk outside of a hotel.