Web-based money transfer services may have started the “disruption” to banks’ monopoly on international money transfer by providing cheaper, faster and transparent ways to transfer money online, but it is the range of new “FinTech” companies who are offering mobile apps to transfer money that will likely complete that disruption.
According to a 2017 report released by the app measurement company, App Annie, in five years the app economy will be worth $6.3 trillion, up from £1.3 trillion last year. As people spend more time and money on their phones, it is no surprise that the mobile money transfer market is growing. Easy user interfaces, quick delivery and fast delivery of funds enable consumers and businesses to make international payments at lower rates than are traditionally offered in the market, with greater transparency, lower fees and more convenience for the user.
2017 has witnessed the emergence of a range of 3rd-party apps, in addition to the ‘traditional’ web-based disruption of international money transfer firms such as TransferWise. The arrival of the Payment Services Directive (PSD2) from January 2018 and its “Open Banking” provisions will force banks to share customer and account information with third party providers via Application Programming Interfaces (APIs) and will level the playing field even more.
One example of this app-based banking is Revolut, a smartphone app linked to a pre-paid Mastercard which enables consumers to spend in more than 90 currencies globally at the best exchange rate, and importantly, to send funds for free. While the actual currency exchange does cost money, Revolut offers the institutional or “interbank” rate unlike banks who charge fees of between 2%-3% above the exchange rate. With its unique combination of multi-currency spending and money transfers in a simple app, it is no wonder that the company has now signed up 1 million customers.
Going forward
Digital banks such as Atom are focusing on the millennial market and ensuring their apps are made available for download for both iOS and Android. As PSD2 paves the way for further collaboration and innovation, 2018 should be an interesting year in 3rd party app development for international payments and money transfer.
