With new developments in technology, the overseas money transfer industry is constantly and rapidly evolving. In the past banks were seen by most as the only reliable method to carry out international money transfers – but now there are many other cheaper and faster options available, with online providers rising to challenge the industry dominance of traditional banks.
How Online Providers Change the Game
These online providers are making money transfers cheaper and faster in a number of ways. The lower barriers to entry provided by the Internet have meant a rapid proliferation of new online providers in a relatively short time frame – in short, lots of competition. This of course incentivized cost reduction and better service, which is a win-win for the consumer.
The Amazon Effect – Lower Fixed-Cost Structures
Online providers also have much lower overheads than traditional transfer service providers such as banks. By following the same model Amazon used to undercut traditional book retailers, online transfer providers are able to avoid the costs of real estate, large staff operations, and running large physical offices.
These savings can be passed on to consumers, making the whole process cheaper. Another benefit of online providers is that they are open 24/7/365, and consumers can access the services more or less instantly from home. This allows people with busy schedules to effortlessly send money to people around the world, all from the comfort of their own living room.
Threats to Established Market Players
The increase in online providers also means well-established players in the money transfer market are facing more competition. Younger companies such as OrbitRemit are now challenging conventional online providers such as PayPal. Services such as OrbitRemit operate on a low flat fee schedule, rather than a percentage-of-payment fee as used by Paypal. This helps make money sending cheaper for regular payment senders, as well as customers looking to move a large quantity of money.
Poor Customer Service Coming Back to Bite Established Providers
Another reason that there has been a shift away from more established businesses is the level of service that new providers offer. PayPal is often regarded as being hard to deal with, and a quick Google search on their customer service record will provide plenty of examples of horror stories. Newer businesses are exploiting this weakness, providing excellent customer service in comparison and further challenging traditional providers.
How Remittance Payments Impact Developing Countries
The growth of international money transfers also has a substantial economic impact on the countries that receive them. A World Bank study in 2013 found that over $542 billion dollars was remitted globally, with this amount expected to grow more each year.
This especially benefits developing countries, such as India, the Philippines and Nepal, where remittances can form as much as a third of their total GDP. Awareness of financial services is increased because access is promoted to both the sender and the recipient.
Money flows from remittance also tend to remain stable in times of economic downfall, which can provide a much-needed hand to developing countries and their inhabitants. These money flows mean that there is more money in the local economy, which not only benefits the recipients of the money, but the goods and service providers at which the money is spent. By offering lower fees and better exchange rates, services like OrbitRemit help remittance senders get more money to their home countries – and expats who remit money are taking note.