Sometimes you just can’t get enough of Donald Trump. No matter where you go, Trump it is! In your email, on your Facebook, on LinkedIn, especially by people who confuse LinkedIn with Facebook, on Twitter, on Instagram, on your daily news feeds, he’s everywhere! (Sorry Donald, I had to cite you as an example).
In many instances, I feel the same way when I hear about the word disruption. It seems it would be fintech unbecoming if you’re not disrupting something, especially within the payment country.
Of the 100s of founders and co-founders I have talked to, the theme is the same. Disruption: If you’re not going to disrupt, you’re not going to make it is the popular opinion.
The Fragmented World of Payments
On a serious note, if everyone is out to disrupt, the universe will remain disturbed. If we were to imagine the payments world of today as equivalent to say email, you will quickly discover the banking & payments world we live in today is a very disjointed.
Consider the following ten scenarios (juxtaposing both examples):
Regulatory Restrictions on Geography
I’m not sure if I can even send you an email – No route.
Not sure if I can send you money from my city/country to your city/country
Cost of Transaction
If I do send you an email, most of the time I am not sure how much data will be shaved off (truncated) from the message?
I’m not sure how much it will cost me to send money to you – its not clear.
Currency Conversions or Forex Restrictions
If I send you an email in Chinese will you receive it in Chinese or English?
I’m note sure when I send you Chinese Renminbi, will you receive Renminbi or US Dollars at your end?
Delivery Times are Uncertain
I’m not sure how long it takes for you to receive my email?
I’m not sure if I send you the money on Monday 10:00 AM my time, I am not sure when you will get it?
Lack of an International (Open) Standard for Moving Money
Simply Mail Transport Protocol (SMTP) is what I use to send emails
What protocol do I use if I have to send you money? I’m not sure!
Universal Addressing Mechanism
What’s your email address? Okay, got it! Sending email now.
What is your bank / mobile wallet information? Why don’t you have a SWIFT Code? What does “for further credit to” means? Why is there a correspondent account?
Email Read Receipt.
Received your money!
I’m sending email from Lotus Notes to your GMail
I’m sending money from my app/bank to your app/bank
KYC (Know Your Customer) & Lack of Worldwide KYC Standards
Let me instant message you on WhatsApp or Facebook Messenger
I know who you are so let me send you money
Anti-Money Laundering Controls
My service provider has some really good spam and messaging filters and rDNS checks, but sometimes mail may get stuck in one of these
I’m sending you money, the bank will do all the necessary OFAC and others regulatory checks to ensure the transaction is genuine
Embarking on a journey to stitch together fragmented payment systems, seems to make more sense. There are plenty of opportunities (and business cases) to get into the game of becoming what I would call, a financial router, being able to take payments from one entity/country and being able to seamlessly route it to another entity/country. Nomenclature notwithstanding, the gateway functionality in payments has a lot of catching up to do.
Most fintech startups are hell-bent (if you will) on pushing their own global or regional solution, which brings us back to square one, who will stitch your solution together with the rest of the fragmented payment systems and networks?
To cite three examples…
- There is no way a PayPal payment can land on a bKash wallet in Bangladesh.
- There is no way Boleto payments can be loaded on to a debit card in Philippines.
- There is no way for a Dwolla payment to go to Venmo – seamlessly.
These kind of interoperable transactions are missing from the greater ecosystem and perhaps would represent a missed opportunity in the billions (of Dollars, or your currency of choice).
Paying attention and developing collaborative payment solutions that bridge the gaps, is somehow not gaining traction. The problem has been there for many years, yet no one is willing to bridge the demand and supply side of things.