The parallels between the 2020s and the 1920s are often talked about in society. The increased technological transformation of today is comparable to that of the past, and even the experience of a pandemic is eerily similar. However, it is this rapid innovation that is giving people hope, and our technological advancements that have happened in the last year or so are indicative of an optimistic decade to come.
Yishay Trif is Chief Executive Officer at MoneyNetInt. An accomplished business executive recognized for leading high-profile client relationships while deploying, operating and growing customized payment solutions.
Here he shares his thoughts on how affordable international payments can bring banks roaring into the 20’s.
As the world struggles to find a solution to the pandemic, and before we’ve begun to deal with its devastating economic consequences, a recent front cover of The Economist provided a welcome ray of hope. Above the image of a rocket soaring off the launchpad, the magazine ran the headline “The Roaring 20s?”, with the article examining how rapid technological change means we have every reason to be optimistic about the coming decade.
I agree that we have our best years ahead of us, but only as long as innovation benefits everyone, rather than widening the divide between rich and poor. This is especially true in the financial services sector, which is under significant pressure to democratise its services and bring them to billions of under-banked people around the world.
While the future may be full of promise, financial services today are more redolent of last century’s “Roaring Twenties”, not least the most famous line from that seminal document of the era, The Great Gatsby: “Let me tell you about the rich. They are different from you and I.”
This difference is evident today in financial services’ distinctly two-tiered model. For the rich, anything goes: they benefit from a huge range of bespoke services, the very highest level of service and – another privilege of the wealthy – preferential rates for everything from overdrafts to foreign transaction fees. The rest of us get what we’re given.
Let me be clear: this isn’t an attack on banks. Providing retail banking at worldwide scale makes it completely unfeasible to deliver bespoke services to every customer. So, if someone wants to send money to a relative in Nigeria or Pakistan, or a small business wants to receive payments from sales to the US or Australia, then of course they have to pay for the privilege.
Banks are only passing on the cost of making foreign payments that they themselves incur. Customers might gripe at the high cost of making SWIFT payments, but they rarely realise banks themselves pay a pretty penny to be members of, or use the network.
Nevertheless, this leaves us with no middle ground. Banks for high net worth individuals will bend over backwards to accommodate the wishes of their clientele, enabling them to move money at will, anywhere in the world, quickly and often at low cost. High Street banks can’t be expected to open up a new payments channel to a foreign country for a small proportion of their customers: it would simply be uneconomical.
That might be tough luck for customers, but it’s also bad news for banks. It means they miss out on the opportunity to grow their customer base by providing the widest range of services; they are also denied the opportunity to be truly “international” financial services players.
So, will banks be denied the dream of shrinking the world that so many other industries have achieved? If they stick with the old models of making foreign transactions, certainly. But there’s a new way to move money quickly, reliably and cheaply – and it has surprisingly little to do with technology.
International payments are all about relationships: between individual banks, of course, but also with regulators, payment service providers and other stakeholders in each foreign territory. While banks lack the time to create these channels for a small proportion of their customers, a new breed of nimble yet global payment service providers are busy forging these relationships and opening up new networks.
Once a payment service provider has these partnerships in place, it has created a new channel that any bank, wealth manager or specialist financial services provider, whatever their size, can use to send or accept money from overseas.
This represents nothing less than a revolution in international payments. By partnering with a provider that has these payments channels in place, any financial services provider can piggyback and start providing foreign transactions at a fraction of the price it costs them today
For the first time any bank – from mass-market retail to boutique banks for HNW individuals – can deliver bespoke services for all their customers. No longer does the ordinary consumer have to pay through the nose to send money abroad, nor small businesses worry about their profit margins being eaten up by high transaction fees.
And best of all? Banks don’t have to change their business models – they just need to work in closer collaboration with such payment service providers to show new and prospective customers that they have truly global reach. This, then, can be banks’ contribution to a new “Roaring Twenties”: if not by making us all millionaires, then at least by providing bespoke international payments services that make everyone feel like a Jay Gatsby.