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Technology Is Making Money Transfer Brands More Relevant, Not Less

October 17th, 2016

Technology Is Making Money Transfer Brands More Relevant

Fintech – or financial technology – seems to be in the news quite regularly these days, and for good reason. Some of the innovative ideas coming out of the field have the potential to revolutionise how people earn, spend, save and transfer money. Yet 94% of the remittance industry is still brick and mortar.

This should be seen as a tremendous opportunity that gives nimble startups, fintech firms and apps to innovative new services in this space. We’re already seeing e-banking grow by leaps and bounds, and the rise of digital channels for remittance transfers. Mobile wallets are bringing financial inclusion and empowering people in developing markets where conventional bank coverage is patchy.

I’m often asked if this digital revolution is a challenge for conventional money transfer brands. And the short answer is – no.

The reason I say that is because this isn’t a zero-sum game where everyone is fighting for the same market. There are tremendous opportunities for the industry to grow as a whole – and along the way deliver better value to more customers.

For a sense of perspective, it’s worth remembering that the remittance industry is already worth USD 600 billion dollars annually – and those are just the formally declared financial flows. As new digital and mobile channels come into play and make it easier to remit in transparent ways, this total will grow. That leaves ample room for traditional operators to grow alongside their digital counterparts.

I’ll even go further than that. Digital, social and technological innovators aren’t a threat to traditional IMTOs. In fact, most of these new channels will need the dynamic network of a traditional IMTO to reach and deliver their services – in short, traditional money transfer brands will continue to be the backbone of the remittance industry.

These traditional IMTOs have spent years building their networks and investing in physical outlets and branches across their global markets. They have worked diligently to get accredited and licensed by regulators, and have qualified for the right to process financial transactions.

For new startups, these strengths will be invaluable. For instance, it might be difficult for a new brand with digital offerings to build scale and reach, and clear regulatory challenges. But these hurdles can be skirted by asking an established IMTO to handle the backend processes and payouts as needed.

At present, purely digital channels account for a mere 6% of total global remittances. Meaningful collaborations with IMTOs can help digital channels scale faster and gain the clout they need for a seat at the big table – where they can more effectively present their points of view to regulators and stakeholders.

There’s also the fact that despite the burgeoning success of mobile wallets – particularly in markets that have historically been underserved by banks – there are limitations on the transactions these wallets enable. Eventually, remittance receivers will want to turn their digital credits into paper money. And IMTOs are the most convenient way of facilitating such payouts because they already have a dense network of easily reachable branches.

We’re already seeing greater collaboration between online banking platforms and IMTOs.For instance, Xpress Money has tied up with leading banks to facilitate remittances through the banks’ websites. The bank’s customers can request to transfer money overseas from their online banking accounts; the request is then handled by the Xpress Money framework in the backend, to ensure a smooth delivery of funds.This is excellent for financial inclusivity, because the receiver on the other end doesn’t need to be a customer of the sender bank. Rather, they don’t need to have a bank account at all: they can just walk into an Xpress Money payout location and pick up their money. Again, this is an example of IMTOs facilitating online transactions through reach and on-the-ground network strength.

There certainly is growing recognition of the potential of digital and mobile channels to serve new audiences, reach unbanked customers, and create added value. But I’m going to argue that these advances make IMTOs more relevant, not less. I see technological innovation creating a layer of easy-to-use channels, apps and interfaces. But underlying that will be the traditional IMTO engine, chugging along and facilitating global payments through incredibly strong physical networks.


Written by Sudhesh Giriyan, COO, Xpress Money