Take a deep breath. For once, Brexit woes have taken a back seat and the currency markets have had a little breathing space. With no fresh crises or emergencies, it has been relatively plain sailing this week for Sterling. Perhaps a good time then, to think about making that pounds to euros transfer you had been putting off? Read more “3 Great Deals For Sending Money Overseas: Pounds to Euros”
Overseas investment; property, financial, or business related; supporting family and relatives overseas; moving and living abroad; importing or exporting goods over the medium to long term.
These are all good, and prominent reasons for taking extra care that you are managing currency exchange rate risk effectively. Failure to do so; using a high street money transfer company last minute to make a significant transfer of funds from pounds into euros, dollars, or renminbi, for example; can result in paying way over the odds, in fees and charges, or exchange rates skewed in the vendors favour. It could cost you 5% extra each and every time you make such a transfer, research shows. Read more “3 Of The Best Expat Overseas Bank Accounts”
To use a straightforward example, isn’t it strange that, in a tech-mad world, we still need to employ advanced mental arithmetic skills to work out how much money we have in our bank accounts. Read more “Flavors of Fast? 40 Countries Now Using Faster Payment Schemes As Business Case Becomes Unarguable”
Amongst the many disruptive fintech startups that have mounted a sustained attack on banks and money transfer operators’ share of the international money transfer market, TransferWise may be the best known, and certainly the noisiest, trumpeting their bank beating rates via PR campaigns and flash mobs, everywhere from the City of London, to the streets of Singapore and now, as far afield as Sydney.
Today the company announced another historic moment in their short history, recording their first ever annual pre-tax profit. Read more “TransferWise Records First Ever Annual Profit, Pledges To Maintain Bank-beating Prices”
Last month, we looked at the fragmented Indian payments and overseas money transfer market, which, thanks to its size, estimated at over $70 billion, is attracting competitors from Silicon Valley tech giants, disruptive mobile startups, domestic players, and the might of China, a country that is truly mastering micro-payments.
We also suggested that blockchain based international payments could be a coming force in India, and news reaches us this week that European digital payments provider TransferGo is announcing a new partnership with Ripple, the California based blockchain platform designed for real-time payments.
TransferGo CEO Daumantas Dvilinskas declared himself “delighted” to be able to offer remittance customers the ability to send payments in real time, using banking partners based in India, a service that Ripple’s considerably larger, in terms of market share, rival SWIFT is unable to offer.
SWIFT has been the market leader when it comes to providing the “plumbing” for international money transfer since the 1970’s, but in Ripple, which has developed its own decentralised blockchain system, it maybe encountering a genuine rival.
Asheesh Birla, SVP of Product at Ripple has given some insight into the way Ripple is thinking big in India by revealing that “We realised that if you get the top three banks in India onto Ripple, you get 80% of the market share.” Easier said than done perhaps, but Ripple has already overcome some major hurdles, as we have written about here in the past, and has worked with the likes of MoneyGram, and Santander, to revamp and accelerate their overseas payments infrastructure.
Another major attraction that Ripple has to offer is its price. In their press release, Ripple and TransferGo announced that they want to make sending payments from India to Europe, or vice versa, free of charge, which would place SWIFT under further pressure, to try to be as competitive. Granted, Ripple cannot deliver both superfast payments and free money transfers, as its free service, which uses the mid-market rate, takes 2-3 days, but it is an advantage in itself to be able to give customers the opportunity to either save money, or speed up their transfers.
And then there is mobile. Ripple realises that the way people send money is changing, moving to mobile rather than through banks or traditional Money Transfer Operators (MTOs); after all, even amongst India’s “unbanked” population, most own a mobile phone or at the very least have access to one, and if you can set up a digital wallet and start sending and receiving money in a few swipes and taps, why make the trek to your nearest bank, which could be a few hours travel away?
Ripple has described its market penetration in India as “high”, as its free service, which offers “zero fees and a mid-market rate,” will take at least 2-3 business days to send the cash to its destination.
Marcus Treacher, SVP of Customer Success at Ripple, commented that “TransferGo is a great example of a forward-thinking payment provider that’s leaning in to new technology to facilitate real-time, cross-border money transfers for their customers. That’s a big step forward.”
Whilst there is no disagreeing with that, and Ripple will doubtless be encouraged by TransferGo’s declaration that the partnership “opens up new horizons for TransferGo to develop additional products and services”, the Californian company with the big ambitions will have to set their sights higher and capture a significant portion of India’s $70 billion dollar if they really want to frighten SWIFT.
London based international money transfer company WorldRemit has seen its volumes of transfers to Africa increase by 80% in the past year, and is now sending more than $1.6bn at an annualised rate.
