Before you can know where you are going, you need to first know where you have been.
When I started my first money transfer company back in 2005, we were living in a world where the latest Nokia smartphone was as hip as the iPhone 6S; internet was painfully slow and most of us still bought CDs. Today, we live in a world of hyper-connectivity, where the way we live, work and interact with each other, especially remotely and across borders, has fundamentally changed thanks to digital, mobile and social technology.
By 2020 there will be six billion smartphone users worldwide – close to the number of people on the planet. That’s nearly everyone, online, all the time. This rise will help to drive financial inclusion and the World Bank has reported that the number of adults with access to a bank account, either through a traditional financial institute or mobile device, has grown by 700 million between 2011 and 2014.
These changes are resulting in a huge shift in the way that people interact with their money: lending, borrowing, sharing, donating, paying and getting paid. Gone are the days of paper cheque books and cash-only payments; now we’re in a digital-first world where, essentially, money lives online. Mobile technology is making money more accessible and has led to a democratisation of the banking process.
This is especially true when it comes to how money is moved around the world. In the remittance sector the new ‘Fintech’ players are driving lower prices, greater accessibility, more convenience and putting customers back in control. In turn, that’s breaking down the financial barriers between countries, shifting value from large institutions to customers and breathing new life into developing and emerging economies.
But while we’ve come a long way, we’re only on the cusp and I predict that the next ten years we’ll see the payments and in particular the remittance industry change beyond all recognition.
Here’s how I see it all playing out by 2025:
• R.I.P. Offline: Money transfer stores will all but disappear from the high street, with 90% of remittance senders in Europe and USA using a smartphone to send money abroad
• UK will become a cashless society: There’s no doubt the UK is moving towards a cashless society (our Scandinavian neighbours are already a lot closer to this than us) and the next decade will see us move away from physical money as the options to pay digitally become more widespread. For the first time, digital payments over took cash (52% digital vs 48% cash) this year according to The Payments Council. This figure will only rise with the incoming generation of digitally native millennial consumers and new technologies like Zapp, ApplePay and AndroidPay offering new ways to turn your phone into a payment device.
• Mobile Wallets will become ubiquitous: Nearly two billion more people will have smartphone-centric mobile wallets in Africa and Asia putting them financially on grid. However cash will not disappear. Users will still be need to be able to freely cash-in and cash-out and I predict over 50% of remittance will still be sent to cash.
• Social-first money transfers: Sending money will be fully integrated with messaging and chat (FB messenger, WhatsApp, Viber, WeChat, Hangouts etc). Sometimes those services will be native, sometimes they will be offered using third parties.
• Instant everything: The always-on consumers emerging today will not accept anything less than ‘instant’ in 2025: three to five-day delivery timescales just won’t cut it anymore. Speed matters especially when it comes to money. It’s already forced companies to reinvent their business models and those that fail to adapt won’t survive the next ten years.
• Blockchain technology will rapidly change the remittance backend: Blockchain and distributed general ledgers will go mainstream but only for corporate and institutional users as a means to speed up international delivery of funds in place of services like SWIFT. However, mainstream consumer adoption of crypto currencies like bitcoin won’t happen – the regulators won’t let it.
• Consolidation: The rising tide of regulation and high step costs of technology will mean that the money transfer market will continue to consolidate. We’ll see mega-mergers of the traditional players (like the rumored Western Union/Moneygram tie up) as well as more high profile acquisitions of digital businesses (like the recent Xoom / PayPal deal).
• Expect much more investment, led by the UK: Last year, Fintech startups attracted $12 billion of investment, a massive rise on the $3 billion raised in 2013. This will continue to grow in coming years as London continues to lead the Fintech wave. From challenger banks like Tandem to payments platforms like The Currency Cloud, London has managed to carve out a niche in international money transfers, digital currencies and peer-to-peer lending. We’re lucky in London that we have a proximity to a talented European workforce who are keen to work in the capital, but it is also encouraging that we’re now investing in tech education to ensure we stay ahead of the curve in the next few years.
I’m optimistic about the next ten years as the plummeting cost of digital business building and slow speed of change of traditional banks has opened the door for new business models. There’s no shortage of challenges, but we’re at a tipping point where, collectively, we’re striving for change in an industry that that will promote financial inclusion and bring consumers more choice.
By Michael Kent, CEO and Founder, Azimo.