The global money transfer market has gone through unprecedented change powered by remarkable financial technologies. In the early stage of digitalization, the banking sector used information technology to perform basic functions such as customer service, auditing, book-keeping, etc. which continued in the form of core banking system. In recent years, we can see the advanced innovation in infrastructure that has largely been characterized by peer-to-peer lending, big data analytics, open API models, and cloud computing.
In 2019, the industry had witnessed rising concerns over data privacy, adoption of blockchain technology, and increasing acceptance of cryptocurrencies as the new money for international transfers, not to forget an increase in peer-to-peer money transfer companies.
Based on how we have been closely following past trends, here are our top predictions for the global money transfer industry for 2020:
One of the most promising trends in 2020 is the continuous growth that the remittance industry will be experiencing. The upward trajectory that started in 2016 with a consistent 7.8% average reached a record high to reach $528 billion in 2018, a 10.8% increase.
India is expected continue retaining its top position with remittances expected over $87 billion in 2020, followed by China and Mexico
The rising interest in cryptocurrency for international money transfer has been the common theme in most of the conferences and think tank proceedings. Follow us on Twitter for live coverage on similar discussions.
IBM conducted a survey of 200 banks in 16 countries titled, “Leading the pack in blockchain banking: Trailblazers set the pace”. The study concluded that almost 70% of the banks believed that Blockchain would positively impact the three critical elements related to international payments that are time, cost and risk.
As the popularity of cryptocurrency-based payment methods grew in developing countries like in South America and Africa (Venezuela, Argentina, Brazil, etc.), it is likely that many developing nations around the world will follow suit. If the traditional money transfer providers can’t keep up with the emerging innovation, blockchain payments and cryptocurrencies will hold as mega key players in the remittance industry. For more on Bitcoins, CompareRemit has a detailed report.
With the recent testimony that Mark Zuckerburg, CEO of Facebook had to do before Congress, it has been established that privacy is a huge concern. There is a primary focus on how the users, governments, regulators, and consumer rights groups see big tech. The rising concern over privacy, data manipulation, and ethical monetization has called for stricter laws and regulations. Owing to the concern, any new moves by the global technology companies could be held back because of the fear of interference in governance like the 2016 presidential election and compromising the rights and freedoms of the customers.
Big tech like Apple and Google are already in the payment space, which is inevitable but a big worry nonetheless for the regulators. More regulations are likely when it comes to big tech companies venturing into global money transfers and payments.
Mobile apps are indispensable in this digital age. Mobile has helped achieve great lengths in terms of financial inclusion, especially in developing countries. The majority of the money transfer companies have developed their own apps for the convenience of their customers. Since there are so many apps that function separately as a digital wallet or as a payment app or as a money transfer app, there could be re-bundling of all these functions into one app called the “Super App”.
Super Apps are umbrella apps bundling together many apps offering multiple services within from city services to travel bookings within the single app. We have seen many companies in China leading the trend in super apps. A similar growth pattern of high density and rapidly rising urban middle-class population will enable tech companies to capitalize on this leapfrog effect. As the use of mobile devices increases along with greater financial inclusion, people will gravitate towards having a form of digital money that they can rely on.
For the latest in apps used to transfer money across CompareRemit has everything you need to know.
Over $700 million were raised between these 6 cross-border payment service providers in 2019. As we can see, most of the funds were raised by the companies in Europe, primarily in the UK, Remitly, a Seattle based startup, and Singapore based InstaReM being the exceptions. In 2020, we could see more funding for companies in America, Africa, and Asia working towards improving or disrupting the cross-border payment industry. China, India and Mexico were among the top five countries that benefitted from remittances
Alliances between emerging financial technology companies and traditional financial institutions have proven to bring a competitive advantage over others. We also see a resonance in the money transfer industry. Last year, Mastercard acquired Transfast, a global payments company with significant cross-border network reach. Retail giant Walmart launched their global money transfer service called Walmart2World in partnership with Moneygram. Xoom, a PayPal company also signed a strategic alliance with Walmart and Ria to strengthen their foothold.
We have also seen a few successful partnerships between banks and financial technology providers namely; the tech giant Apple’s partnership with Goldman Sachs and Mastercard, and TransferWise collaboration with Groupe BPCE. We could see continued interest in complementary service providers joining forces and a rise in collaborative competition.
We expect further improvement in the traditional money transfer systems and the introduction of new products to compete with the existing methods. For example:
In the coming years, as the fintech industry matures further and new financial technologies develop, we expect global money transfer to become instant, accessible, cost-effective, transparent, and resistant to fraud. Other factors like geopolitical situations, rise in oil prices, etc will have an effect on the overall money transfer industry. Follow us for more updates.