The company says that its new proprietary service, launched this week, will reduce the costs of sending money between countries in Africa, which they say are currently prohibitive, although a recent continent-wide free trade agreement signed by 44 African countries has provided hope that the situation can be improved in that regard. Read more “WorldRemit Makes Move Into African Market For International Money Transfers, Partners With Safaricom”
At The Money Cloud we have kept a close eye on the Indian micro-payments market. It is fascinating for a number of reasons: firstly, it showcases some of the most advanced fintech being developed anywhere in the world; secondly, it is a model that it is likely to have a transformative effect on the way people pay for things, not just in India, but all over the world. Thirdly, it is a place where social media giants embrace finance, and lastly, it is an open field and nobody knows who will emerge triumphant from this fragmented and highly competitive market.
This week, an article in Bloomberg revealed that Warren Buffett had invested into Paytm, which demonstrates just how influential and lucrative the payments market in India looks set to become. According to Credit Suisse, the market will soon (by 2023) reach $1 trillion dollars, and stands at $200 billion today. But this volume accounts for just 30% of all payments, with the rest being made in cash. Compared with a market like China, where the mobile payments market is already worth $5 Trillion.
According to journalists Suritha Rai ad Anto Anthony, the major difference between the Chinese and Indian payments markets is that China is a closed shop to foreigners, whilst India’s government is welcoming international players to launch their services in the country. Hence, the world is looking on to see the future of the payments industry being incubated. India’s government is keen to move towards a cashless society, and has provided an enviable payments infrastructure to facilitate digital wallets, and domestic and international payments.
Looking at the numbers, however, it is Indian born services that are leading the way. Flipkart has generated more than 133m downloads, whilst Paytm leads the way with more than 150m. Google Tez apparently has 50m users, whilst another Indian firm, BHIM, has pulled in 32m customers.
What the Silicon Valley tech giants do have, however, is a colossal number of users who may well be tempted to switch their payments habits if the likes of Facebook, Google, and Apple can make their payments options more visible, effective, and a good cultural fit. In this regard, WhatsApp, which is phenomenally popular in India, is one to watch, but is yet to progress beyond the beta testing phase.
Google Tez has changed tack, and is now known as Google Pay, launching with a range of new services including splitting bill payments, and tap-tap-go style functionality that makes pinging rupees around as easy as messaging a friend.
And then there is Ant Financial, the Chinese fintech giant that commands huge volumes of transactions in the East, and is determined to break into markets including Africa, India, and the US, have narrowly missed out on the acquisition of MoneyGram last year.
Finally, could blockchain based payments apps make an impact on the market? Again, here, foreign players are on the charge, with Singapore based LaLa World has been making headlines, whilst online startup mag Inc42 lists no fewer than 13 new entrants, all with ambitions to be the everyday Indians preferred payments choice.
Warren Buffet et al should not expect to have things easy, but as things stand, it seems the Sage of Omaha has backed the right horse.
This content is sourced and brought to you by The Money Cloud – comparing the best rates for sending money overseas offered by hand-picked, regulated brokers and money transfer agencies.
Over the weekend, news emerged that overseas footballers in the UK; of which there is a higher proportion than in any other international football league; have been attempting to hedge against further falls in the value of Sterling.
Sterling has fallen around 15% against both the euro and the dollar since Britain voted to leave the EU, dropping 3% in the past 3 months, and creating problems for businesses and individuals alike. In the case of the Premierships’ multi-millionaire footballers, many are asking to be paid in Euros, a request which football clubs, even those as rich as Manchester United, are struggling to accede to, due to the fact they do not hold sufficient foreign currency reserves.
Currency hedging can be a tricky business; knowing when to buy or sell a currency is an instinct that the best FX currency traders, for example, possess, but not even they can get it right every time. So what are the best options for individuals and businesses with financial commitments overseas? Let’s look at 3 strategies that might help to protect against unexpected, unplanned for losses.
Take control of your risk with financial projections
If you are a seasoned entrepreneur, business owner, or traveller, you may feel that you have an understanding of how currency movements play out, and what can be done to hedge against them. But experience alone is not enough; to ultimately make the right choices, planning ahead is essential.
All businesses, and even most domestic households, create budgets to try to plan for the future. In order to plan a currency hedging strategy effectively, it can be useful to plot different scenarios; a best case, worst case, and most likely case, for example, is a good start.
By plugging in different currency fluctuation scenarios into your budget, it should be possible to calculate when, for example, a sale and delivery of goods overseas becomes unprofitable, a holiday or spell abroad becomes prohibitively expensive, or, alternatively, when it becomes attractive to spend in the short term for longer term financial gain.
