London, regardless of any Brexit uncertainty, continues to be the biggest market in the World for foreign exchange trades, a third of global totals, in algebraic terms, NY + SG + HK = UK.
Ever more entrants trying to cut a space whilst margins get thinner and thinner. The new ‘challenger’ fintechs and forex companies are taking clients from the incumbent banks, for whom foreign exchange is, or at least was, one of the most profitable of their services. They’re now also competing against each other in ever tightening circumstances. They tend to adopt the no margin business model + fees, or the small margin no fees. Either way it’s a close game in terms of making money by moving money.
As the people of the World become more digitised in their connections, more mobile in their choices, the movement of money becomes ever more necessary, and the expectations of digital transfer are a reflection of the times. It should, we think, be no different to sending a text, or email, or other digital communication. Indeed. The principle key is automation. Total automation. Everything automated can scale, and as it scales, the unit cost of activity decreases accordingly. Everything that isn’t automated is manual, and everything that’s manual can only scale by adding more people, more desks, more office space, more human resources, more recruitment, more everything that costs money. In a perfect Forex World human activity is totally removed from the equation.
So why is Bank to (overseas) Bank transfer still not like sending an email?
One of the biggest factors is the emphasis on the client to enter data correctly. Everyone knows what it’s like to typo an email address and get a return to sender a second later. The problem with bank to bank transfers is the failure to send notice can take hours or days to come back. The other even more irksome feature for a Forex fraught with snags is that the goal posts, and indeed the net itself, move, Banks merge, rules change, nothing is static for long. An email address stays the same, indefinitely, whereas the Bank codes change, the rules of transfer change, from bank to bank, country to country, quarter to quarter, year to year. It’s a dynamic environment and it’s basically impossible to know when something has changed in such a way as to cause a failure to transfer other than by sending money and waiting to see if it’s accepted or bounces. In other words, it’s only possible to find mistakes by making them. And once you’ve made them, you have to fix them. And if you’re sending ten thousand payments a day and 2% are failing and require manual intervention, that’s your biggest cost and headache. It’s the human factor, making a payment to Manila? What you don’t know is it’s a holiday in the US, and the transaction is dollar linked, so it’s going to get delayed. Making payments to or via a Middle Eastern Bank? There’s religious holidays that are linked to the position of the moon. This and a thousand other things you don’t know. The data for the entire banking system would need to be available to you, and you would have to check it before you entered the recipient details in order to avoid the inevitability of exceptions.
The solution is for a single company, and it only needs to be one company that does it, to acquire all the bank data, clean all the bank data, and make it available completely integrated with algorithmic rules and rich functionality for all companies to use in such a way as to enable them to have a ready made solution and avoid failed transfer attempts. The company doing this also needs to keep the data clean, updated, and totally current, and to know the intricacies of lunar determined religious bank holidays amongst other variables.
Information partner: APPLY FINANCIAL.
The company providing the solution outlined above