When I strain my brain I can remember the time in my childhood when my mother opened a bank account for me. I was given a printed bank book that kept a record of the amount in the account.
When I needed money, I went to the bank, filled out a withdrawal slip and waited for my order to be processed. Of course, I had to go during regular hours; on weekends the bank was closed. (ATMs still were not common). Such was the world of American fintech in 1975!
Fast forward to 1990: my first job after university was at S.W.I.F.T. headquarters in Belgium. I remember the feeling of awe working in the epicenter of the ‘nervous system’ of global finance and capitalism. In the first 22 years of my life, little changed in the way banks functioned locally and globally. And I never thought it would change. Few people did. Life was pretty static back then.
Almost 30 years later, here we are in 2021 where the fintech industry is in a constant state of flux and disruption; every year brings newer, faster, cheaper and more efficient technologies.
This sector has become so lucrative that the Tech giants are moving into financial services. Apple Pay. Google Pay. Then there’s Facebook, which plans to soon launch its cryptocurrency, Libra, in order to make global payments cheaper and faster for the social media platform’s nearly 2.4 billion monthly users.
Sometimes the Tech giants are striking up alliances with major financial institutions: JP Morgan recently announced its alliance with Amazon and Airbnb to offer banking services. Also, in cooperation with Citigroup and the Stanford Federal Credit Union, Google plans to begin offering a smart checking account.
Tech giants, however, are looking further afield than just the developed markets of North America, Europe and East Asia. In another example, Opera Software sees financial services as a lucrative way to monetize its customer base. The Opera web browser has an estimated 120 million users in Africa, making it the second largest on the continent, after Chrome. They have been courting customers who aren’t well served by existing regional banks.
Like the other Tech giants, Opera Software sees financial services as a lucrative way to monetize its customer base. The Opera web browser has an estimated 120 million users in Africa, making it the second largest on the continent, after Chrome. They are courting customers who aren’t well served by existing regional banks.
“The world of financial services is currently undergoing a major disruption,” said Dima Kats, CEO of Clear Junction, a London-based fintech company that “offers correspondent accounts to financial institutions in order to extend services to consumer technology companies interested in the global payment infrastructures.”
About six months ago Clear Junction opened an account for Muthoot Finserve USA Inc, a global money transfer operator serving Indians worldwide and sending money to India. Since banks are very conservative and selective in providing services to the remittance companies, Clear Junction serves this domain.
The advantages of using Clear Junction over traditional banks is that leveraging this up-to-date technology enables clients to have a better visibility over their inbound and outbound payment flows. That is translated into shorter time frames of settlement with agents and higher service efficiency of the whole network.
Globally, the number of people who need to make low value, retail cross-border transfers has grown rapidly since 1990. Today, there are more migrant workers than ever before, not to mention global nomads and international students.
These groups are grossly under-serviced by the global banking community, and international remittances are expensive and cumbersome. Traditionally, the main option for migrant workers are money transfer networks such as Western Union or the post office, which are expensive, cash intensive and fall short of the modern digitization standards.
“Clear Junction is a badly-needed game-changer for extending the reach of the local fintech companies outside their domestic geographies,” said Kats. “We help payment companies in the workers’ country of origin to have a collection account in those places to where workers have migrated.”
Long gone are the static and predictable days of my childhood. We truly live in interesting times – the battle for where we store our money and the means by which we spend it is just heating it. I look forward to the next decade and the surprises that it will bring.
by John Varoli
(Former foreign correspondent, Bloomberg News)