Trends in the Money Transfer Sector in the UK

June 1, 2016 12:45 pm

pic 1As the world enters into the fourth industrial revolution, a lot of things are evolving and making our lives much easier and convenient each passing day. Among the highest beneficiaries of the technological innovations mushrooming each day from innovation hubs globally is the financial sector. Specifically, the money transfer sector has benefitted from faster, cheaper and real-time money transfer innovations that are redefining the whole industry. Today there are several peer to peer money transfer companies in the UK that are offering real time money transfer services.

From an era when the services were reserved for the commercial banks about two decades ago, you are now spoilt of choice and need a comparison of currency transfer services in order to determine which one to use. Traditionally, money transfer services were offered by commercial banks and the clearing process was slow and could take several days; especially when different banks were involved. Over time the process of transferring money from one bank to another has been streamlined and it is faster than before. However, the rates charged for the money transfer are still very high compared to the alternatives available in the market.

Western Union and MoneyGram came into the market as specialized companies for international money transfer. To many they were a timely “savior” since money could now be transferred very fast to any part of the world where the two companies had their agencies. The short-comings for both however is that in most cases the sender and the recipient are needed to go physically to the Western Union or MoneyGram agent to make the deposit or the withdrawal. In this day and age of electronic transactions, money customers do not find the physical appearance at the banking hall convenient. In addition, the rates charged by the two pioneers in the international money transfer business are also considered to be very high.

pic 2As with any sector, technology is bringing about disruption in the international money transfer sector in the UK. Capitalizing on the desire by the customers to make instant money transfers from their comfort zones as well as receive money instantly when they need it; innovators came up with new online systems that addresses those specific customer needs.

Among the biggest players in the new online money transfer field is WorldRemit; which has simplified the money transfer process into a very easy 3 steps process. All their customer needs to do is to select the country to which they are sending the money, adds the recipient and then send the money. The recipient can then withdraw the money through a bank, get it cash from a World Remit agent, get it transferred into mobile money wallet or even top-up their airtime directly using the money. With such a simple but effective platform they have been able to attract funding from investors to the tune of $100 million in 2015 and $45 million in 2016. The funds should help them expand their business to the US and other developing economies.

Another major player in the sector is Azimo which also offers peer to peer international mobile money transfer across the world. The platform is also based on a very customer friendly system with only three steps needed in completing the money transfer in real-time. Back in 2013, Azimo raised $1 million in seed funding, followed by $10 million Series A funding in 2014 and another round of funding of $20 million in 2015. In 2016, it has raised an additional $15 million from the Viber owner, Rakuten. With growing global population and increasing cross-border transactions as well as a high adoption of e-commerce, investors are keen to get into the money transfer sector and make a killing as the sector booms.

pic 3We also have other players who have a significant market share and growing very fast including Currencyfare and Transferwise.

International money transfer has become real-time and the costs have dropped significantly in the past decade. However, all is not all pomp and glory since there are other smaller companies getting into the space and competition is tightening in the growing industry. Other international companies such as PayPal also pose stiff competition in the international market both outside and even within the UK. Moreover, as the banks start feeling the pinch of losing their international money transfer transactions revenues, they will be prompted to re-think their strategies and hence pose even more competition to current players in the sector. Other innovations from the developing world such as Mpesa in Kenya can also not be ignored since they have a huge potential of disrupting money transfer industry in the developed world.

Going forward, we expect to see more competition among the players through quality improvements, more convenient and simplified mobile platforms and price reductions. Eventually, the customers will end up as the winners; true to the fact that Customer is King!

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