Turning the money transfer market upside-down

| Tuesday, February 7th, 2017

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We love finding unique business models in the international payments space, so we spoke in depth with BillMo, a company focusing entirely on the recipient, not the sender of money transfers. More on that later though - first we're looking at currency volatility.

Uncertainty ≠ Volatility?

We've heard from a number of you that trading has been slower recently and wanted to dig into this. In common wisdom, market uncertainty leads to volatility which drives lots of FX transactions. Recently though, we’ve seen market uncertainty potentially reducing market volatility.  

In the first chart below we look at the volatility of the Pound (along with the Mexican Peso, Japanese Yen, and Euro) against the dollar during the past 12 months. As expected, the biggest political events for both the Pound (Brexit) and Peso (Trump election) result in massive volatility spikes. These spikes led to large FX transactional increases.

Here's each currencies volatility over that time period:

GBP Volatility Chart 2016

Now we're going to zoom in on the past two months. After a brief spike following Theresa May's brexit address, we can see the volatility of the pound has fallen dramatically. Recently, it's even fallen below USD:EUR volatility. This has left us with a still highly uncertain but not particularly volatile market. 

GBP Volatility Chart 2017

While the Euro has remained quiet and stable against the dollar, upcoming political events across the Single Market may well shake that up.


Has BillMo turned the remittance model upside down?

I had a great discussion with Steve LaBella, Founder and CEO of BillMo. We chatted about their unique strategy and how they are approaching the international payments market by focusing on the transfer recipient instead of the sender. 

Here's one of our favorite exchanges:

 

On BillMo's unique business model


LaBella: "To [most] money transfer companies, the recipients are just along for the ride. ... BillMo’s model is completely the opposite. Rather than focus on the senders, our focus is to onboard as many recipients as possible. The recipients are who we really ultimately consider to be our customers.

A traditional money transfer company is focused on making money by charging the sender. ... we're focused on trying to make money on the use of the funds that are received in the remittance equation. Traditional remittance companies consider their job done once money is paid out.  For BillMo, our job is just beginning upon receipt of funds."

_______

In the rest of our extensive conversation with LaBella, we cover his thoughts on:

  • Why targeting transfer recipients is the better long-term strategy
  • The importance of simplicity in transfer operations
  • How bill pay and mobile top-ups have shaped their strategy 
  • and much more...

Who will win the race for MoneyGram?

Just as talk of the proposed buy-out of MoneyGram by Ant Financial (the Alibaba affiliate) was beginning the settle, Euronet has publicly submitted a counteroffer. Aside from a 15% higher per-share offer price, they are touting their U.S. status as a key selling point - the merger would not have to gain approval from the foreign investment committee. 


The latest in international payments: Our favorite news and articles

If you can't beat 'em... UK challenger bank Starling, which is launching later this year, has announced they will partner with TransferWise to facilitate customer's int. money transfers, instead of employing an in-house operation. Financial Times.

Heating up. Google announced Android users would be able to send money to each other through the Gmail App, in a potential challenge to Venmo. PayPal stock closed down 1.5% on the news. Yahoo Finance.

Shake it off. Last week the SEC declined a proposal for a bitcoin-based ETF, citing concerns over fraud. In the aftermath, Bitcoin prices plunged by 20%, but have since recovered nearly all their losses. CNBC.


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