The 10 Most Important Issues – 2015 Edition – 9

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Hugo Cuevas-Mohr puts together every year the 10 Most important Issues for the industry. To download the PDF go to Download/IMTC Publications.

The rise of P2B, B2B, and Forex services in the industry is making the “Payments” side of the International Money Transfer & Payments Industry more dynamic and more important, overall, with new services, new entrants and new offerings. The P2P money transfer and remittance market has been historically closely linked to the Forex Market, although regulations in many countries, as well as currency controls due to AML compliance concerns, broke the bond and led to the demise of many Forex firms, most prominently, the “casas de cambio” in Latin America.
Hawala, currency trading, and money transfers are still one and the same thing.  But, the Forex Market, which is the “the largest, most globally integrated, and most active financial market in the world” has been changing as the Executive Vice President of the NYFed pointed out in his remarks at the 2015 FX Week in New York. Mr. Potter noted that the participation and the execution in this market, due to the transformative effect of technology platforms, has brought individuals and firms to deal directly with Forex firms to execute money transfers and payments – some P2P, but mostly P2B and B2B where better exchange rates mean big savings.

While many MTOs concentrate in the remittance market (the “migrant” market) and are not comfortable dealing in larger payments, some companies, most notably RIA, have invested in the Forex Market with the purchase of UK’s HiFX in 2014 for $242M USD, and XE in 2015, to reach other segments of the market competing with banks for white-collar workers and small businesses, competently leveraging its RIA remittance network. The rise of Forex firms and online currency offerings have been growing, mostly out of the UK (Currencies Direct, WorldFirst, Currency Cloud, MoneyCorp, and others) using their online presence to reach hundreds of customers and effectively make headways in the MT market.

Start-ups like Revolut are using mobile and a prepaid card to entice customers into their Forex Service. TransferWise management sees themselves as a Forex firm more than a RSPs and use the term “modern Hawala digital system” and its growth (discussed in issue #6) has more to do with a non-migrant sector of the market. The average transaction value for TransferWise is £1,500 (US $2,170) considerably higher than the rest of the P2P industry. The company describes it’s client base as “expats, sole traders and freelancers, retirees and small businesses”.

At the same time, bill payment companies, prepaid card issuers and small-value lenders, have been partnering with MTOs to offer these services in both their online and agent channels. We also must mention airtime and top-ups as one of the most successful cross-industry products, paving the way for the slow coming-together of the mobile and IMT&Ps industries. A good evidence of this is WorldRemit growth in both segments and Xoom online money transfer and bill payment offerings.

Continue reading The 10 Most Important Issues of the International Money Transfer & Payments Industry for 2015 in this Blog or  To download the PDF go to Download/IMTC Publications.