Why FinTechs are helping to democratise corporate remittance

A recent blogpost by Currencycloud has detailed how the FinTech sector is helping to level the playing field in the corporate remittance market.

Until the recent past, banks were the most common – and also the most expensive – type of service provider for corporate remittance. According to figures by the World Bank, banks have an average cost of 10.66% per transaction, compared to the global average of 6.38% for all remittance approaches.

Currencycloud detailed that the discrepancy can be attributed to the fact that as banks are the oldest players in the remittance ecosystem, they’re commonly stuck with legacy technologies. Also, due to the opacity of these systems, it makes it difficult for them to quantify the real cost of FX.

The company said, “Because updating these systems is so challenging and risky, many banks are stuck between a rock and a hard place. On the one hand, they know that customers want a more transparent, faster and lower cost FX solution. On the other, they don’t want to invest in a disruptive upgrade that — if it were to fail — could lose them customers and put them out of compliance.”

However, the rise of FinTechs has blown apart the tight grip banks have on corporate remittance, with firms such as TranSwap and Remitr enabling firms to send money across borders at increasingly lower costs.

Currencycloud remarked, “Where once only banks had the necessary infrastructure to enable fourth party collections and cross-border payments, now, the barrier to entry has been significantly lowered. New technologies and new approaches to compliance are making it easier than ever for digital-first institutions to deliver fast and inexpensive FX transactions with a transparent user experience.”

The firm used Currencycloud Spark, a product that enables corporate remittance FinTechs to provide their business customers with a single multi-currency account in their name, as an example of the kind of technological innovation enabling such a sea change in the market.

Spark also enables customers to collect and pay-out funds in different currencies to anyone, anywhere within the supported Currencycloud ecosystem. The product provides access to 38 currencies and payment ability in over 180 countries, as well as streamlining costs and transaction processing.

Additionally, through the use of Currencycloud’s SWIFT Global Payments Initiative, unique tracking codes can be applied to any GBP-enabled SWIFT payment. The business claims this means corporate remittance FinTechs can provide their customers with speedy confirmation of delivery, unneccesary fee insight and faster troubleshooting.

The company noted that businesses previously didn’t have much choice but to rely on banks to process payments due to the fact that there weren’t many organisations that had the necessary regulatory coverage to comply with know-your-customer and anti-money laundering requirements. This also stretched to FX, as they were again the only ones with the necessary regulatory cover.

Currencycloud highlighted in the blogpost that another key benefit of the rise of corporate remittance FinTechs is that they can offer FX transactions at a fraction of the cost and time as banks. Previously, any new remittance company would need to onboard each and every one of their business clients’ customers in order to facilitate FX transactions.

Beyond simply providing lower FX transaction costs, many corporate remittance FinTechs are also giving banks a run for their money through services such as payment tracking and multi-currency e-wallets.

Currencycloud said that if customers are presented with a low-cost solution – corporate remittance FinTech – that also offers a multicurrency e-wallet and total payment journey visibility, business can often come to two conclusions.

The first is that ‘banks’ higher costs aren’t being invested into better FX experience’ and the second being that ‘innovative FinTechs can provide them with value-add capabilities to their FX transactions that enables them to be more strategic’.

The full blogpost can be read here.

Copyright © 2021 FinTech Global

Enjoying the stories?

Subscribe to our daily FinTech newsletter and get the latest industry news & research


The following investor(s) were tagged in this article.