Banks near zero hour on $124-trn flows as fintechs cut their share, margins

International News

What's the first thing that comes to mind when someone mentions "remittance"? Expatriates sending money home. Second? Lousy exchange rates.
While exorbitant currency spreads and hefty bank charges are the norm for payments that cross national borders, the impression that they mostly affect individuals is wrong. Annual people-to-people transactions amount to $400 billion a year. People-to-business payments – like sending fees to schools overseas – come to another $1.5 trillion. Those are substantial figures, but they pale before the $124 trillion of business-to-business transfers, according to McKinsey & Co.
A large multinational may be able to squeeze a saving from its corporate bank, but SMEs and individuals get routinely shortchanged. The challenge is acute in Asia, where money transfer costs are three-fifths higher than in Europe or the US Capital controls and fragmented domestic banking industries breed inefficiency, which helps banks garner $85 billion in annual revenue – $38 billion more than what they make from cross-border transfers in North America. That hurts the competitiveness of smaller Asian firms.
On their own, banks would have done nothing to alter the status quo. But a rising challenge from fintech means better rates are coming to Asia, and not a day too soon. The export-led region is deeply enmeshed in global supply chains. (The disruption caused by the China-US trade war has demonstrated that amply.)

 Many of the small and midsize firms that move anywhere between $11 trillion and $15 trillion internationally are in Asia. To that add digital consumption, which is growing everywhere but exploding in the region. Finally, every small saving on Western Union transfers by Indian, Bangladeshi and Filipino overseas workers gives them more ability to consume other things.All this makes it crucial that clients in Asia – both individuals and small firms – get fair prices....Read More