Unravelling the Spaghetti of Complex Money Movement – An Introduction

by Alistair Cotton, Co-Founder of Integrated Finance

Fintech isn’t simple. As we traverse the complex landscapes of money movements, particularly those within B2B global payments, it doesn’t take long to realise we’re navigating a scene of ever-increasing intricacy. Money moves through a multi-dimensional maze of transfers across institutions, providers and geographies, with each transaction adding a new strand to this tangled web.

So, what is ‘complex money movement’? For fintechs, it’s akin to tackling a multi-headed hydra; each transaction is a convoluted riddle involving various payment providers, currencies, jurisdictions, and of course, that beastly enigma called regulation. The world today has a globalised pulse, and with that comes an increasing demand for real-time payments, and businesses to come-ready made with the DNA to operate across borders. As such, fintechs need to not only get things done right, but get them done now.

Navigating the Challenges of Regulation and Globalisation

We’ve had the great unbundling and, as the industry matures, it’s now facing what we call the era of “horizontal rebundling.” This rebundling isn’t the same as reassembling the old banking model under a single roof; rather, it’s a mosaic where each business uses a bespoke way of communication and unique processes to create a multifaceted financial services platform. This digital Tower of Babel exacerbates the complexity of integrating systems. We also see the line distinguishing finance from non-finance has blurred into oblivion, leaving brands floundering as they rush to launch financial services for their customers. This murkiness extends to marketplaces too, each with its own labyrinthine money movement network to navigate; buyers needing to shift money to sellers, and sellers needing to receive money from buyers, all from a digital intermediary.

The regulatory ogre in the room only adds to this chaos. Compliance burdens have amplified over time, piling complexity atop technical complexity. While regulators toil to manage this invisible backend, the manual processes they favour haven’t exactly caught up with the digital tide. Too often we see them taking shots in the dark, aiming at a target they can’t even see. Regulatory requirements like onboarding, screening, and open banking add another layer of complication. Post-Brexit, regulatory norms diverged, and onboarding became too regional; for a global business, understanding the limitations of each provider becomes crucial. Let’s not forget, for all the benefits they provide, services like open banking are still region-specific, restricted to the UK and Europe and failing to fully conquer new territories like the US.

Mastering the Future of Complex Money Movements

The impact of these complexities on financial system design and functionality is significant. Building a ‘real-time and default global’ system demands foresight. This is not merely about ensuring you can cater to an audience that scales; it’s also about guaranteeing instantaneous transactions without hiccups, whether it’s paying your suppliers or letting customers make simultaneous purchases.

Take the example of marketplaces like Airbnb or Uber. They grapple with a formidable beast of money movements involving multiple geographies, currencies, fees, and regulations. For Uber, there is a need to facilitate instant payments to drivers, and they practically had to bolt their core product to a bank, and multiply this across every global jurisdiction. Every new provider adds to the complexity, given the varying information required about the payer and the payee, differing by country.

Despite these challenges, we must strike a balance between optimisation and cost. Businesses need reliable providers to facilitate processes initially, followed by optimising for customer experience and cost-saving. After all, delivering optimal customer experiences needn’t be at odds with reducing costs.

Legacy players with outdated connection methods add to the challenge. Redundancy, although an added complexity and cost, has become critical to survival, allowing businesses to switch flows to alternate providers on the fly.

Compliance, often perceived as a thorn in the side of progress, currently operates on an outdated model which further slows processes. The future, however, might see individuals owning their compliance information or a central repository holding all data.

The challenges of managing transfers persist, especially at the “within”; intermediaries and integrated finance platforms play a huge role in keeping the money moving along a chain which will only continue to grow longer as the number of financial players in the space increases. Then there are the  “in” and “out” stages of any complex money movement. Lastly, there is security; funds (and customer data) need to remain visible and within reach in order for transactions to move seamlessly.

The journey through the realm of complex money movements can feel like a descent into a bewildering maze, fraught with hurdles. However, as we unravel this tangled web, we can start to envision a streamlined, real-time, and hopefully simpler global financial system. As this new chapter unfolds, fintechs, banks and regulators must continue in their efforts to work together and create a more welcoming environment for all.

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