December 27, 2015
Mike Massaro, CEO of Flywire (formerly Peer Transfer) shared his thoughts on what the future holds for large cross-border payments.
Flywire is a leading provider of high-ticket, cross-border payment solutions, connecting institutions on six continents with consumers from around the world. Convenient, fast and secure, Flywire’s scalable cross-border platform accepts bank transfers, online banking and credit/debit cards—providing currency conversion at exchange rates that can offer significant savings when compared to home-market banks and credit card providers.
Here are some highlights:
Emergence of a new global citizen demographic:
Today, there are more people transacting across borders in larger sums than ever before. This group does not consider borders in terms of lifestyle, access or travel. They spend more on goods and services outside of their home country and are driving an increase in the number and size of cross-border payments—whether it’s on education for their children, medical care, real estate or other offerings.
Increasing preference for digital channels for large cross-border payments:
As the number of large, cross-border payments increases, consumers will look for the most convenient, cost efficient and transparent channels. This will drive more of these transactions to Web channels vs. traditional agent-based and financial institutions due to the ability to track their payments, confirm receipt and better understand the fees involved. This move to digital is already underway—even by companies with predominantly agent-based models like Western Union and MoneyGram.
A stronger focus on compliance and transparency with the threat of terrorism
With the increased threat of terrorism and the focus on the financing sources of these parties, we can expect to see a much greater emphasis on transparency and compliance. Any entity processing large, cross-border payments will need to be able to verify sources and recipients; ensure strict compliance with anti-money-laundering laws and be able to provide detailed transaction reporting.
Demand for related support services
Any entity accepting large, cross-border payments in any volume will need to be able to provide ancillary support services related to those payments. With consumers from around the world making large payments in different time zones, 24x7 customer support becomes essential.
Education is a key market where cross-border payments will continue to grow significantly
Medical tourism is another market that will experience significant growth in cross-border payments
Rhonda Bassett-Spiers, EVP of US Payments GTBS, at D+H, said:
Payments hub modernization will continue to be a key theme for banks through 2016. The drivers behind this include the globalization of banks’ corporate customers and their growing need for sophisticated payments capabilities. Furthermore, new innovations in the payments sector—such as blockchain and the adoption of real time and faster payments schemes—are also necessitating that banks have modern payments systems in place.
Speaking of blockchain, this will be the most talked about trend in 2016. In 2015, blockchain really gained buzz and momentum. The year 2016 will see banks starting to implement solutions that drive value to their customers. Blockchain and virtual ledger technologies can complement banks’ long-standing quest to enable real-time payments. They can vastly improve or eliminate reconciliation times making payments faster while also reducing certain reconciliation risks and costs. Now that the early adopters have conducted their due diligence on the technology, we can expect to see banks begin production deployments for use cases that allow them to bound and control risks. With benefits proven, banks will race full steam ahead to capture the market.
- The year 2015 is about to go by and we have seen a massive amount of interest in the blockchain space. There are lots of investments that are going on from big major financial institutions. I think that it is partly for innovation reasons because banks clearly want to be part of this and also for intermediation reasons. They don’t want to be cut out of whatever happens next. I see blockchain as being potentially as disruptive as Voice over IP. We have seen banks like UBS who have set up a blockchain lab and Goldman Sachs who have invested in Circle, which is a blockchain company. There is an interesting mix of companies that are investing. It is interesting how everything can be made disruptive by this centralized ledger.
- In 2016, we might see a lot more activity around beacons enabling notifications of the customer entering the store, and that effectively being the start of the checkout process. I think we can see some activity there with tons of money going into this space. We have got Google in this space; we have got PayPal in this space. These companies are desperate to extract information like: who you are, where you are, when you arrived and ultimately what you are buying as a result of being in that place. There is another dynamic here that banks potentially have earned—the goldmine of data of what consumers are actually purchasing. The information which can be derived from consumer behavior can be revolutionary.
I think about blockchain as software and this is the first time that we have a technology and the concept of a distributed ledger which can allow us to build trust without having to have any centralized entities. Santander Bank made a very bold statement earlier this year saying that blockchain technology could reduce bank infrastructure costs by 15-20 billion a year.
I definitely think that the work has already started. The good part is that people are learning from what happened in the payments space and how important it is to build the infrastructure and the protocol as well, apart from the application layer. What I am seeing in blockchain is that in 2016, you will see a lot of companies coming up with these sandboxes, network nodes of production deployment, protocol work and then there would be a bunch of companies working on the application side bringing decentralized financial exchanges, municipal bonds, smart contracts, etc. What I really like about this is that the whole vertical stack is being targeted with blockchain.
I think the data that banks have and how they are going to use it is something that is going to be great in 2016. I’ve talked to some people at banks; Citi has been doing something under that. These banks have done some amazing work and the best part is that today, they are not only trying to look at the data that banks have but are also trying to mash it up with third-party data. You can look at Amazon and the views that a particular merchant is getting and then use those data points to decide what kind of a risk profile a merchant can have and what kind of loan you can get. I think data is going to be a very strong play both in terms of the banks side and payments side as well.