New Trends in International Money Transfers

Translation by Cem İnan Ünlü

With regard to international payments the most reliable method is the SWIFT transfers through the correspondent bank. However, the wire transfers conducted under the intermediary of correspondent bank are subject to delays, even at times impeded by the operational control mechanisms of the correspondent bank and sended back to the bank account. The most pressing point of this matter is the high fees and their unpredictable nature. Due to the processes that the money goes through in the correspondent bank’s control mechanism, the money sender may incur additional costs expensed through the wire transfer, leading to unforeseable costs unbeknownst to the sender. My collegues handling these transactions especially working in customer relationship management experienced such an instant at least once and struggled through a transaction with a customer.

In addition to aforementioned issues, the lack of transparency and accountability surrounding wire transfers erodes the quality of customer experience. Likewise, the wire transfers conducted between two countries take an intermediary by SWIFT and are priced more expensively than EFTs. Considering my experiences while I was still actively pursuing banking profession, such as valor losses of foreign currency time deposits during their transference amongst banks, account summaries cumbersomely acquired from the correspondent bank, the time deposit accounts that we tried open up after the quitting time, I am one of the proponents of the conviction that this process needs to become a simpler one.

Different Solutions, Alternatives

Fast processing, accessible and low cost adverseries with international distribution channels such as Western Union, Paypal and Moneygram serving individuals and local businesses challenge the banks and the SWIFT system. Also, involving themselves solely through the digital platform, China’s WeChat and the US’ Paypal Xoom services emerge in the market. Even more so, declaring their partnership in 2015 Western Union and WeChat have been bilaterally providing the services of money transfer to more than 200 countries under the name of ‘’WU Connect’’.

For those who have not heard, WeChat initially came out in China and expanded all around the world as instantenous messaging application. As of June 2017, its membership number increased to 963 million monthly active users, making a progress towards 1 billion users. WeChat, alongside its messaging and voice calling attributes, also harbors the specialties such as money exchanges between friends, money requests and low cost ‘’Red Envelope’’ atributes such as donations, gifts, treats and pocket money.

Where Are These Payments Going?

The main reasons for the increasing significance of international payments are people’s migration to the developed countries, globalized work force and rise in the number of refugees. According to World Bank’s statistics, 10% of 25 developed countries’ GDPs is transfered to the developing countries by wire transfers. It is safe to say wire transfers taking place to a great extent deliver funds to the family members and relatives.

Regarding refugees, the digital payment system called MONI was developed in Finland to meet this community’s needs. Two years ago as a result of Finnish government’s initiatives, according to the customer and document diagnostic principles a digital payment platform was created for the refugees who cannot open up bank account. MONI application, while it is based on MasterCard’ prepayment card, it also harbors client’s financial and personal information within Blockchain. Therefore, every refugee utilizing the digital platform possesses a singular identity on the system. Hence, refugees not only receive their salaries from their employeers and government but also pay their bills and handle the money transfers amongst themselves.

Similar case exists for the Syrian refugees without residency permit or declaration of a steady address, when they try to open up bank accounts or engage in banking transactions. I hope that by extending similar solutions all across the globe refugees’ transactions will also be integrated into the financial system.

On the other hand, Blockchain solving every problem in the system became the panacea of the financial system and I regard introduction of a different solution as an overly positive development.

All aside, World Bank estimated that 90% of the relatives exchanging funds has a social networking account. I also agree with this estimation as I exchange money with my husband, mother and sister and we all are very much acquainted with social networking sites; thus, this ratio is 100% for my family.

Consumer Seeks For Confidence

According to BCG’s Global Payments 2015 report;

In 2014 global transactional banking revenues are reported to be almost 1.1 trillion $ and this value is 27% of global banking revenues. The value is estimated to rise to 2 trillion $ and revenues raised will be 34% of global banking revenues.

In 2014 while the share of retail payments is 11% of global payments, this year share of retail payments amongst the overall payments is 78%. Meaning that banks profitability margins for the retail payments are overly high.

The document also reports a survey conducted within a pool of 5500 consumers in France, Germany, England and the US. Despite a myriad of changes taking place throughout the transition period towards digital payment instruments, the reasons for people’s inclinations to stay on the traditional are investigated. According to the research, the main causes turn out to be the insufficiency of mechanism for the loyalty and reward system, reservations regarding data privacy and security and limited acceptance area of digital payment instruments.

Conclusion

As to international payments there are numerous methods, applications, agencies, and intermediaries country-wide as well as globally.

The most exciting ones aforementioned are WeChat and MONI in my opinion. WeChat appears to be an application on its way to serve a wide customer base. As for MONI, it is a remarkable initiative that promises to alleviate the refugee’s pressing financial problems and I am very certain that it will be developed.

I may be regarded as a person holding obsolete ideas; however, I believe  conventional SWIFT system through banks despite its disadvantages is still a reliable channel of payment. I suppose having employed themselves with digital wire transfer and payments by employment of fast fish Fintech, banks through their support and cooperation will transmute the system into a securer and more reliable one. In summary, nature will take its course.