STARTUP STAGE: Refundit automates VAT refund for travelers, retailers and governments

Refundit

Refundit automates the VAT, or value-added tax, refund process for tourists visiting the European Union. Users can submit their VAT refund request through the Refundit app, even before they arrive at the airport and without having to stop at customs.

Refundit’s founders are Uri Levine, the co‐founder of navigation app Waze acquired by Google for $1.15 billion in 2013, and Ziv Tirosh, founder of Stockton Group, a bio-pesticide maker acquired by a Chinese company for $90 million in 2015.

Describe both the business and technology aspects of your startup.

Refundit is a travel tech startup designed to completely transform the VAT refund (tax free shopping) scheme for tourists in Europe, creating a new and fully digital process that will have numerous benefits for tourists, retailers, authorities and governments alike.

Refundit clears up the red tape and cuts the lines for non‐European Union tourists, allowing them to quickly and efficiently obtain their VAT refund through a simple mobile app, making shopping more attractive and contributing to the growth of tourism economy.

The core innovation Refundit brings is the fully digitized and paperless process, which allows tourists to submit their request through a mobile app, and allows tax authorities to approve the refund online. The app frees tourists as well as retailers from needless lines and paperwork. The tourists can now obtain the VAT refund at all stores, with no effort on the side of the store.

Tourists can download the Refundit mobile app to their smartphone, take a photo of valid receipts along with their boarding pass and passport and send their request. That’s it. No need to stand in line, fill out forms or rush to the airport. It’s simple and will only take a few seconds to complete.

Refundit provides local authorities (customs, VAT, etc.) with a special digital system which enables them to receive, track and authorize the requests before the tourist’s flight. Only in special cases will tourists be requested to stop and show the goods at customs at the airport.

Digitizing the process enables tax authorities, for the first time, to integrate innovative capabilities such as big data, artificial intelligence and fraud prevention into the VAT refund process, to better manage, document and analyze data.

What inspired you to create this company?

Refundit’s founders are well-experienced entrepreneurs - Uri Levine and Ziv Tirosh - and both are looking to empower consumers around the world and save them time and money.

The idea was Uri Levine’s. Uri is passionate about empowering consumers and helping them save time and money. He hates standing in line and any waste of time, and the many cases in which the money was never returned made him understand there is an inefficient process that needs major disruption.

Give us your SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis of the company.

• Strengths

We are the first to develop a fully digitized process with a friendly mobile app that offers advantages to all stakeholders – tourists, retailers, authorities and governments – with everyone enjoying it. We help them get rid of all paperwork and lines, developing the infrastructure for monitored processes through big data and analytics capabilities.

• Weaknesses

We depend on governments and their collaboration. The good news is that we see great interest in digital innovation from governments throughout Europe - all want to make the process more efficient, valuing the strength of making tax-free shopping easier in attracting tourists and increasing their spending.

We have great interest and have met in recent years with more than 17 countries in the EU and believe things will proceed to the benefit of all stakeholders.

• Opportunities

Some 90% of VAT refund is “left on the table” and does not reach its rightful owners. This makes about 23 billion euros out of a total of 26 billion euro annually. With a fully digital solution, this market also has the potential to grow since more tourists will want to shop while they travel. These are very large numbers ‐ a huge market is waiting for a disruption.

• Threats

In some countries there have been attempts to digitize the process, yet most of it is still manual, or partly manual, with the need for tourists to stand in line to stamp their paper invoice digitally in a special kiosk, for instance. So, the problem is not yet solved, and we hope to get the opportunity to change how things are operated in the EU.

What are the travel pain points you are trying to alleviate from both the customer and the industry perspective?

We save tourists time and money on their shopping through a friendly, easy-to-use app that makes it all more enjoyable helping them skip the long lines and paperwork on their way to get the refund they are entitled to by law.

Small- and medium-size retailers benefit, being able to attract tourists by offering refunds as well, with no need for them to do anything but sell. We take care of the rest. Benefiting from Refundit’s services are also the local tax authorities, who enjoy a state-of-the-art digital platform and capabilities it brings, and governments promoting bigger tourist spending on shopping, stimulating economic growth.

Another important fact is that tourists pay substantially less fees with Refundit, since Refundit sets a new standard in the industry by offering the lowest and most transparent handling fee in the field ‐ 9% as compared with current agents who charge 30 to 50% of the refund.

