Sending money back home is a motivating factor for the estimated 200 million migrant workers around the world. Improving the money transfer experience by speeding up the process and lowering fees has the potential to significantly improve lives. The money transfer industry will continue to evolve in 2019.
Money transfer collaborations grow in number
Money transfer is finding its way into mainstream apps, some of which have nothing to do with finance. Currency exchange and money movement is becoming something you do, not somewhere you go.
For example, in 2018, in addition to integrations with challenger bank, Monzo and cloud accounting platform, Xero, Transferwise partnered with European food delivery service, Wolt. For its part, Wolt had expanded to 11 different countries and partnering with a money transfer firm means the company can handle all its payments globally with a single partner.
It's not just retail businesses partnering with money transfer firms. In 2018, Western Union launched a number of collaborations including Amazon, Albertsons and Safaricom.
"Next year, you will see major mobile operators, banks, national postal networks, and retail networks collaborate to expand value for their existing customers and grow," said Odilon Almeida, Western Union's global money transfer president.
"Collaboration is the glue that will bind innovation and growth within future business models."
Online access and offline convenience
Money transfer was one of the first subsectors of finance to attract the attention of upstart fintechs. The digital disruptors, like Transferwise and WorldRemit, are taking aim at the over $600 billion of consumer transfers conducted globally. Traditional remitters are also gearing up to compete, positioning their brick and mortar locations as a strategic advantage. These incumbent firms are exploring ways to use technology to draw more value from existing physical networks.
"The vast majority of transactions still occur with cash and those market participants who can more fully employ technological solutions to drive consumers through these omnipresent networks will end up the big winners because providing a seamless transfer environment between both worlds best satisfies customer needs,” said Joe Cachey, chief operating officer of Sigue Corporation.
Sigue launched SiguePay in 2018 as a way to bridge both the online and offline worlds. A customer initiates a P2P cash transfer using a U.S. debit card. The recipient can choose from multiple ways to access payment, including cash pickup, bank deposit and cash delivery.
To SWIFT or not to SWIFT
Speed continues to be a theme in the payments industry. In 2019, SWIFT's new standard for cross-border payments, gpi, will continue to be adopted by the correspondent bank network around the world. With gpi, payments can be made in minutes around the world.
Transparency is another major feature for gpi, as money in motion has been historically very hard to track. "Of particular importance will be the gpi’s Data Tracker capability, which will allow corporate customers to track the status of their payment at all times between initiation and clearing, much like one tracks their packages during mail transit," said Craig Ramsey, head of real-time payments at ACI Worldwide.
But even if gpi becomes fully embraced as a standard, banks may decide to use new digital alternatives anyway. The entrance of new, venture capital-backed startups is driving fees down. Financial institutions, the fintech community and corporate customers will explore cheaper options to move money.
"While SWIFT gpi has raised the bar, new endpoint solutions will challenge the market-leading provider of secure financial messaging services, prompting banks to consider making ‘least-cost’ routing decisions for domestic payments, preferred correspondent bank partners, and deciding which settlement path to use internationally if not SWIFT,” said Ramsey.
Software eats money transfer
Consumers are enjoying new options as startups and traditional remitters compete for their business. Financial services may eventually get Amazon-ed. Products and services will continue to get cheaper until customer costs will be negligible. Technology will play a big role in this change.
"This will be accomplished by higher levels of automation – building more intuitive experiences for users and reducing the need to call customer service," said Transferwise CTO, Harsh Sinha.
"We’re already seeing this with robo-advisers, mortgage brokers, and savings and money transfer apps. Your smartphone has become the physical branch you go to to access a plethora of financial services and this trend will continue."