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)   

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