According to a recent PricewaterhouseCoopers report, around 90% of all global banks are wary about losing out to FinTech companies in realms such as fund transfers, personal finance and payments. The same report also suggests that more than 80% of banks are not taking this lying down. Banks, without doubt, need to up the ante a bit more, failing which they will continue to lose out on their share of the pie.
Where Do Banks Currently Stand?
An article in the Guardian earlier in the year shed light on a leaked internal memo from Santander. The memo discussed how 10% of the company’s profits came from overseas fund transfers, given that it charged around six times more than newer FinTech companies. If a bank claims to offer ‘fee-free’ transfers, you may want to take a close look at the exchange rates on offer, and don’t be surprised if you see a noticeable difference when comparing them to prevailing market rates. Another drawback is banks usually don’t perform well when it comes to turnaround times.
FinTech Money Transfer Companies
Be it lending, investment management or fund transfers, banks are facing stiff competition from FinTech companies. Western Union began its wire service in the early 1870s, and this sector has come a long way since. The evolution of Western Union itself is clear to see, given its widespread network of agent locations coupled with its seamless entry into the online world. Other players that have physical cash pickup locations include WorldRemit, Ria, Azimo and MoneyGram. What works in favor of transfers to physical locations is they tend to process almost immediately.
Stripe, a US-based company, gives businesses easy means to process online payments without requiring merchant accounts, and the company serves individuals too. UK-based TransferWise, Australia-based OFX and UK-based World First provide free receiving accounts in multiple currencies, making them ideal for online sellers with customers in different countries.
The Role of Second Generation Mobile Phones
Several countries in South America, Africa and Asia remain important markets for second generation mobile phones. While this is an aspect FinTech overseas fund transfer companies must look at, it has already caught the attention of mobile phone network providers. For instance, Jamaica-based Digicel Group owned by Irish billionaire Denis O’Brien, is already wetting its feet in mobile banking and micro insurance. O’Brien has also displayed interest in facilitating fund transfers. The company is present in more than 30 countries and has over 14 million customers.
Are Crypto Currency Remittances Here to Stay?
Some experts are looking at blockchain as a volcano that’s waiting to erupt on the international fund transfer market. In the last few years the use of crypto currency as a medium for global remittance has increased, mainly because it does away with the need of middlemen. However, not everyone is optimistic. Taavet Hinrikus, CEO of TransferWise, says, “I see things coming to life which are built around blockchain but not digital currencies.” Since depth of market will play a role, easily trading in exotic currencies using this medium might take some time.
If banks don’t take stock of the situation before quickly enough, they may well forget about dealing in cross-border payments. After all, when consumers have scores of FinTech options that they can compare easily, why would they bother with higher costs and slower speeds?