Is there money to be made in the money transfer business? Yes, but that is a cautious yes.
Hello. My name is Faisal Khan. I am a banking and a payment consultant. I get many calls where people ask me ‘Is there money to be made in the money transfer world?’.
Well. Considering that there are about anywhere between 12 and 16 thousand, some even say 18,000 money transfer operators in the world, surely there have to be making money. Surely, they cannot be in a business where there is no money being made. What they’re not doing is not making very easy money. It is tough these days. Because of all the banking regulations, the de risking, the anti money laundering, the counter-terrorism actions and so forth. It is very, very difficult to make money because the compliance costs are very high. Your legal costs are very high, your network costs are very high, your software, you know, identity management costs are extremely high. But it’s difficult, but its not that they’re not making money.
The ones who are not investing in technology, they’re losing out. They are slowly and slowly going from the black into the red. The ones who have pushed out into a larger network, who have done better as far as alliances are concerned, who have extended their reach and beyond a single market, are reaping the benefits and economies of scales are kicking in for them and are taking advantage of, you know, having access to multiple markets with very little investments and there is money to be made. It’s difficult no doubt but the money is there.
On an average, people make, I don’t know, half a percent or 1 percent or sometimes one and a half percent on a transaction in a particular corridor. On a yearly basis, if you’re making a percent that’s a 12 percent return, on a half a percent 6 percent return, on a percent and a half it’s 18 percent return. So there are healthy margins in the, in the industry no doubt. But it is getting difficult. But there’s money to be made. So if anyone tells you that there’s no money to be made that you’ll be going at a loss etc. I would beg to differ because like I said between 12 and 18 thousand money transfer operators working in the world today. A 630 billion dollar industry – someone is pocketing some.
I hope I was able to explain the concept. Till next time, have a good one.
This page was last updated on December 10, 2019.