iCompareFX is a platform that aims to bring transparency to the cross-border money transfer space. Hear from Gav Smythe, founder of iCompareFX, first hand on the most recent trends and emerging solutions in B2B cross-border payments.
Tell us more about iCompareFX, including what makes your company and your vision unique?
The overseas money transfer industry has seen significant changes over the last two decades, with a number of new entrants now giving the older players quite a run for their money. Our vision at iCompareFX is simple – we aim to give our users all the information they need to make informed decisions in selecting the right service provider, no matter where they live. Our website lets users compare the top overseas money transfer companies based on geographical locations. In addition to offering the ability to run side-by-side comparisons across multiple factors, we also provide in-depth and non-biased reviews. Besides, if there are promotional offers for the taking, we make sure to scout them out.
Are there any areas in the cross-border payments space that iCompareFX believes are currently underserved by incumbents? What specific segments/needs have FinTechs been successfully targeting or should start to target more?
The World Bank pointed out that around US$429 billion was sent to developing countries in remittances in 2016. With a significant number of people remaining unbanked in areas of Africa, South America, and Asia, people who end up receiving money from overseas still have to depend on the likes of Western Union and MoneyGram. While these companies give recipients easy means to collect transferred funds in the form of cash, exchange rates and fees still leave room for improvement. FinTechs such as WorldRemit and Azimo have created their own agent networks, but I am of the opinion that this segment needs the attention of more players.
The widespread use of mobile phones opens up further opportunities, especially through the use of mobile wallets. M-Pesa, for instance, facilitates cross-border payments to and from several countries in Africa already.
We’ve seen that the B2B cross-border payments space has been a hot topic for many providers and corporates. From your perspective, how has the landscape changed in the last year – have there been any players/solutions that have stood out from the crowd, any headline or latent opportunities or threats?
Having closely followed this industry for more than a decade, we’ve noticed that continuous innovation is crucial in staying ahead of competition. Incidentally, not all of the top players have been as quick to adapt to changing times and evolving technologies. The main points of focus in the past year, I feel, have been reducing costs and increasing customer centricity.
In the last year, TransferWise and WorldFirst have stood out as leaders in innovation. Both companies have started offering multi-currency accounts for small to mid-sized businesses and online sellers. The TransferWise Borderless and WorldFirst World accounts function as a virtual bank account service that can receive and hold funds in multiple currencies. The customer receives unique banking details instead of a common provider holding account that is segregated using inbound bank transfer reference numbers. While TransferWise offers its Borderless account in a number of countries, WorldFirst is taking it slower, limiting its offering to the UK for now.
Additionally, the presence of Blockchain technology in this realm has strengthened in the last year, and it appears that it will gather greater momentum. Ripple, for instance, is creating more than a ripple. It is already working with leading international remittance service providers – Western Union and MoneyGram – to test the technology. Its tie-up with French Bank Crédit Agricole shows that banks are also open to giving this technology a go.
Are there any key trends and/or technologies that you feel will be game changers in 2018 within the B2B cross-border payments space? And why? What does this look like for Europe vs. the rest of the world?
I am optimistic about there being a version of the Blockchain that banks and regulators can agree to be a new standard in international remittance. Ripple, among others, is starting to make headway on this front and is working with all parties towards this goal. The B2B cross-border payments space will witness even more turbulence once the use of Blockchain becomes commonplace. Forex costs will reduce considerably and businesses will benefit through increased transparency and security.
If Blockchain technology gathers momentum and reaches a tipping point where it becomes the de-facto platform for international payments, there may be geo-political consequences. Europe could be left out in the cold and beholden to the US Government, as it does with the current Society for Worldwide Interbank Financial Telecommunication (SWIFT) system.
Blockchain and cryptocurrency are increasingly being trialled in different areas of cross-border payments. Do you think the current challenges of the technology’s and currency’s applicability will be overcome in the near future? And who will lead this?
Just about all the glitches faced by Blockchain when it comes to cross-border payments have been user-generated, and have been addressed in haste. The acceptability of cryptocurrencies such as Bitcoin, Ethereum, and Litecoin has increased noticeably in the last year. While there is a current lull in their performance, there is no taking away from the potential they present.
Ripple is poised as the frontrunner that might completely disrupt how cross-border payments are made. Ripple, being a closed and centralised system, has a higher chance of working with regulators and being adopted by banks – to bring international money transfers on the Blockchain to banks, small and medium-sized enterprises (SMEs), and ultimately, the public at large.
What is the threat to the current B2B cross-border payments space if regional faster payment schemes are developed and start to interconnect?
The peer-to-peer (P2P) system, as employed by TransferWise, has been a major disrupter to the aging SWIFT system used by the US. Once regional payments schemes are developed and start interconnecting, the traditional players will have to revamp the way they operate or prepare to lose out on their share of the pie. The SWIFT system proves that it is not as secure as some would like you to think. The series of cyber attacks that took place in 2015 and 2016 using the SWIFT banking network resulted in the loss of millions of dollars, and they did well in pointing out the vulnerabilities of the SWIFT system. Blockchain, with entries in digital ledgers that cannot be forged, may well be the solution to such modern problems.
What is the one pearl of wisdom you would share with FinTechs starting their journey and why?
No matter how much you believe in your product, never forget that you need money to get it off the ground and keep it in the market. Make sure you secure your funding well in advance. Determine how much capital you will need and potential profits at the very onset. Loans, grants, and subsidies can come in handy, depending on where you plan to set shop. You may also consider attracting investors and partners, in which case you should look for entities that believe in your idea. Money matters do not cede after the launch of your product. While your company should remain liquid, it should also have a firm grip on aspects such as taxes, accounting, centralized business bank accounts, and company credit cards.
What is one pearl of wisdom you would share with corporates who make B2B cross-border payments?
As much as banks would like you to believe, never assume they are your best friends. Instead, think about partnering with a specialist wire transfer provider. While FinTech companies offer better cost-effectiveness through competitive exchange rates and reduced fees, they come with other benefits too.
When you need to make cross-border payments in today’s world, you get to define what features you want from your service provider. You may, for instance, want to integrate your existing book keeping package with how you make international payments. Some businesses also benefit by turning to hedging tools such as market orders and forward contracts, both rarely offered by banks.
Finally, before making a final selection, create a shortlist and interview your potential partners.
About the Author:
Gav Smythe is the founder of iCompareFX, an online platform which gives its users easy means to compare the world’s leading overseas money transfer companies. As an Irish expat who lives in Australia, he used his first-hand experience from trying to find suitable ways to make cross-border transfers. That he works closely with technology made it easy for him to put his dream into fruition. Blockchain technology has attracted his attention in recent times, and he is of the firm opinion that it holds the potential to revolutionize the international money transfers landscape. Banks, he feels, need to pull up their socks quickly or be left out of the race.
More about FinTech Vantage:
This post is part of the FinTech Vantage series by KAE that provides a fresh perspective and hears first-hand from various players across the FinTech ecosystem.
KAE will be posting a number of interviews with FinTechs that share their candid viewpoints and to really get under the skin of the FinTech world.
If you would like to share your views and participate in the FinTech Vantage series, feel free to reach out to us at FinTech@kae.com