This year’s International Money Transfer & Payments Conferences (IMTC) provided three days of learning and discussion at the Las Vegas Westin. The show provided some great insight into the current state of the money transmitter industry, and hosted a variety of interesting sessions from US and International companies. We’ve summarized our highlights from the conference below.
Going Online/Mobile- It’s not a question of if, but when
The ‘Going Digital’ session provided a very active discussion on the importance of offering digital money transfer services (specifically mobile), and when to do it. While much of the conversation emphasized competition between existing players- brick and mortar locations vs. new digital-only options- the conclusion was a transition to digital, and timing of that transition, really depends on product, geography, and client base.Western Union & MoneyGram have already gone mobile, successfully. Western Union has seen mobile growth of 28% year over year, while Moneygram added 230k digital clients last year.
Anay Shah of Remitly, an online-only company, discussed how important it is to be a digital-native company in order to compete online, and how they’re focusing on user experience to pull clients away from others- including physical stores on the US/Mexico border, Xoom, and Western Union.
When asked about the transition to digital, Alberto Laureano of Barri Financial group mentioned that it isn’t a question of whether they go digital or not (they will eventually), but rather about timing the transition, as it depends on what their clients need and are comfortable with. For instance, while Barri cashes 180,000 checks a month, most of their clients simply aren’t ready for a shift to online transfer.
From what we’ve seen working with remittance companies, you cannot build a mobile product and simply expect customers to use it, or new customers to appear. It is essential to review what types of products your clients are using (pure remittance vs. airtime top-up and remittance), the geography of the clients (Japan’s originators are almost exclusively mobile, India’s are not), and the age and technical savvy of the client base. Both sides of the conversation reflected this idea during the session- Remitly, in their discussion of the markets they target, and Alberto Laureano and others describing their focus on the needs and comfort level of their clients.
Bitcoin & Blockchain
IMTC USA offered a full pre-conference track dedicated to international money transfer using bitcoin and blockchain technology. The sessions provided an in-depth overview of the ecosystem with entrepreneurs, advisors, and experts speaking about different components and their experiences in the space.
Bloom Solutions‘ Luis Buenaventura gave a great talk about the different remittance corridors and how bitcoin isn’t always better. Buenaventura described how Bitcoin is a great solution when providing remittance to a less-used corridor, with examples from Bloom’s success and challenges in the South Korea to Philippines corridor. Customers in the corridor typically pay 6-7%, which Bloom brings down to 2.8% by using bitcoin as an intermediary. Others have seem similar success- such as Bitso, who operate in a corridor from Mexico to India. The secret Mr. Buenaventure shared is that when a corridor requires conversion to a third currency, bitcoin can provide lower cost, and greater speed.
AlphaPoint‘s Scott Bambacigno spoke about the Blockchain, it’s emergence over the last year, and its importance going forward for companies to remain competitive.
Abra‘s Eric Rosenthal mentioned that 200 telecommunications (Telco’s) are doing mobile money transfer, yet m-Pesa still controls 15% of the world’s total volume; evidence to Rosenthal that the other 199 telco’s “are not doing well.” Abra is positioned to provide mobile transfer all over the world using human tellers. Interestingly, Rosenthal insisted Abra is only a platform to connect users- they do not plan on pursuing the licensing required of MSB’s in the United States.
Andrew Ittelman spoke about how money transmitters are regulated by criminal statute, which means it’s a felony to operate an unlicensed money transmitting business, even if you don’t know it’s a crime. Registration involves telling FinCEN who you are, subjecting yourself to federal audit, and having this information transmitted to the individual states.
In addition, money transmitters located outside the U.S. are not exempt from U.S. law. If you work with US financial institutions or US customers, you must be registered with FinCEN & be licensed in the states where you have customers.
Brazil has an amazing money transmission history
Money Transmission in the Dolero Years
- Originators in US, EU, Spain and Switzerland would send money to Brazil using a licensed Money Transfer Operator (MTO)
- The MTO would send the instructions, but not the actual funds, to a payment processor or IMGO (Intermediary Grey Market Operator) in the UK, rather than a licensed company in Brazil.
- The UK IMGO would send the order to a Brazilian Grey Market Operator (GMO)
- Clients of the GMO in Brazil who needed to launder reais- often gained from illicit means- would willingly lose a small percentage in exchange for the funds being laundered, which provided an unbeatable exchange rate.
- Brazilian GMO clients would send reais to local banks for the beneficiaries
- The beneficiary would receive the money within 24 hours
- The MTO would deposit the original funds in its bank account and send a wire transfer to the IGMO, or another entity who the IGMO would provide instructions on where to wire the funds to.