Sunday 6 December 2015

Fintech Money Transfer Firms are not quite what they first appear to be

Money Transfer companies - the huge prize no one has yet grabbed (and why the banks have nothing to fear) 

The world of money transfer companies and foreign currency payment firms is getting ever more crowded as various exciting sounding firms join the throng with yet more promises to revolutionise the market, disrupt the banks, change the world etc .

The fact is none of them (unless there is a firm deliberately keeping it secret) has managed to deliver a complete solution. The first firm that does this, has ridiculously huge potential to genuinely disrupt the market and make eye watering amounts of money in the process. 

I work as an intermediary between both sides of the market, matching companies and individuals with the non-bank or bank provider that best meets their needs. So my work would be very easy (and totally pointless!) if such a firm existed 

Here is just a sample of the gaps I come across on a daily basis working with the leading FX payment firms (money transfer companies and banks alike) 

Can't do that currency 
Can do outbound payments but not inbound 
Can't do same currency payments 
Poor rates on some or all currencies 
High payment fees 
Won't do small deals 
Won't do large deals 
Can't give credit 
Need to ask for collateral 
Will serve corporate clients but not individuals 
Can do high value payments (eg SWIFT) but not low value (eg ACH) 
Don't want small clients 
Don't want large client 
Can't set the client up quickly enough 
And that really is just a sample, the full list is MUCH longer 

Having been closely involved with the design build and delivery of FX/payments systems for two very large banks and one non-bank, I know how hard it is to cover all the possible scenarios that a client may look for....but I also know that it can be done. 

So will the likes of TransferWise, MoneyMover, Azimo, Revolut, VFX, Worldfirst, Currencies Direct,  MoneyGram,  Cambridge FXHiFXMoneyCorp, Travelex, Western Union, BaydonHillHaloFinancial, Ria, UKForex, etc, etc, etc, ever get there?

I doubt it and this is why.  

It is far too easy to make a decent amount of money just by offering the easy stuff, and to skip past anything a bit more difficult. 

In addition, thcrumbs falling from the table of the big banks are enough to feed them all well enough and in any case the cake gets bigger every year as more and more people and businesses do more and more international transactions and trade.  

So that's the first point covered

The second point can be covered more quickly;

Why the banks don’t really have anything to fear. 

Despite the claims that many of these self styled FinTech firms are developing FX and payment systems that don't need banks - it just isn't true. Let's look a very quick look at Revolut, one of the more ground-breaking firms in my opinion; Client funds are held with Barclays, the currency card is issued by Mastercard, you have to fund the card from a bank or debit card, many payments will go by SWIFT, you withdraw the cash from ATM machines...see what I mean?

Show me a single one of them that could function without any bank accounts, without using the payment systems and other infrastructure that the banks own, without the finance and credit their banks given them and I will show you a Pig flying at 30,000 feet. 

If the banks do get properly annoyed with them, they will just withdraw their facilities - and that will be that. They will not be able to function at all.  

(oh, and by the way,  some have done that already)   

Friday 27 November 2015

Literally can't give it away!

Giving money away is harder than you think. 

I recently wrote to around 50 Finance Directors, mostly in what are quite large firms, offering them some free money. I was very open about why I was doing it, so that any suspicion about it being a trick of some kind could be set aside. (a transcript of my email to them is below)

These individuals have enormous responsibility to manage the finances of some pretty big firms, so more than anyone should be smart with money. Yet not one of them took me up on my offer.

Now I am sure, if I popped down to my local shopping centre and tried the same thing, all my envelopes of money would be gone in minutes.

So, why did my experiment get this result ? (which, by the way, did not actually surprise me at all)

You see, in my many years of working with Finance Professionals what I experienced is that almost all of them believe they know everything they need to know about finance matters already. This leads to a very close minded approach and a suspicion of anyone who suggests there may be a better way of doing things for their firm. Now of course if you believe someone is trying to sell you something on the back of such suggestions, that is going to make you wary. 

I wasn't trying to sell anything at all and was very clear about that.

This should be worrying for CEO's and shareholders of companies everywhere. Finance Heads should be tuning in to any opportunity to improve their firms profitability. I know that if I had an FD refusing an envelope of free money, I would be giving them a very different envelope. 

An envelope with their marching orders inside


Would you be interested in having some Free Money? 

That's right, would you like an envelope with some bank notes in? 

Why am I doing this? There are three reasons 

  1. Having travelled all over the world for the last 20 years, I have always been one of those people that hangs on to my unspent foreign notes to use on my next visit there. For the moment though I have stopped globe trotting so I thought I would give it all away. 

  1. I want to conduct an experiment. You see, everyone these days is so weary of the endless tricks used by companies selling their wares, that I expect very few people to say 'Yes please, I'll have some free money'.  No one believes that anything is ever really free. 

  1. The last reason is to raise awareness. Most companies are wasting money in the way that they handle their foreign exchange. So I thought I would too, by just giving it away. 

If you want to receive an envelope with free money inside, all you have to do is send me an email with your details, and agree to a have a 5-10 minute chat with me on the phone about how betterFX (my business - can save your firm much more than the money you will get in your envelope. 

I have divided up my bank notes into 10 envelopes, which are all sealed and identical, so I genuinely don’t know now what is in each one.    

First come first served. So, as they say in all those corny Black Friday promotions, when it's gone, it's gone!