Fintechs have been instrumental in driving change over the last decade. The agility and speed of change that fintechs represent has led to better options for customers and businesses alike. This in turn has put pressure on traditional banks to improve their customer experience. Additionally, regulation continues to evolve, making us ask the question: who is winning the international money transfer battle?
Traditional Banks and Money Transfers
The Bank of England summarized innovation in the payments landscape last year. In its summary, the central bank pointed to countries like Sweden, Brazil, and India as examples of where the interbank payment systems have been updated. The same is the case in Poland. Much of the innovation, which is mainly domestic for now, is waiting for some next steps. Steps which undoubtedly lead to the use of central banking digital currencies (CBDCs) or stable coins to help better drive economies.
When it comes to international payments the innovation is less visible. The value of cross-border payments, according to the Bank of England, is estimated to increase to $250 trillion by 2027. This is due to expanding supply chains, global investment, international trade, and migrants sending money.
Cross-border payments have not been as quick to innovate compared to domestic payments. The G20 addressed this in 2020, The Financial Stability Border, recently updated progress on the initiative.
Going forward we are seeing companies like Ripple, with its blockchain technology, get involved in international money transfers. 80% of Japanese banks are set to embrace XRP for global payments. Japanese banks aren’t the only ones looking at this solution. Much of the solutions for international money transfers leverage the power of blockchain. This overlaps with the drive for CBDCs and stable coins, which both rely on blockchain technology.
Fintech’s Disruptive Edge
One of the most disruptive companies that provides international money transfers is Wise (formerly TransferWise). Alongside companies like Remitly, Worldremit, and PayPal, Wise has already helped lower the costs of sending and receiving money for hundreds of thousands of customers. In fact, Wise has gone further than any other fintech in the space. Naming banks that continue to overcharge customers. Even showing comparisons online to help customers decide how to send their international money transfers.
Wise has found a way to lower costs as well as more competitive exchange rates. The speed of delivery of a given currency is also normally much quicker than a traditional bank can achieve.
In fact, Wise has done even more. Today, Wise’s international payment service is being used as an embedded payment service within traditional banks. Morgan Stanley is just one of the banks that recently selected Wise’s platform to enhance its payments capabilities for corporate clients.
This should come as no surprise. Wise has been looking to work with traditional banks direct for over a year now:
Despite advantages that fintechs have, fintech firms face hurdles such as regulatory scrutiny, less developed geographical reach compared to traditional banks, and on occasion fintechs do struggle with customer service.
Wise isn’t the only fintech offering solutions. With time expect to see more choice for consumers as investment into fintechs continues to improve in 2025.
Regulatory Landscape: A Level Playing Field?
Regulation remains a double-edged sword in the international money transfer battle. Banks benefit from long-standing compliance frameworks. At the same time fintechs can struggle with evolving regulations that differ across jurisdictions. Initiatives by the International Finance Corporation (or IFC), a member of the World Bank Group, show the importance that fintechs play in helping improve trade finance as well as access to credit.
In Africa, IFC is working with TerraPay, a leading fintech in the payments space. Last summer the two organizations started work on boosting access to international remittances in Africa.
Elsewhere, the Monetary Authority of Singapore has championed cross-border real-time payment systems connectivity between Singapore and Malaysia. Fintechs like PayNow and DuitNow are helping with the project.
Regulatory bodies, government agencies, and international organizations are all increasingly recognizing fintech players as necessary for the future development of financial institutions. It is becoming easier for fintechs to compete with traditional banks. Often by collaborating with them.
The Future of International Money Transfers
Who is winning the International Money Transfer battle? It isn’t that easy to say. Many fintech firms have achieved unbelievable things, like Wise, However, banks like HSBC, and others remain on the lookout for opportunities to address cross-border payments. Much of this change will be taking place in Asia, Africa, the Middle East or South America. Banks who have more exposure to these markets will be amongst the first to address the gap. However, banks in Japan are also seeing the opportunity.
The ideal outcome for all parties will be one where traditional banks and fintechs collaborate. Fintechs can struggle to gain banking licenses, but they offer customers solutions to problems often in record time. Wise, for instance, addressed how customers want to earn interest in three different currencies from a standing start to rollout in less than three months. Banks would struggle to achieve this.
Digital transformation is ongoing. The battle is more of a war, than something that can be resolved soon. One thing stands out. The way we move money across borders will continue to go through significant change in the years to come.
Author: Andy Samu
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See Also:
How Fintech Roadmaps Are Revolutionizing SME Financing in 2024 | Disruption Banking
How Wise Platform is changing Global Money Movement | Disruption Banking
