By Daumantas Dvilinskas, CEO and co-founder of TransferGo
We live in a highly strung geo-political climate. Over the last decade, we’ve seen a gradual move away from a policy of globalisation as various corners of the world instead opt for stronger borders and isolationist rhetoric. So much so, that regulation reversing global integration is currently manifesting and setting a new political agenda.
However, amidst this change, there is an interesting dichotomy that is unfolding. As physical borders look to once again be drawn firmly in the sand, virtual borders – such as those used in financial services – are expanding and becoming ever more inclusive. The world of international remittances, for instance, is now worth $550bn to low- and middle-income countries, and the WorldBank only expects this growth to continue. This trend is reflective of the role of fintech in navigating geo-political tensions to provide a service that connects us all, no matter which physical borders separate us.
Democratising financial access
For too long, financial services has not worked for hard-working migrants. They have been victimised by an outdated system that benefits local communities as opposed to those who maintain a need for global connections. Traditionally, migrant communities have been stung by predatory fees, inefficient processes and unfair foreign exchange margins when making international money transfers. Remittances are a vehicle for international development, effectively lifting people out of poverty by funding education, healthcare, housing and business investments. They empower families to explore new opportunities abroad, learn new skills and seek out better career prospects.
Yet, the existing model can penalise this movement of workers by charging unfair fees. The World Bank estimates the global average cost of sending US$200 at around 7 percent – or US$14. However, traditional incumbents have been charging anywhere between 11 and 29 percent of the transfer value, and few can settle those transfers in anywhere near what consumers should accept.
Thankfully, this is a system that no longer needs abiding by. It’s a model that is synonymous with the same attitudes ascreating physical borders and preventing free movement. Instead, fintechs have created an alternative; borderless financial services that create access for migrants the world over.
Leading by example
Across Europe, there are start-up hubs that are leading the charge in breaking down these obstacles, and creating virtual, permeable borders. One fintech strain that is pioneering change is digital money transfer services. These facilitate the flow of money across borders without unfair fees and hidden exchange rate mark-ups, empowering migrant communities by giving them total control over the movement of their money. At TransferGo, for instance, we partnered with blockchain remittance service Ripple to change the landscape of outbound money transfers by giving consumers faster, more secure and straightforward options through the latest technology.
As well as empowering consumers, a separate cohort of fintechs that specialise in payments are creating open, financial borders for businesses of all sizes. Companies like Stripe are unlocking the global opportunity for online businesses, allowing them to accept payments in foreign currencies, scale into new markets, and tap the growing global e-commerce market. Similarly, point of sale (POS) merchant platforms like Adyen are enabling businesses to accept online, mobile and POS payments and access a global customer base.
Therefore, while geo-political trends may be leading to the affirmation of physical borders and a move away from globalisation, fintech is playing an evergreen role in connecting international communities regardless. The incumbent money transfer system is outdated and detrimental to migrants, but innovative start-ups across Europe are helping to provide borderless remittances and offer an inclusive alternative.