Top challenges being faced by the remittance industry.

• Author: Nisar, Ahsan
• Position: List

Byline: Ahsan Nisar

The five biggest challenges the international money transfer industry is facing in 2019 would break down something like this:

Globally significant events

If one puts the technology and the emerging world of FinTech to one side; in many ways the overseas money transfer industry will always be most affected by major world events and the modern day industry is no different.

Global political and economic factors affect not only the FX industry, but also the remittance industry. Events such as Brexit, an escalation in the US China trade war, developments in war zones like Syria, changes to the global supply of oil, or countries experiencing political turmoil such as Sudan or France often dictate global exchange rates and this is unlikely ever to change. Likewise remittance flows are influenced by political and socio economic events such as the migrant crisis in Europe, or going back further, 9/11 in the US. These kinds of events are so fundamental in their importance that coping with their effect on the international money transfer markets must always be considered the industry's biggest challenge.

Technology

It's an open secret that new technology is radically changing the way that transfers are made. Because banks are more used to dealing with Business-to-Business international money exchanges that cater for larger volume transactions than when an individual wants to send money to an individual, they do not offer either a fair fee or provide access to the bank-to-bank lending rates they use for their core FX services. For banks, the task of sending money abroad on behalf of individual customers is labor intensive, and far from a priority.

FinTech startups are challenging the notion that money transfer should be done through a bank or a recognized money transfer operator (MTO) like Western Union or MoneyGram. Using disruptive technology like peer-to-peer matching, or by accessing the interbank rate, or automating procedures such as Anti Money Laundering checks and Know Your Customer checks, and making all of these best-in-class services available literally at your fingertips via a smartphone app, today's FinTech firms are pushing the envelope to try to undercut the 'incumbents' prices.

FinTech startups in the money transfer space are raising capital to take on the incumbent big banks and MTOs, and increase their share of a market worth in excess of $500 billion, becoming billion-dollar-valued companies in the process.

But...