The internet has revolutionised the world. It has transformed how people work, how they communicate, how they shop, and even how they spend their free time. Hardly any aspect of daily life remains untouched. Rapid technological advancements are also ringing in big changes in the financial sector. And they are helping to remodel the international money transfer industry too.
Traditional money transfers
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) network was established in 1973. Since then it has become the industry standard for banks around the globe. Today, the SWIFT network has over 11,000 members the world over. According to the United States (US) Treasury, SWIFT handles approximately USD 5 trillion per day.
It should be noted that SWIFT itself does not transfer funds. It merely acts as a secure medium of communication between banks and financial institutions during a money transfer.
In any case, online money transfer via the SWIFT network has one big drawback: A single transfer can take several days. This is because the money transfer process may involve various intermediaries. Plus, each intermediary has its own set of fees and charges. As a result, the transfer process can be quite expensive.
Financial technology or fintech has seen significant developments over the past decade. Fintech has transformed the money transfer industry in several ways:
Online banking services: The emergence of the internet and advancements in mobile phone technology have played major roles in transforming the world. All you need is internet connectivity and a smart device. For example, you no longer need to queue up at banks to carry out money transfers. You can do it on your computer or via your smartphone.
Online money transfer services: Online money transfer services offer low-cost international remittances. Some providers like Axis RemitMoney allow users to transfer funds completely free of charge. There are no hidden costs either. Users can schedule transfers and track past transactions. Plus, it all happens with such speed! Your recipient could receive the funds within an hour.
Cryptocurrencies could be the future
Bitcoin has taken the world by storm since its launch in 2009. And it has spawned a thousand other cryptocurrencies. Today, many of the world’s premier banks have joined forces to design a new blockchain-based cryptocurrency. This could eventually reduce both the time and expense related to international money transfers.
At this point, consider the case of Ripple. The payment protocol company has developed XRP—a cryptocurrency that is seen as a low-cost alternative to money transfer services. XRP is being tested by international banks in the US and in Japan. Ripple has already partnered with around 100 financial institutions around the world.
Cryptocurrencies cut down on costs related to money transfers. What’s more? The transfers can occur in a matter of minutes. The hindrances are far fewer too! For example, you can send money abroad even if the receiver does not have a bank account.
But cryptocurrency still has a long way to go. It is unlikely to replace online money transfer services at least in the near future.
That fintech has disrupted the money transfer industry is beyond doubt. More changes are expected in the coming years. Will cryptocurrencies change the way the world transfers funds tomorrow? Yes, they are being adopted by more and more companies. But they are yet to overtake the popularity of other money transfer modes. For the time being, online money transfer services seem to be a bright spot for those who remit regularly. Efficient, quick, and inexpensive, they allow users to remit funds conveniently from anywhere.