Traditional institutions within the currency exchange and money transfer landscape have long felt the tremors of disruption. In the last 5 years alone, the number of companies transferring money abroad has grown from 35 to 112 in the online space. With more than 100 different exchange rates available for the same currency, it’s little wonder that consumers are finding it difficult to compare rates all at once, let alone navigate their way through the minefield of complex charges and fast-fluctuating rate changes.
Ricky Lee, founder of currency comparison aggregator Find. Exchange shares his insight on how innovative next generation technologies are set to trigger the biggest shift yet in the currency exchange and money transfer world as they cut through the complexities to deliver a faster, safer, and more transparent experience.
With the Personal and SME Business transfer revenue markets valued at £1.1bn and £23bn respectively, there’s real opportunity for businesses young and old to take a significant slice of the money transfer pie.
To succeed in this space, however, there’s no sense in innovating for the sake of innovation: solutions must identify and address the pain points of the user and, utilising the right technology, be able to deliver an experience that meets the demands for convenience, transparency and security.
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There have, of course, been important moves to shake up the way things are done on the money transfer scene, as disruptors look to improve costs, transparency and even aesthetics. But the actual underlying technology has not been revolutionary: the same things are being done, just in a different way.
Knowing your customer
The lack of technological innovation in the money transfer space means that businesses sending and receiving money on a daily basis are not only met by high fees but they must also navigate a money transfer minefield in order to achieve the best deal.
Within in a business setting, those who organise international money transfers – whether for accounting purposes, payroll or for travel – need the simplest route to the best deal. With the fast-fluctuation of rates and volatility of the marketplace, achieving the best results can squeeze a company’s time, resources and budgets. And so, it’s possible that these decision makers will default to existing partnerships to alleviate the pressures on time and resource. But in doing so, they don’t solve the cost element of the equation.
By understanding the key challenges businesses face – such as the complexities of comparing transfer provider rates – innovators can develop solutions that remove the friction from the experience. Resultantly, they will be able to offer up a quick and seamless service that alleviates the pressure on their time, resources and budgets.
Meanwhile, from a currency exchange perspective, inconvenience is the major pinch-point for corporate travel planners and business travellers alike – as it is for leisure travellers too. The out-in-the-field delegate is unlikely to want to spend time locating exchange bureaus or sourcing best rates, which are often unfavourably high. Ultimately, they want a seamless business travel experience. This means that the user experience is key. They need information at their fingertips, real time data to help them make the best decisions, and a platform that is fast and easy to navigate.
Therefore, any innovation that works to simplify the process and cut through the confusing layers made up of hidden charges, multiple rates and hard-to-locate bureaus, will immediately elevate the overall experience for the user.
While it may seem a straightforward equation to solve, innovation is struggling to progress with any real momentum – particularly amongst the heavyweights of the industry. This is largely due to an increasing shortage of talent.
A paradigm shift
The money transfer market is complicated, and any charge to lead the way needs to be spearheaded by the best. The problem for some of the largescale institutions is that ‘the best’ are increasingly attracted to the agile, in vogue and dynamic practises associated with startups.
The likes of Western Union, for example, have had more than seven years to evolve and catch up with innovation that’s happening across sectors, especially in terms of blockchain developments. But though they may be actively seeking ways to expand, progression hinges on retention of the best talent.
The changing patterns in consumer behaviour add another challenge to the innovation problem, as the marketplace is almost duty-bound to shift with every rise and fall: consider the evolution of players such as Revolut and Monzo, which started off as travel and payment cards, respectively.
Crucially, the move towards mobile has engendered a new paradigm shift that is forcing financial service companies to change: people can work from anywhere – home or away; accounts are multi-currency, meaning payroll has had to change. The mobile revolution isn’t new, but the prevalence of mobile for the banking customer is undeniably shaping the course of innovation.
As customers, we are time-poor and want to be able to organise transfers from our pocket without having to visit a local branch. But poor mobile offerings and antiquated, sluggish transfer systems from the larger players just aren’t meeting these needs. If transfer companies can’t innovate quickly enough and their mobile offering is insufficient, customers – who are increasingly promiscuous by nature – will leave. Ultimately, any innovation now has got to be user-centric. It’s not about reinventing the wheel, it’s about reinventing the customer experience.
While challenger banks are an attractive, cheaper, mobile-friendly option, they simply can’t compete with the customer experience of stalwart players like Lloyds Banking Group. Imagine, as a customer, you lose your card. Lloyds has the capability to respond immediately, asking questions after they have provided a solution to the customer. With challenger banks, you could have a three-month fight on your hands to reach a near-satisfactory result.
There’s a parallel to be drawn here, relating to the emergence of streamlined models impacting the aviation scene. Ryanair’s popularity, for example, is down to pricing, not product or service, and there are many who will – through necessity or choice – trade customer experience for a cheaper price. But for those who favour experience over price, traditional carriers such as British Airways will win them over. In spite of elevated costs, they can ultimately deliver a better experience because they have the infrastructure and the staff, in place. It’s exactly the same in the banking world.
Building solutions block by block
While some players have moved to disrupt the currency market, actual ground-breaking technological transformation has been limited. But with the introduction of blockchain technology, the financial services ecosystem in particular is on the precipice of a new era. Even in its relative infancy, blockchain technology is making its mark and bringing with it the promise of real transformation.
Created initially as the mother of the payments world, bringing with it the arrival of the P-2-P payment process, it quickly became apparent that blockchain could be utilised across many other industries. For currency exchange, it’s the next logical step towards delivering a transparent, secure and fast service.
We are entering a new age of development and integration and we’re at the very start of the blockchain story; no one really knows what the next chapters will hold. What we do know is that next gen technology like this will be a game-changer.
Moreover, with privacy high on the agenda – a call that has given rise to the GDPR revolution – the timing for blockchain technology implementation couldn’t be better.
Blockchain is all about getting data from A to B as quickly and safely as possible, and this ties in well with the globalisation we are seeing. Blockchain is the perfect product to maintain the momentum of globalisation: at its core, it’s about communicating securely, rapidly and transparently.
The start of something
But there’s no doubt that it will take time to implement any meaningful end-to-end solutions. And traditional banks that are weighed down by antiquated legacy systems, not to mention the sometimes more out-dated thinking from within its top tiers, will find it hard to keep up. This is where dynamic startups will come into play.
Collaboration presents a fantastic opportunity for startups, more so than competing with the giants of the industry which have decades of experience and credibility behind their brands. However, the growth in startup culture, spurred on by proven companies such as TransferWise and Revolut, has authenticated startups as just that – the start of something. As such, their potential, hunger and ambition is being widely recognised, thus securing them a role in the future of fintech.
And while startups rarely offer an end-to-end solution, they do hold the important advantages of speed and agility, making collaboration an attractive option for both sides. Working together, startups can help more established companies to implement next gen technologies – combined with tried and tested models – to improve user experience and enhance functionality.
This amalgamation of the Davids and Goliaths of the financial services world could induce a powerful transformation of the fintech ecosystem as we know it, as they cut through the residual complexities and answer the demands emanating from shifting consumer behaviour and a rapidly expanding industry.