There is no guarantee that your scenarios will play out in real life, but they can certainly provide an effective way to manage your currency risk. It is up to a business, or individual, to decide how much appetite they have for risk – but before doing that, it is essential to have a clear picture of what kinds of problems and issues different attitudes towards currency risk will throw up. Fail to prepare,prepare to fail, as they say.
Consult a professional broker
If you are do not feel confident about which strategy is best for you, your family or your business, then it may be worth reaching out for professional help.
International currency brokers naturally charge a fee for their work, so it’s important to decide if the level of risk you are exposed to justifies the extra cost. Sometimes, currency related losses are simply unavoidable due to market, or political forces; witness the current situation in Venezuela, for example, where the government has been forced to launch its own Petrodollar cryptocurrency, a hedge against the Venezuelan Bolivar, which has simply spiralled out of control owing to uncontrollable levels of inflation.
If your currency risk exposure is long term and consistent, however, i.e. you are making regular overseas payments or regularly selling goods overseas, then a broker can help. They are likely to have a superior knowledge of how the markets may move, and not only that, they have access to vast, cheap, quantities of foreign exchange, giving them a significant advantage in the marketplace.
Interacting with a broker on a regular basis will improve your own knowledge of the FX markets, so you may not need to consult directly with your broker over every transaction, but if you have a significant foreign currency exposure, working with an FX broker represents a no-brainer.
Open a self-managed account
Thanks to the rise of disruptive technology, there is a great deal more transparency around the FX markets than there once was. Most brokerages, and a growing number of fintech startups, provide the means for you to run your own currency hedging service. There is no shortage of newsflow, either.
Comparison sites like The Money Cloud can give you an instant overview of the rates, fees, and transaction times offered by a range of MTOs (Money Transfer Operators), and even provide a digital dashboard that helps you quickly negotiate AML (anti-money-laundering) and KYC (know your customer) checks, store all of your transaction history for future reference, and even use techniques such as AI and machine learning to help guide your decision making process.
Brexit has created huge disruption in the value of Sterling, and the instability shows no signs of abating. Within the EU, nothing is guaranteed, as trade wars with the US and differing political agendas create uncertainty, whilst the US, China, Russia, Africa, the subcontinent, Asia and Australasia all have a role to play in sudden and unexpected foreign exchange fluctuations.
As discussed above, there are many different strategies that you can use to protect your own interests, whatever they may be; the one thing you can’t do, in the current environment, is do nothing. Other than that, it is up to you; whether you are an entrepreneur, traveller, or pro-footballer; to decide how best to hedge your currency exposure.
Russia’s market for international remittances is set to grow to $68 billion by the year 2021, according to research, with the fastest growing sector being bill payments made by companies, which looks set to double in size over this period. Read more “How To Send Money To Russia – Soon To Become A $68 Billion Remittance Market?”
The FCA plans to take action against firms offering misleading exchange rates to potential customers, such as offering the “interbank” rate, only to switch to an alternative, less competitive rate once the customer is at a more advanced stage of the transaction.
Besides the offering of “unachievable” exchange rates, the FCA wants to stop firms making unsubstantiated claims about how much rival services charge, “unless the comparison is fair and balanced and the firm can prove that the claims made are true.”
The FCA revealed that the UK currency exchange transfer market for outbound services is worth approximately £60bn per annum, with remittances; sending money overseas regularly to support family or friends; responsible for roughly £18bn of that figure.
The new rules will be aimed at protecting “consumers who are individuals acting outside their trade, business or profession, micro-businesses and charities with an annual income of less than £1 million”, who are perceived to be most vulnerable due to having less experience of foreign currency exchange markets and what the precise costs of making a transaction ought to be. The FCA will insist that: “where providers compare the costs of their service with other providers, they do so in ways which are meaningful, fair and balanced, and capable of being substantiated.”
The main concern is the way in which a foreign exchange company may communicate a promotion offering a particular rate to win a customer’s business, only to offer a less competitive rate once the customer has all but committed to using the firms services. In the FCA’s view, the misleading offer has prevented the customer from visiting other sites or using a comparison service to compare real time or achievable rates offered by other service providers.
As much as possible the FCA wants to make sure that customers are getting all the facts and that there are no hidden charges or fees that are applied at a later stage, making a seemingly inexpensive transaction more costly than advertised, and giving the service provider an unfair advantage over competitors who are more transparent about their pricing and provide information about additional charges up front.
