Looking at innovations made in the payments industry in the last few years, signs are certainly pointing towards a cashless global economy. Yet despite the inclination to pay bills online, split dinner with your smartphone or tap your way through grocery shopping, there is still one area that is lagging behind the digital payments revolution: international money transfers.
Research conducted by finder.com; a personal finance comparison website, found that digital wallets are fast becoming the preferred payment method for day-to-day transactions (57% use payment apps over other means of transacting money), yet this trend has not taken off in the international payment space. According to recent IMTC (International Money Transfer Conferences) figures, 80% of people who transfer money internationally do so in person, with cash.
Here at finder.com, we were fascinated by this discrepancy and wanted to delve further into the industry to find out why consumers are happy to ‘tap and go’ for everyday purchases, but prefer the physical approach for cross-border payments.
We launched a comprehensive study, which went on to form the basis of the first ever finder Money Transfer Awards, collecting over 1,500 data points across 45 different areas; conducting live transfers and engaging leading platform usertesting.com to collate unbiased reviews from real consumers.
Here are the Top Five insights we uncovered in international digital payments:
1) Non-traditional providers are poised to take over
Domestic digital payments set a trend with the likes of non-traditional service providers such as Google Wallet, Facebook Messenger and Apple Pay leading the charge. Results from our research reveal that Money Transfer Operators, and not big banks, could be the digital disruptors in international money transfers. These specialist providers scored high in user experience, as opposed to banks which typically fall short in this area. This is likely due to the operators honed focus on the specific needs of an international money transfer and optimizing the experience for the user.
2) Verification processes may fight fraud but are a consumer inconvenience
A cross-border transaction comes with a whole slew of issues – such as money laundering – that don’t apply to domestic exchanges, or at least not on the same level. As such the verification processes of making a transfer goes beyond punching in a pin. Savvy Money Transfer Operators are creating solutions to this inconvenience without sacrificing security. For example, some ask consumers to submit and upload their verification documents within an online application once only, rather than phone call follow ups for each transaction.
3) Digital payments present a not-so global economy
Cross-border payments are available between almost any corridor, but not with all providers. In fact, the countries you can transfer money digitally to may differ in your own country depending on what state or territory you live. Our research revealed that not one of the providers analyzed in the finder Money Transfer Awards covered over 90 countries and territories and more than half offered less than 40 countries online. In some cases, providers only allow transfers between certain corridors if recipients want cash. Expanding corridors offered will be a big drawcard for consumers to switch from physical to digital transfers.
4) Hidden fees fostering digital distrust
When consumers are weighing up their digital international money transfer options, they usually come across a transfer fee as well as the consumer exchange rate. However, while many consumers might take at face value that the quoted exchange rate is the same as market rates (set by issuing Government), our research revealed that hidden fees built into quoted exchange rates were a common occurrence. As a result, the amount sent and received differs from what the consumer may have Googled, leading to distrust. While transferring in person typically presents higher rates, customers are given quotes on the spot before providing personal information while many providers won’t supply rates and fees until the consumer has signed up. This could explain an inertia in consumers transferring with cash in lieu signing of signing up for online services.
5) The increased need for speed
While an international money transfer is less likely to be an impulse purchase, there are still many instances where consumers want to transfer money internationally in a hurry. When cash is deposited, it appears immediately. So while a consumer may have had to take time to drive to an outlet to make the transaction, they are secure in the knowledge that the recipient will have access to funds soon. Domestic digital transactions have evolved to now offer immediate transfers, however this is not yet the case in the international money transfer industry. The transfer process – which can include verification, approvals, transfer and receipt – may turn around within 24 hours in the instance of the fastest providers we found, however that is still two days longer than right away.
Our research reveals that the international money transfer industry is ripe for digital disruption. With digital wallet platforms, new technology, threats of impending foreign policies and new players entering the market, providers can’t afford to stay stagnant and risk losing even more of the market-share to the cash-only consumer or digital transfer converts.