Money Goes Around The World in New Ways
Biometrics for Convenient yet Secure Payments [Source: https://www.youtube.com/watch?v=obggR1jlw-4]
The lyrics to that old song are true: 'Money makes the world go round'. But did you ever wonder how in the era of digital devices and (potential) payments how money gets around the world? If you want a sense of just how important instant money transfers are to the economic health of the planet, head down to any remittance storefront in a Gulf country like the U.A.E. or Qatar. In those countries, where millions of people from North America, Western Europe, and South Asia, go to find jobs, an important part of the process is sending some of that hard earned cash back home. There, money transfer agents skim a healthy commission off the top of the transaction to ensure that people thousands of miles away will receive the cash in a matter of minutes.
The remittance business in countries that host a significant percentage of foreign workers has been a staple for decades. Even with the global economy stalled and with oil prices plummeting, economists at the World Bank estimate that next year the global remittance business will grow by a respectable 4 percent. But disruption can come along and affect even the most simple of businesses - which is exactly what's happening to the remittance industry.
Name me a growth business and I'll show you how new entrants with innovative ways of doing things appeals to an established customer base. There's a new television streaming service known as Pluto, for instance, that offers 100 channels of running content, including loads of old re-runs (but no original content). The appeal, the company discovered, was that watching TV is a linear experience and it structured its service to feed into that need. Other streaming services didn't quite get it.
It's no different than the remittance space. Companies are looking at it with fresh lenses. For one, banks are being squeezed by interest rates that continue to dwell at rock bottom lows. In turn, they have squeezed their customers with high fees Still, can you blame banks that are under the scrutiny of shareholders and regulators alike? The money transfer industry is a natural fit for banks with good digital platforms and a global presence of physical branches. That's not to say customers even need branches anymore, but for many of them, the sight of a smiling face at the service window is an assuring feeling that the transfer will get to his loved ones without a hiccup.
Banks aren't the only entities giving remittance agents a run for their money. MasterCard recently announced that it will soon offer an app that will utilize a combination of 'selfie' photos and fingerprints to send payments via smartphone. Granted, charge card payments might be a bit sophisticated for a part of the remittance market, but for those who do carry plastic, waiting in line at the remittance storefront will become a thing of the past.
Financial technology startups are also leveraging all that is digital to bring down those hefty commissions. Every penny counts, and fintech firms that are edging into the remittance space are offering far more competitive rates to send cash overseas. Those that need to send cash can tap into one of many fintech services on their smartphones and move the money more efficiently and more cheaply. To be sure, in order to be above-board and compliant with international financial standards, every transfer agent must have some sort of relationship with a registered banking institution. So even the most traditional agents have begun to see the advantage of using digital services to settle and clear payments with intermediaries. When costs of doing business with these financial services giants go up, it's only natural that the transfer agent will look for more efficient platforms that enable more to be done with fewer resources.
Remember: Some of these businesses have significant portions of their operations in parts of the world where law enforcement agencies are scrutinizing every transaction and following every payment. That process in itself costs the transfer agent money and time. That's why the more innovative the digital solution, the more likely it is that the agent will flock to new ways of doing things in one of the world's oldest businesses.