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There is no consensus on the level of tech innovation in the international or cross-border money transfer and payments industry. FinTech startups think that there is none. They think that the industry is so complex, full of intermediaries, with huge margins, settlement problems, etc., that it is ready for disruption. Not totally true because the industry does need tech innovation and there is so much room for technology that we all agree that it must be encouraged, developed and invested on. This article will show you where tech innovation is happening — the baby steps.
To encourage all these efforts is the reason why we are organizing the RemTECH Awards: to bring remittance innovation forward. To highlight the companies, the people are conceiving and putting in motion technologically based ideas that are or will produce changes at any level in the complex and multifaceted remittance industry.
The RemTECH Awards will be hosted the first year by the International Fund for Agricultural Development (IFAD), the World Bank and the United Nations Department for Economic and Social Affairs (UN-DESA) in New York City on June 15 at the United Nations HQ as part of the GFRID2017 (Global Forum on Remittances, Investment and Development 2017). The nominees will be presented at the IMTC USA 2017 Conference in San Francisco two days before June 13, the most important “Tech in the Remittance Industry” event. The awards won’t choose the “winners” in the many categories available; the judging panel wants to boost the tech innovations and encourage creativity and forward thinking.
I want to draw attention to the sectors of the industry where tech innovation seems to be developing at the fastest rate. This list — and the few examples that I mention — are not exhaustive or in any particular order and are basically the product of the discussions in the panels and roundtables that we had in our IMTC EMEA conference in Madrid in early April and the MTBIT Innovation Forum.
1. Digital-First ‘Sending’ MTOs
The digital-first companies — Xoom, WorldRemit and TransferWise, as well as mobile-first Remitly — have had over $100M investments[i] coming their way and Xoom was acquired by PayPal in 2015 for 890 million. They are definitively remittance tech innovators who have been able to draw a number of clients from the traditional agent-cash base channels as well as clients from the banking sector. WU.com, the digital arm of industry leader Western Union continues to have the largest digital remittance revenue at around $90M[ii]. In a report, WU stated that only 80% of WU.com are new clients, so only 20% would have switched[iii]. It is important to say that these companies have only “digitized” the sending side, using the same traditional channels of their brick-and-mortar competitors and even relying on paying correspondents brand awareness to attract customers. The client acquisition costs of these companies have been enormous.
2. Mobile Remittance ‘Paying’ Operators
M-PESA and many other mobile money operators in Africa — as well the Philippines, other places in Asia and new entrants in Latin America — have been working to create the necessary domestic ecosystems to entice customers to receive remittances on their phones and be able to use the funds digitally or use agents to cash-out. The use of technology to improve the delivery of remittances to the rural sector[iv] is one concern that multilateral agencies like IFAD are encouraging. Regulation has been also a difficult barrier to overcome with governments protecting their banks from the mobile disruption.
3. Forex & Settlement
After many years of consolidation and a shrinking of the Forex sector in the world due to regulation, compliance, the euro and other factors, technology has brought this sector back. Existentially linked to the international money transfer industry, international payment specialists are now offering P2P, B2P, B2B and P2B with great exchange rates, online services with easy and clever web presentations as well as offering settlement services to remittance operators in certain corridors where currency offerings can be advantageous for MTOs. They are also a solution to “derisking”[v]in some corridors.
4. Payment Processors & Aggregators
A number of tech innovations have made it easier for payment aggregators and processors to offer their services to both traditional MTOs and digital-first Companies, simplifying operations, lowering costs or vastly expanding distribution networks. Some offer merchant services, some offer automated bank deposits, connection to ATM networks (and retail networks too).
5. RegTech: AML — CTF
No company in the industry can do an effective job in following regulatory reporting guidelines without technology and the same can be said for AML and CTF controls and the careful management of a good risk base approach to managing corridors, agents and clients. Much can still be done in this area and compliance professionals have to get better in demanding technology tools from their CEOs and their Boards. Human resources compliance costs are sky-rocketing and the only way to lower cost and increase efficiency (and satisfy auditors & regulators) is through tech innovation. Outsourcing to RegTech has been mentioned for a while now.
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