The FCA says that “research and evidence collected on market practices, as well as customer behavioural trends, indicate that customers face challenges in understanding the total cost of a currency exchange transaction”, and that misleading advertising “could lead to losses for consumers and SMEs.”
The second Payment Services Directive (PSD2) which came into effect EU-wide in January this year has introduced new legislation designed to curb misleading advertising practices within the international money transfer industry, and covering “disclosure of information, cost and charges for currency conversions”. The FCA also plans to take into account directives from the European Commission “designed to increase transparency of charges for payments that involve currency exchanges and to increase the comparability of the options available for payment service users.”
The FCA is inviting feedback from firms and interested parties before it decides what specific action to take. The public consultation closes in November, with new rules and guidelines expected to be released published early in 2019.
If you are looking to send money abroad and would like to use a comparison service that gives you all the facts, including fees, exchange rates and transaction times, try The Money Cloud. We work exclusively with regulated money transfer brokers and use API’s to display real-time rates that you can compare for a wide range of currencies in just a few clicks.
The world’s best footballers tend to earn jaw dropping sums of money, and their tax affairs tend to be complex, to say the least. In the past couple of years, in Spain, several, including Lionel Messi and Cristiano Ronaldo, who play for Barcelona and Real Madrid respectively and together share the mantle of “world’s best footballers” have tangled with the Spanish tax authorities over undeclared income. Read more “The Non-Dom Tax Rule: Understanding Remittance vs Arising Taxes (& How It Could Save World’s Best Footballers Millions)”
2 financial services giants; Visa in the payments space, and MoneyGram in the overseas money transfer sector; are set to join forces to further streamline the process for consumers of sending funds overseas. Read more “Visa & MoneyGram Announce Joint Partnership To “Modernize & Digitize” International Money Transfers”
This month, Google announced some sweeping changes to its payment services, which had become a little confused, and confusing. Read more “Google Is Cleaning Up It’s Payments Act, Merging Apps & Offering Enhanced Services; Could International Money Transfer Be Next?”
Filipino workers in Hong Kong, of which there are more than 180,000, received a potential boost to their finances this week as Jack Ma, the billionaire co-founder of Alibaba, which counts fintech firms Ant Financial and Alipay as subsidiaries, made good on a promise he had made years ago to help his Filipino friends spend less on fees when sending money back home to friends and relatives. Read more “Ant Financial Introduces Low Cost Blockchain Money Transfers for Lucrative Hong Kong Philippines Remittance Channel”
In a recent article in Finextra, Lakshmi Narayanan at Travelex discusses the contrasting approaches taken by the Pakistan and India governments to the problems inherent in their countries remittance industries.
India is the largest market for inbound remittance in the world, receiving more than $72bn of inbound money transfers from overseas, whilst Pakistan also has a large inbound remittance market worth around £19.3bn. Read more “Cheaper, Faster Overseas Money Transfer Options Are Inspiring Customers To Embrace Digital MTOs”
Research published by the Higher Education Policy Institute (HEPI) and Kaplan International Pathways has revealed that international students in the UK are worth more than ten times more than the costs associated with supporting their studies; £68,000 per typical EU-based student, and £95,00 per non-EU student – a total of more than £22 billion overall. Read more “International Students Worth More Than £22 Billion Net To UK Economy, Report Reveals”
It’s been an eventful week in the world of international money transfer. Whilst Trump launches trade wars with Europe, China, Canada, and Mexico (to name a few), which is guaranteed to lead to tricky exchange rate calculations for many businesses (don’t forget to check the latest rates and save up to 80% on fees using The Money Cloud), there has plenty of activity in the consumer international payments market too.
Here’s how the big stories have broken down in the past week or so. Read more “The Week In International Payments; Partnerships Galore, & Currencies Direct Tests Blockchain Solution”
Modern technology, and mobile tech especially, is making a multitude of lifestyle services easier to deal with; provided you are up to speed with the latest tap, swipe, scan and track technology, many things, including sending money overseas, can be done faster, easier, and cheaper using apps. Read more “The Best Money Transfer Apps of 2018 So Far…?”
There is nothing unremarkable about a shipment of soybeans from Argentina to Malaysia; nor is it surprising when a transaction of this nature is financed using a letter of credit, issued by one bank, on behalf of the buyer, to another. Read more “World’s First Blockchain Based Trade Finance Transaction Completed By HSBC Using R3’s Corda”
Although Europeans make up only 10% of the global population, the region is home to 20% of the world’s migrant workers; around 50 million people; who between them send over $110 billion per annum back home to families and loved ones, according to research from the International Fund for Agricultural Development. Read more “Inside Europe’s $110 Billion Migrant Remittance Market”