This piece is another one surrounding the topic of cross-border payments, this time written by staff at The Fintech Times and summarizing a discussion with a senior at Wise (formerly Transferwise) who manages Asia-Pacific business development.
The discussion, in this case, is mostly about experiences and innovation in APac around the remittance and B2C commerce space, although the specific pain point about lack of transparency has certainly been a universal experience in all use cases over time.
‘Customer expectations are bigger than ever: the best-in-class experience that customers receive today is tomorrow’s baseline expectation. When one company raises the bar for customers, it primes consumers to expect something more across all aspects of their lives….Look at the advent of BBM (BlackBerry Messenger) and the way it overhauled customers’ expectations on how messaging should work — instant, convenient and on-the-go. That innovation which took root in personal communication led to a knock on effect on other communication verticals, such as Slack for team collaboration or Facebook Chatbots for customer engagement….These expectations have also spread to other industries, whether it’s aviation, entertainment or health. In the same vein, customers are also expecting these same seamless experiences from their financial services providers….While there has been significant progress made with domestic banking — think mobile banking and the ability to send funds to a phone number — the story is very different as soon as there is a cross-border element. Lack of transparency, slow speeds and hidden costs are historic pain points of cross-border payments that continue to plague consumers and businesses of all sizes even today.’
The $150 trillion in cross-border commerce mentioned in the piece is an estimate that incorporates all use cases, although we have estimated that >80% of uses are for B2B cases, but we have also covered that part in various postings over time as well.
The piece goes on to point out a few of the new approaches being taken in Asia, specifically Singapore and Korea, and the transparency issue being overcome (transparency meaning, among other things, knowing the actual cost of the money transfer, including FX conversion percentages). Worth a quick read for those attempting to keep current with advancements in global markets.
‘Here-in lies the opportunity for customer-first organisations to lead the way by setting the standards in their core markets. Customers want brands they can trust and research shows that transparency fosters trust and loyalty. Studies have found that the key to creating trust is to simply do what customers expect of you. In this context, that means making their banking experience seamless, quick, and most importantly, transparent, by charging them exactly what you said you will be charging with no hidden fees….So, why aren’t more players doing this? One of the reasons why only a few incumbents adopt transparency is because it exposes the inefficiencies that exist in the legacy infrastructure that is used to move money around the world. This infrastructure is not built to service the 21st century customer — unknown intermediary fees, high bounce-back rates and manually intensive processes are just some factors that make the cost of cross-border remittance high for banks. The poor customer experience only compounds this by impacting revenue margins. Saddled with these costs, incumbents have little incentive to adopt transparency, instead maintaining the status quo of hiding costs in the FX spread.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group