According to the information compiled and sent through the free Pew Research Center, migrants from around the world sent more than $ 570 billion to their home countries in 2016. While the banks and a handful of high street brokers dominated this field until the turn of the last century, the arrival of several FinTech players has changed the international remittance landscape for the better.
The rapid growth that some FinTech overseas money transfer companies have experienced is remarkable, to say the least. For example, TransferWise, a UK-based FinTech Unicorn worth more than US. $ 1 billion. It is an international money transfer company that hit profitability within six years of beginning operations. After its brand in the peer to peer (P2P) manufacturing payments arena, it entered the customer to customer (C2C) sector.
Some of the leading fintech players have done well in the attention of venture capitalists. WorldRemit, a British company, has raised more than US. $ 230 million through nine rounds of funding. TransferWise has managed to raise over $ 390 million in seven rounds. Headquartered in Singapore, InstaReM has raised over $ 18 million through seed funding and two more trials.
With a noticeable increase in alternatives, FinTech has given people who want to transfer money abroad more benefits. Here are 10 things FinTech has done for the international referral industry.
Reduced dependence on banks
Until the late 1990s, people who wanted to transfer money abroad had little choice but to turn banks or a limited number of high street forex brokers. While FinTech has not been able to completely eliminate the banks from the picture. But now a significant number of people continue to move away from the banks and toward specialists overseas money transfer companies.
Better exchange rates
Until FinTech Enterprises entered this space, individuals as well as small to mid-size businesses usually had to deal with less than desirable exchange rates. Only banks and large companies were privy to near market prices. Now, FinTech companies offer very competitive exchange rates, often in close proximity to existing market prices. In addition, some companies even let their customers bid for preferred exchange rates. Which correspond to which customers might end up then.
Little to no transition fees
While the exchange rate has an impact on the viability of a transfer, so does the fee that the sender has to pay. Most banks continue to charge quite high fees, although this is not the case with their FinTech counterparts. Depending on where you live, you could be a company that has little to no transfer fees to pay. For example, Currencies Direct and OFX offer free transfers to residents of most countries.
The speed factor
Most banks take days to process money transfers overseas. However, FinTech companies have used technology to process transfers much faster than before. Sending money to a bank account abroad might take 3 to 59 business day, depending on where the recipient lives, the company you work with, and the payment method. In addition, you could also choose from standard and express transfer.
Multiple payment methods
FinTech Overseas money transfer companies tend to choose more payment methods from which to give their customers. Paying via a bank account transfer is usually the least expensive. Not all companies accept payments via debit and credit cards. Those who charge extra fees tend to charge for card payments. Some of the other methods you can get to choose from include ACH, Google Pay, Apple Pay, IMMEDIATELY, POLI, and iDEAL.
Online transmission, over the phone, or in person
FinTech will simplify how and when people abroad initiate money transfers. With access to an internet enabled computer or smartphone, you can make a cross-border money transfer from virtually anywhere, anytime. Some companies allow you to initiate transfers by talking about the phone currency brokers. You can also find alternatives that let you send cash from physical locations.
Increased cash pickup locations
While older players such as Western Union and Moneygram still account for a large portion of the market when it comes to transfers that involve cash pickup. FinTech is making slumps in this segment as well. Although not many fintech companies have physical storage or agent networks, some of their options are Azimo, WorldRemit, and Ria.
Hedging instruments and regular payments
Hedging instruments such as market orders and futures have been difficult to find so far, and are not usually offered to individuals and small to medium-sized businesses. Now, several FinTech companies, such as WorldFirst, OFX, Currencies Direct, and TorFX offer hedging tools to their clients. These tools give people the opportunity to make the most of exchange rate fluctuations. Some fintech companies have their customers set up scheduled transfers.
Multi currency accounts
Multi currency accounts offered by FinTech money transfer companies such as TransferWise, WorldFirst, and OFX are designed to serve online sellers, freelancers, and small to medium-sized businesses that employ internationally.
With a typical multi currency account, you receive free receipt account information from different countries. Then, you can, without worrying about exchange rates, receive payments in the same currency. For example, you can live in the United States, but still receive payments in euros directly into your Euro denominated account. In such a scenario, withdrawing your money into your bank account is entirely up to you.
Big Data Advantages
With big data, international money transfer companies can give means to build better relationships with their target audience. Xoom already employs the services of industry experts to analyze the large data of its transactions. The system has successfully an anomaly that missed well to the human eye. This was in 2011 when a criminal group attempted to cheat the company by bombarding it with a fairly high number of New Jersey based Discover Card transactions.
Big data can also provide businesses with valuable insights into aspects such as why people send money, frequency of transfers, locations, devices, and timestamps.
FinTech has successfully disrupted the international remittance industry by making cross-border remittances faster and more cost effective than ever before. In addition, people can now send money abroad from the comfort of their own home when they are in the office, or even while traveling. Another important thing, though, is to compare different alternatives before choosing the supplier that suits your individual needs.