So you've got the product, now how will you get lots of customers?

Refundit has two different types of customers: 150 million non‐EU tourists who visit the EU every year and do quite a lot of shopping as part of their visit. The others are the tax authorities and finance ministries across the EU. Refundit helps stimulate tax-free shopping in their countries.

We offer authorities enhanced fraud prevention tools, full control and data analysis of the process and the opportunity to improve service to tourists. Our team meets officials all over Europe and presents them with the solution.

As for tourists, we reach them through different channels: directly via digital media and PR, through retailers who use our service as a “sales tool” in their store, and also through different travel industry partners. We believe that once the service is in several countries it will become the “must have” app for tourists.

Tell us what process you've gone through to establish a genuine need for your company and the size of the addressable market.

More than 50 countries in the world have a VAT refund scheme for purchases of goods tourists take with them when leaving the country. In Europe, VAT on clothing, electronics, toys, etc., ranges between 17% to 27%.

Around 90% of these VAT refunds, some 23 billion Euros out of a total of 26 billion per year, don’t reach the tourists. Why? Most tourists just give up on the refund as they must go through a  process which might include: standing in long lines, navigating complex forms, paying high commissions and, in the end, not always receiving their money back due to a lack of a traceable paper trail. Refundit helps overcome all this.

Refundit provides its services today to non‐EU tourists in Belgium, in collaboration with the Belgian Ministry of Finance. Refundit is now launching the service in Slovakia with the Slovak Ministry of Finance collaboration. Our plan is to help tourists to obtain their VAT refund across the EU and we are in contact with most of the EU governments.

How and when will you make money?

We already have income from our users. As our mission is to empower the tourist, Refundit sets a new standard in VAT refund handling fees with a minimal and transparent 9% percent commission from the VAT refunds as compared to 35 to 50% cut that current agents charge today.

What are the backgrounds and previous achievements of the founding team, and why do you have what it takes to succeed with this business?

Our co‐founders are Uri Levine, the co‐founder of Waze (and many other startups) and Ziv Tirosh, founder of Stockton.

Uri co‐founded Waze, the community-based mobile navigation app that was acquired by Google in 2013 for over a billion dollars. Now he is a serial entrepreneur, with several startups, some of them in the travel tech industry.

Uri invests his time and energy in developing new startups that are focused on saving consumers time and money. He’s co‐founder/chairman/board member in Moovit (public transportation navigation app), Fairfly (monitors the airfare after reservation and rebooks once price drops), Roomer (marketplace for non‐refundable hotel reservations), Wetrip (enabling Generation Y travelers to easily book concept holidays together), Engie (diagnostics and maintenance app that empowers car owners), LiveCare (the first smart medical alert device specifically intended for the elderly), Refundit and more.

Ziv was the founder of the Stockton Group, a world‐renowned bio‐pesticides firm. China’s Hebang group bought a majority stake in Stockton for $90 million in 2015. Ziv built up the company over a long period of time and made it a global leader in the agriculture industry.

Both of our founders are men of vision and with a deep understanding of what it’s like to take an idea, build a team who will marry it with technology and see it through to implementation. In today’s startup world, there are many pitfalls that must be avoided while not losing sight of the business’ goals, which is not just making money but also to contribute to society as a whole and leaving the world a better place.

What's been the most difficult part of founding the business so far?

Getting into new countries is the most challenging part of the business, but it also creates the barrier to entry. We are also proud to say that in only 18 months we have been able to implement our solution into two countries ‐ which we see as great results for the time frame since our establishment.

Generally, travel startups face a fairly tough time making an impact ‐ so why are you going to be one of lucky ones?

We believe in our mission of making tax refunds for tourists in the EU more fun and easy. The amount of money left on the table due to the tedious process, along with the high interest we get from governments and tourists, all show that we identified a real and painful area that demands a solution. We are the first ones to create an end-to-end digital solution and to engage with all stakeholders. Our model truly creates value for the authorities, the retailers and the tourists. 

Something you would like to add?

Yes, we are also very proud to have won the first prize in the first United Nations World Tourism Organization ‐ Globalia competition for travel tech startups. We were chosen out of close to 3,000 startups from 132 countries. This happened just in January. We are excited by the recognition we received to the contribution of Refundit to global tourism economy and tourists' experience.