By Lim Paik Wan
WITH globalisation, where many are no longer restricted geographically in terms of opportunities for work, leisure or further studies, there is a growing need for faster, cheaper, and accessible digital solutions when it comes to making financial transactions, be it currency exchange, overseas payments, or money transfers.
One of the biggest trends to emerge from 2020 and continuing well into 2021 and beyond is digitalisation. Given the lockdowns imposed worldwide in an effort to curb the spread of the COVID-19 pandemic, the use of technology to access daily services such as financial services have become a necessity, further accelerating the pace of digitalisation.
More people are turning to digital methods by using their laptops or mobile devices to pay bills, transfer money, and access their bank statements. Southeast Asia in particular is at a tipping point, with research by Boston Consulting Group finding that mobile e-wallet usage rates here are well above those in other regions.
A banking system not built for the 21st century
However, sending money around the world still remains slow, difficult and expensive. The global banking system was built with domestic needs in mind – banks and other payment providers are mostly local, using a patchwork of systems to move and manage money internationally, making it difficult and expensive for people with multi-currency needs. Tedious administrative processes and unsatisfactory online interfaces are other reasons why it is in serious need of an overhaul.
The current COVID-19 pandemic has only highlighted these pain points. In a recent survey commissioned in Malaysia by Wise to understand how the pandemic affected Malaysians, it found that one out of two Malaysians who sent remittances in 2020 found the high cost a challenge.
Other challenges included long wait times (57%), the inability to visit a physical branch (54%), and time needed to set up the transfer (51%). This propels a need for alternatives that can properly cater to consumers — lower charges, better and convenient services, accessibility, and faster transactions.
The shift to fintech
But these are problems that can be solved and are being solved. Fintech players are rising to the challenge by offering personalised services that remove barriers that exist in traditional financial systems and building upon existing technology to solve pain points for consumers.
Take for instance the traditional in-person verification process — fintechs have employed digital solutions such as eKYC (Electronic Know Your Customer), allowing accounts to be opened anywhere, anytime and within minutes.
It would otherwise be a vexing task with long wait times for the customer, who would also need to prepare a number of physical documents to be verified in person.
A new global standard for transparency
Another issue that most people face when using banks or other traditional remittance providers for international transfers is the problem of hidden fees. These fees, usually unknown to the customer, may be hidden in hiked-up exchange rates, transfer premiums, or commissions charged to the sender and the receiver.
This must stop — consumers should be made aware of these costs so that they can find solutions that best suit them and their needs.
Today more than ever consumers and businesses need to get the most out of their payments — and transparency will help them do that. Especially in uncertain times like these, people should be able to move their money to wherever it’s needed without any surprises.
Remittance players, banks or otherwise, can improve on their transparency by informing costs upfront rather than in fine print, for example. Customers are put at a disadvantage when they have to find out for themselves what these costs are, and chances are they do not know where to even begin looking.
In the European Union, Australia and also in Singapore, there has been increased recognition among regulators for the need for transparency in foreign exchange fees, leading to increased competition amongst those providing remittance services which would ultimately benefit the customer and hopefully lead to the building of a new global standard.
An alternative solution
Fintech providers are taking the lead by being completely online without the need for a physical branch — providing digital and convenient experience for consumers — and by being transparent with clear breakdowns of their fee charges and costs for consumers.
Here’s how we do it at Wise — we use the mid-market exchange rate (that can be seen on Google) without any mark-ups and are up to 4x cheaper than banks in Malaysia. Fees are shown upfront so customers know exactly how much they are paying to use the service.
We’re cheaper because we lower costs by doing away with the middlemen and using our own proprietary banking network, meaning transfers are cheaper and take a much shorter time to arrive — over 30% of all international transfers reaching their destination in less than 20 seconds. These cost and time savings are passed on to our customers.
A holistic effort by all
We’re at the cusp of revolutionising today’s finance framework, enabled by the advancement of technology. We see companies like us working to address the pain points in the conventional finance system, and we’re also seeing efforts by regulators and industry players to digitalise the banking system and make improvements on the processes, but there are still ample opportunities to drive improvements in the financial ecosystems by industry stakeholders, so that the best interests and needs of the consumers are prioritised and met. – March 21, 2021
Lim Paik Wan is the Wise’s country manager for Malaysia.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
Photo credit: Tech Funnel
