While all services are swayed by their customers and the customer’s experience of using it, this is perhaps more true with remittance than any other player in the payments industry. When you pay a bill, there is little emotional attachment involved - you’ve received a product or service and need to complete the transaction, so speed and convenience are certainly going to be factors. However, when remitting money home to loved ones, there is significantly more emotion behind the transaction, making transparency and security also very important. More so than with other transactions, customers who fail to find these traits in a remittance service are extremely likely to look for a different provider.
Technology has been a driving influence in the development of customer experience in many industries in the last couple of decades, but nowhere more prominently than in financial services. The rapid development of smartphones and the connectivity they give our everyday lives forced many traditional services to rethink how they operate in order to remain relevant, with banks and remittance services being forced to really up their game to meet customer expectations.
It could be argued, at this point, that it was technology driving customer expectations instead of the other way around. It’s a little like asking whether the chicken or the egg came first, but did the customer’s desire for faster, safer and more convenient remittance direct the development of fintech or did the developments in fintech just elevate customer expectations? In either case, the fact remains that digital solutions are now a must for any financial service, and that they must provide a solution that is as or more simple than walking into a physical office to complete a transaction.
The need for digital parity in almost every industry (though especially financial services) was vividly illustrated during the COVID-19 crisis. With the populations of many countries locked down and confined to their homes, the option of completing transactions in person was removed - it was digital or nothing. Under these trying circumstances, those companies that provided the most trouble-free digital solutions would thrive while those that had neglected their digital transformation either had to rapidly adapt or flounder.
A Buyer’s Market
The necessary development of fintech to meet customer expectations has had a further impact on the industry - it has widened it significantly. Just as eCommerce removed limitations in retail and removed the importance of bricks-and-mortar shops and high street locations, leading to an explosion of highly successful online retailers like Amazon, so the well-established names in the remittance industry have found themselves facing a lot more competitors in recent years.
Western Union was founded in 1851 and MoneyGram in 1940, and yet the long tenure of both is no longer enough to keep them at the top of the remittance game when facing recent startup competitors that focus on a technological approach. While the old names once held enough gravitas to attract customers, largely because of a lack of alternatives, the much broader range of options now means that customers can seek out the most cost-effective companies instead of relying on familiar names.
One response by the traditional companies in the industry has been to seek non-traditional partners. For example, Western Union partnered with cryptocurrency company coins.ph in the Philippines in 2019 to make transfers in and out of the country easier for those who have embraced eWallet technology.
The greater amount of choice on the market has inevitably led to a significant reduction in brand loyalty when it comes to remittance as customers instead seek the best possible deals. This shift in behaviour has also been directed by the fact that the Millennial generation is now entering the marketplace. Unlike their predecessors, this generation is more tech-savvy and more inclined to switch allegiances when a product or service fails to meet their requirements or even just their personal tastes and preferences. In fact, a study by Swift Prepaid Solutions found that 80 per cent of Millennial and Generation Z respondents said that they value price over brand loyalty and 60 per cent said they were indifferent when choosing between brands and independent products. Given that this generation is now the one moving the most money around the world through remittance services, companies cannot afford to overlook their whims.
In response, money transfer organisations must innovate. The Millennial customer has grown up in the era of eCommerce and mCommerce, with everything being available at the touch of a symbol on their smartphone, with simplicity and convenience being paramount and speed close behind. The idea of having to walk to a specific branch, fill in forms, produce documentation and then wait for up to a week or more for the money to reach its destination is simply not acceptable. As such, money transfer organisations have had to partner with fintech firms and other third parties to accelerate their development of innovative solutions to age-old obstacles in the remittance industry.
The rise in migration has also forced the remittance industry to improve and develop its services, if only to handle increased volume. More so than previous generations, Millennials are fond of travelling and living overseas. While the digital nomad movement is relatively small (though not small enough to be entirely overlooked), the number of expatriates around the world is already huge and continuing to growing. According to a report published by Finaccord, there were about 66.2 million expatriates in 2017, amounting to 0.9 per cent of the global population, and that number was growing at a rate of 5.8 per cent per year. And that’s not counting displaced populations forced to move country by conflict, persecution, famine and natural disasters (among other causes).
Naturally, more people living and working overseas means more people wanting to send money home or around the world to other destinations. This puts pressure on remittance services to not only expand to meet customer demands in terms of the number of transactions and amounts of money being transferred, but also to connect more countries. Choosing not to enable customers to send money to or from a specific country just because the legal barriers are too challenging now means losing thousands of potential customers.
While every customer’s first and foremost expectation of a remittance service will inevitably be the sending of money from one country to another, companies restricting their focus to just this area will inevitably be limiting their number of customers. Thanks to the sheer amount of choice on the market now, as mentioned above, customers will inevitably gravitate towards the service that can offer the best deal - the best combination of cost, convenience, speed and safety. However, if they find a better deal elsewhere, they will rapidly take their custom there instead. The result is that remittance companies choosing to focus solely on remittance can be very quickly and easily undercut.
The counter to this is offering additional services. Increasingly, international money transfer organisations have been forced to look at using their existing financial expertise and technology to offer customers a broader range of financial services such as money management. This adds a little extra value to the deal, which can sometimes be the deciding factor between two similarly priced alternatives and, if the other services are good enough, can even convince a customer to pay a little more for their remittance in order to take advantage of the convenience provided by the bonus extras.
The challenge for remittance services is predicting what customer behavioural trends will next direct the industry. Speed continues to be a priority and anything companies can do to make their transfers instantaneous will certainly attract more customers. Convenience, too, will remain a driving factor, especially as more and more people make their lives overseas and want to be able to repatriate their income with ease.
However, other new influences on the financial world generally may also direct customer behaviour. Digital wallets, for example, have rapidly grown to widespread use while cryptocurrency continues to gradually gain momentum. Just as with the shift from bricks-and-mortar businesses to digital services, the remittance companies that correctly predict what their customers want and act to provide it first will triumph while those that wait for the trends to form first may suffer for their inaction.
Of course, the examples of new developments cited above are relatively small innovations and are already being integrated by some companies. Neither is a development on the same scale as the shift from traditional to digital business. Predicting what the next step of that scale will be is the far greater challenge.
This article is provided to you by DeeMoney. Thailand's money transfer solutions provider licensed by the Bank of Thailand. Interested in transferring money from Thailand to the world? Download the app from the Google PlayStore or the Appstore to get started.