Numbers that surround the overseas money transfer or international remittance market might come as a surprise to many. Consider this – in 2016, around U.S. $574 billion was sent as remittances by migrants from different parts of the world to their home countries. Of this, more than U.S. $138 billion was sent from the United States, more than U.S. $25 billion made its way out of the United Kingdom, and more than U.S. $23 billion was sent from Germany. While some large banks and a limited number of high street forex brokers controlled the overseas money transfer market until a couple of decades ago, the arrival of different FinTech companies has changed the scenario for the better. Incidentally, increased value for money is not the only advantage that the FinTech players have to offer.
The Growth of FinTech is Apparent
UK-based TransferWise is a FinTech unicorn – valued at more than U.S. $1 billion – that hit profitability within six years of getting into the act. This company has been around only since 2011. TransferWise, and some of its competitors such as Xoom started out in the peer-to-peer (P2P) payments arena and did not take long to spread their wings into the customer-to-customer (C2C) sector. PayPal, one of the older players from this field, appears to want to give itself a FinTech boost, having acquired Xoom in a deal that valued that U.S. $90 million.
Venture capitalists (VCs) have obviously taken note of the FinTech effect on the overseas money transfer industry, which explains the considerable amount of funding different companies have received in the recent past. UK-based WorldRemit has received $180 million through three stages of funding, TransferWise has received $31million in two stages, and Singapore-based InstaReM has received over $18 million through seed funding and two rounds of funding that followed. Some of the other FinTech money transfer companies that have attracted the attention of VCs include Azimo, Remitware Payments, and CurrencyFair.
More Alternatives for Consumers
A number of the top FinTech overseas money transfer companies operate multilingual websites dedicated for different regions, giving customers the ability to make selections according to where they live. Azimo, for instance, provides website access in different European languages, but you may sign up with this company only if you live in Europe. Australia-based OFX, on the other hand, lets people from most countries register as customers. However, access to its website comes only in English.
Rather than fading out, companies that rely on agent networks are turning to technology to make the process more cost effective and secure for their customers. Western Union and MoneyGram, for instance, have already put Ripple’s blockchain technology to the test. Meanwhile, newer FinTech companies such as WorldRemit, Azimo, and Ria are building their own agent networks. While just about every international remittance company lets you transfer money to bank accounts, some even let you top up mobile airtime and send money to mobile wallets from different regions. The FinTech effect has also resulted in several companies accepting payments via credit and debit cards.
Reducing Costs
From 2013 to 2015, the average cost of carrying out a U.S. $200 transfer had reduced from 8.94% to 7.52%. What comes as no surprise is the disparity between banks and online money transfer companies. While the average cost of using the former is close to 11%, the average cost of turning to the latter stands at 5.32%.
Conclusion
FinTech companies have reduced costs of out carrying out cross-border money transfers, while also simplifying the process. Besides, overseas money transfer companies tend to score over banks when it comes to turnaround times as well.
About the author:
Jon works for iCompareFX, an online platform that lets users compare leading overseas money transfer companies depending on where they live. His job as a researcher involves delving into the intricacies of how companies from this field operate, and he is often found mystery shopping. Outside of work, Jon likes exploring new music from different genres.