The money transfer business is a fast-growing industry. It is a fast-changing one, as well. To keep pace, money-transfer companies need to consider new products, new technologies and new partnerships.
Innovative partnerships have already begin to reshape the landscape:
While some banks have grown enormously, especially in the U.S., new customers from the “non-banked” population have not been a major path to growth. Many customers perform only a few transactions and don’t need the other services banks provide. Money-transfer companies are more transaction-oriented, and perform some of the payment services that banks have been less successful in providing. A partnership brings these non-traditional customers to the bank.
Banks which wish to reach these under-served populations are eager to partner with such companies because these firms know more about their customers. For example, Regions Financial made a deal with Western Union to offer the latter's products to its customers, rather than trying to develop similar services in-house. Western Union has made such deals with banks in Latin America and the rest of the world, and is now pursuing such agreements in the U.S.
Many financial services companies have developed their own software systems, while banks have tended to rely on providers of banking-technology systems. But technology innovations are moving so fast that financial services providers are learning they cannot develop the software fast enough. They are increasingly relying on outside providers, despite potential security problems with customers’ personal information or with the transferred funds themselves. There’s also the fear of losing the customer to an outside provider. Yet outsourcing continues.
As mobile phones and smart phones provide a platform for payment services, telecom companies are partnering with financial services companies, large retailers and credit-card processing companies. Rogers Communications, one of the main telcos in Canada, has applied for a banking license, leaving open the possibility that such U.S. companies as AT&T and Verizon may follow them into this space. In addition, players as varied as Google and Amazon are now prepared and licensed to perform money transfers.
With all of these changes, the landscape is likely to shift even further over the next generation. New innovations in financial services will accelerate as younger generations rely less and less on traditional banks.
Expect not only that innovations will continue but that the pace of change will accelerate as well. Expect the unexpected as new players, new technologies and new business models enter the financial services domain.