If you wanted to send money to a foreign country before the turn of the last century, you would have to use the services of either a bank or a high street broker. You would, in all likelihood, pay steep fees and get a less than desirable exchange rate. Also, the transfer might have taken days to process. Fortunately, much has changed with the arrival of several FinTech companies in this realm.
The Visible Growth
While not all FinTech companies that entered this space have managed to stay afloat, some seem to be in it for the long run. UK-based TransferWise, for instance, is a unicorn that hit profitability within six years of getting started. In 2015, its series C investment managed to raise the U.S. $58 million. The company counts the likes of Richard Branson, Max Levchin, and David Yu among its investors.
Another UK-based overseas money transfer FinTech company, WorldRemit, has raised the U.S.$40 million, the U.S.$100 million, and the U.S.$40 million through its series A, B, and C rounds of funding, respectively. Singapore-based InstaReM raised the U.S. $5 million through its series A round of funding.
If you’re wondering why this field is attracting investors and competitors alike, it is because of the sheer volume of money people send across borders. According to the Pew Research Center, migrants living in different parts of the world transferred to their home countries in 2016.
Overseas Money Transfers Becomes More Cost-Effective
Data released in thefrom June 2017 suggests that the average global cost of sending U.S. $200 has decreased by around 2.5% from 2008 to 2015. released by Infosys in 2016 points out that while a consumer pays an average of almost 11% as fees when sending money through a bank, the average fee drops to 5.3% with FinTech alternatives.
Until FinTech money transfer companies’ arrival, only banks, high street forex brokers, and large businesses had access to the highly speculative foreign exchange market. Now that the FinTech companies have access to the same market, they use technology to minimize costs. In turn, they are passing the savings on to their customers.
While the leading FinTech players provide bank-beating exchange rates consistently, they charge little to no transfer fees. For instance, you may make an overseas money transfer through OFX or Currencies Direct without paying any fees. Some companies have fee-free thresholds in place.
Alternatives Now Come in Different Forms
Consumers now get to choose money transfer companies depending on their individual needs. For instance, if you look at, you will notice that while the former accepts customers only from the U.S., Canada, and the UK, the latter has a much wider outreach. However, while Remitly lets you choose from standard and express transfers, TransferWise does not. , , and are a few other FinTech players that accept customers from most countries.
The most common way to send money overseas using a FinTech company is to transfer it to the recipient’s bank account. Some FinTech companies such as Azimo, WorldRemit, and Ria have their own agent networks in place, giving customers the ability to transfer money to cash pickup locations. Some companies such as WorldRemit and Ria even let you top up mobile airtime and mobile wallets from different regions.
FinTech companies such as OFX, Frontierpay, and Currencies Direct give customers the ability to choose from different hedging tools such as forward contracts and market orders. This enables them to make the most of exchange rate fluctuations.
FinTech companies have also affected how people pay for overseas fund transfers. The most common way is to pay using a bank account transfer. Some companies accept payments via debit cards, credit cards, Apple Pay, and Google Play. A few let their customers pay using region-specific methods such as iDEAL, BACS, CHAPS, SOFORT, and POLi.
FinTech has acted as a disrupter in the world of overseas money transfers by making the process simpler, quicker, and more cost-effective. This, though, is not quite the end of the line, and technology will continue playing a crucial role in improving the overall consumer experience. If banks don’t pay heed soon, they may well lose out on this sector completely.