Navigating through the jungle of international money transfer services
As more and more Fintech start-ups are challenging traditional players leveraging emerging technologies and innovative business models, migrants are facing more and more complex services and decisions.
Transferring money overseas can be a tedious and expensive process, particularly for migrants sending money to their families in the global south. The main reasons for this is the lack of proper, accessible financial services and information about the existing options. However, this is about to change.
More and more fintech start-ups are disrupting the international money transfer market, leveraging emerging technologies and innovative business models. And it is only the beginning as big companies like Facebook, Google and Visa are willing to enter the game.
REACHING THE UNBANKED — THE MOBILE BANKING CASE STUDY
In Kenya, there are only 10 ATMs for every 100,000 adults. That is why over 17 million Kenyans use M-Pesa, the pioneer in mobile money, as a substitute. The service is a real game changer with regard to international remittances, and is only starting to reveal its full potential. According to a Juniper Research, mobile money transfers are forecast to exceed $65bn by 2014.
Looking at this graph, it’s no surprise that Vodafone announced its will to enter the Eastern European market starting with Romania.
WHERE DOES CRYPTO-CURRENCIES COME IN?
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It might be too soon to predict whether bitcoin will change the way in which people send money overseas. However, some companies are determined to offer substantially lower costs by using bitcoin to avoid third-party facilitators such as banks. Good examples include 37coins, Bitpesa and Kipochi.
And maybe it’s the protocol and not the currency that will disrupt the remittances market. At least it’t what the guys at Ripple Labs believe building the Swift 2.0 or the Internet for value.
AVOIDING THE (EXCESSIVE) EXCHANGE RATE FEES
Payment service providers often apply excessive and hidden additional fees to currency conversions. Peer-to-peer networks like Transferwise or CurrencyFair offer an interesting alternative, matching people wanting to send money in opposite directions within a given corridor.
Regalii (for Latin America) and Afrimarket (for Sub-Saharian Africa) offer recipients the ability to withdraw payments in the form of commodities such as medication or groceries in selected outlets, or to pay their bills (telco, electricity) instead of receiving cash.
The maturity of online payments in western countries also resulted in new online services such as Azimo, Xendpay, TransferGo and Worldremit, that send money worldwide at better rates and more conveniently.
HOW TO FIGURE OUT WHAT IS BEST FOR THE END USER?
Many parameters have to be taken in account when choosing the right service and type of transfer. The cheapest service may differ depending on the amount, the type of service and the time of the year. This is why we have built TawiPay, a comparison website for international money transfers that is intended to help migrants navigate through this jungle.
THE MISSING BILLIONS
A World Bank report puts the global amount of remittances in 2014 at $582 billion and estimates that migrants paid an average of 7.9% in fees on these money transfers. A huge cut that could be reduced by $28 billion if migrants used already available cheaper services.
