How Will Money Transfer Look Like In 5 Years Time?

In 2012, I answered a question on Quora, How will money transferring between countries look in five years? I did not edit or touch the answer in any manner for five years. Well, now that the 5 years are up and over with, let’s do a check on where I was right and where I was wrong on my predictions?

My answer can be viewed here, pasted below in Blue.

  • TRANSACTION & SETTLEMENT TIMES: The biggest change you would see is the ability to make the end-to-end transaction as near to real-time as possible for the two parties between which money is being remitted. The second factor is the near real-time settlement between the two financial institutions that were doing the remittance (i.e. Sender’s Bank and Beneficiary’s Bank).

VERDICT: Did not happen fully. Whilst transaction and settlement times have certainly improved, they are nowhere in real-time. That change is coming with all the new provider like Stellar, Ripple, SWIFT GPI, etc. that will enable real-time settlement, but the adoption has a long way to go.

  • ANTI-MONEY LAUNDERING: Money laundering would be more difficult (as more correlated reporting and systems integration of various financial institutions will make it so)

VERDICT: Predicted correctly. Laundering money today is extremely difficult within the confines of the regular fiat world.

  • KNOW YOUR CUSTOMER: The KYC would be inherently more advance. By more advanced, I imply that the KYC system would be able to tap into periphery system to verify what as already been submitted. Eg: A credit card KYC may query your bank account for address verification/name match.

VERDICT: Predicted correctly, but not there yet, so this is half-fulfilled. Open APIs are making it possible for KYC to be cross-examined and for it to be passported, but the world has a lot of catching up to do.

  • MOBILE: Money would be more mobile than it is today, and you guessed it – it would reside in/on your phone. Your phone would be in some crude sense a financial instrument. Expect to see a sharp rise in QR Codes. No more lengthy forms to fill out for money transfer/payments.

VERDICT: Predicted correctly. Mobile phones are ruling the world as far as interaction, mobility and payments are concerned..

  • SUSPICIOUS ACTIVITY REPORTING: SAR checks are currently performed in the US and in different countries (under various different nomenclature/taxonomy). To nib the money laundering bud, and to better have a more accurate visibility on suspicious transactions, it is my belief that SAR checks (albeit performed) would most likely also be cross-referenced across the border.

VERDICT: Partially correct. Whilst checks are done against lists, etc. countries still do not effectively share the data with one another for various reasons, security, reciprocity, local laws, privacy claims, etc. However, with FAFT in the equation, this is improving.

  • FINANCIAL ROUTERS/ROUTING: More companies will prop up providing financial routing services. Take money from your PayPal and credit it to your ATM card. Take money from ATM card to credit to your Visa card, Take money from your Bank and credit the money to Micro-Wallet payment company. For example, if you want to transfer money from your Prepaid VISA card to PayPal (and they are not connected), you will be able to do so. Or if you are traveling overseas and you buy a Deutsche Telekom SIM card (that does payments as well) and you want to transfer $50 to it from your Bank, you will be able to do so.

VERDICT: Predicted correctly. Today, quite a few companies are becoming liquidity providers and allow you to swap your asset or value from one network to another for a fee.

  • MONEY EXCHANGE COMPANIES: You traditional money exchange companies with walk-in customers will eventually consolidate and business for walk-in clients will diminish drastically.

VERDICT: Predicted incorrectly. The walk-in business still rules by far. Approximately 84% of the money transfers being done are vi walk-in clients, 6% via non-banking financial institutions (MNOs, MTOs) who are online only and remaining by licensed Banks (which includes both online & offline).

  • INTERNATIONAL PAYMENTS (CROSS-BORDER): International payments would become much more easier (as KYC, AML check would be a whole lot better). The Person-to-Person element would become more common and speedier, economical and reliable.

VERDICT: Predicted correctly.

  • EXCHANGE RATE: You would get a whole lot more competitive exchange rate on your international transactions (I believe less than 1% exchange parity between Interbank and Open-Market rate).

VERDICT: Predicted correctly.

  • MICRO-PAYMENTS: Yes, the world will finally have a micropayment setup. One that allows micro-payments in multiple currencies.

VERDICT: Predicted correctly (partially), however, micropayments still have a long way to go. Long, long way to go.

  • VIRTUAL CURRENCIES / CREDITS: More and more companies will start to offer exchange and settlement of virtual currencies and credits that may be specific to a social network, gaming network, etc. Even Bitcoins. This could also be part and parcel of the Financial Routers.

VERDICT: Predicted correctly.


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