Low-value cross-border payments refer to the monetary transactions involving relatively modest amounts sent across national borders. These transfers are usually made by migrants or individuals sending money to friends and family in their homeland. As the name implies, these transactions are worth a few dollars to a few hundred dollars. It is projected that by 2026, this segment—which includes micropayments, remittances, and P2P transfers—will be worth up to $5 trillion.
Challenges in Traditional Banks
High Costs:
Traditional banks frequently charge high fees and exchange rates for low value cross-border payments, rendering it uneconomical for individuals and small businesses.
Complex CBP System & Lengthy Transaction Times:
As the traditional banks involve several intermediaries in the fund transfer process, it can slow fund transfers and lead to errors, especially for low-value payments.
Lack of Transparency:
Traditional banks may not disclose costs, currency exchange rates, or transaction timelines, leaving payers and payee uncertain about the charges.
Accessibility and Inclusion:
Individuals and small businesses in developing economies find it difficult to access the cross-border payment operation of traditional banks owing to its costly and lengthy procedures.
Opportunities for Fintechs & MTOs
In 2020, consumer payments hit $2.1tn and are predicted to climb 6% annually. Consumer-to-business transfers, which are mainly linked with global transactions, constitute an impressive opportunity for many players such as MTOs and fintechs, amounting to $1.4 billion and are extremely important for the growth of emerging economies. Notably, many developing countries lack access to standard banking services and financial inclusion remains a challenge. Therefore, the role of banks in ensuring the security and accountability of cross-border payments cannot be overstated.
In the present scenario, technological advances are making low-value payments faster, affordable, and more transparent. For low-value cross-border payments, the international financial community must collaborate to improve present solutions and develop new ones. It is vital that we take this step towards a more inclusive global economy by addressing the challenges associated with executing these payments globally.
How MTOs and Fintech Can Address these Unbanked Customers for Low-Value Cross-Border Payments
Simplifying KYC/CDD
Risk-based approaches:
Analyse transaction patterns, device information, and alternative data to assess risk levels and implement lighter verification for low-value transactions.Mobile phone verification:
Utilise mobile phone numbers as a primary identification method, especially in regions with limited documentation.Biometric authentication:
Adopt technologies like fingerprint and facial recognition for secure and convenient identity verification.
Prioritise Speed & Affordability
Simplified onboarding:
Digital account opening and KYC verification with minimal documents.Competitive transaction fees:
Charge lower fees for money transfers, and other financial services than traditional banks and money lenders.Real-time transactions:
Offering instant fund transfers and access to financial services through mobile apps and platforms.Offline functionality:
Utilising agent networks and USSD-based platforms (Unstructured Supplementary Service Data) to guarantee service accessibility in regions with limited internet connectivity.
Cut Out the Intermediaries
Removing unnecessary players from transactions empowers direct engagement between parties. Employing blockchain and other innovative technologies can optimise transaction flow, eliminating the layers that inflate fees and slow down the process. Eliminating the intermediaries unlocks a world of faster, cheaper, and more inclusive transactions.
Leveraging Mobile and Digital Technologies
Fintech companies are developing user-friendly platforms that facilitate the transfer of small payments across international borders by utilising mobile and digital technologies. This eliminates laborious documentation, hidden charges, and lengthy waiting times.
Flexible Payment Methods
With emerging technologies, fintech can offer a range of options to customers to choose the desired payment method. Be it through mobile wallets, bank transfers, linking debit cards, or even cash-in/cash-out networks.
Transparency
Fintechs may inform the client of the fees and FX charges associated with each international money transfer prior to its execution.
Role of FinTechs in Low-value Cross-Border Payments
Leveraging the Power of Partnerships
Access to Global Payment Networks:
Fintechs can access vast global payment networks by partnering with SWIFT GO, Ripple Net. This allows them to reach a wider audience, deliver instant transactions, and offer competitive rates. This breaks down geographical barriers, making cross-border payments smooth, efficient, and convenient.Bill Payments:
Fintechs are partnering with bill payment platforms to bridge the gap for the unbanked by offering seamless integration, accessibility for all, and transparent payments. This enables people to pay for essentials like utilities, rent, or family support from their mobile phones, promoting financial inclusion and empowering unbanked communities.Local Agents & Retailers:
Local agents and retailers are partnering with fintechs to offer cash-in/cash-out options for those without digital infrastructure or bank accounts. This allows them to reach remote areas and underserved communities, while also providing flexibility and trust. Also, these partnerships bridge the gap between digital innovation and traditional preferences.
Diverse Payment Tools
Swift GO:
Swift GO is an innovative service that enhances low-value cross-border transactions through the provision of a solution that is quick, predictable, secure, and priced competitively. It empowers financial institutions to offer SMBs and individuals sending money internationally a streamlined payment experience. Swift GO also offers transparency on processing fees, allowing real-time tracking of payment status. It streamlines user experience, minimises delays, and reduces processing costs, underpinning payments with the SWIFT network’s robust security.Digital Wallets:
Digital wallets are like carrying your bank in your pocket, as they offer a secure, user-friendly platform for unbanked individuals to manage their finances. They store funds safely, facilitate easy money transfers, and provide transaction records and budgeting tools, promoting financial literacy and responsible money management.Pre-paid Cards:
Prepaid cards help customers make payments without a bank account, minimum balance, or credit check. Positive credit history with prepaid cards aids in getting finance in the future. Also, through the pre-loading of a specified sum of money into the pre-paid card, adherence to the budget is ensured and reckless spending is prevented.
How NetRemit Promotes Low-Value Cross-border Payments?
NetRemit caters to the specific needs of MTOs and Fintech companies dealing with low-value cross-border payments by following means:
White-Label Solutions: Your Brand, Your Way
Branding control:
Maintain your brand identity while leveraging NetRemit’s technology.Flexibility and customisation:
Customise your platform that easily adapts to your specific requirements and preferences.Faster market entry:
Can quickly launch your cross-border payment services, as the development time is minimal.
Remittance Technology as a Service (RTaaS): Seamless CBP
Seamless Integration:
Easily integrates into your thrid party platforms for AML/KYC, foreign exchange, payment gateway, payouts and manages all the back-end activities of cross-border payments.
Reduced Costs:
No need to build and maintain remittance infrastructure and hence there are significant cost savings.
Scalability:
Designed to handle both low and high transaction volumes, allowing you to easily scale the business based on growth.
Real-time Transaction: Speed that Impresses
Instant Transactions:
Provide immediate gratification for your users, enhancing satisfaction.Competitive Edge:
Offer faster transaction speeds compared to traditional methods.Improved User Experience:
Streamline the payment process for a smoother user journey.Diverse Payment Options:
Stand to serve various user preferences with multiple payout methods.Streamlined Operations:
Manage all your cross-border payment needs through a single platform.
NetRemit’s value proposition extends beyond technology as they actively collaborate with FIs to ensure their success in the low-value cross-border payment market.
Thus, NetRemit offers a comprehensive solution for MTOs and Fintech companies to serve the unbanked and underbanked populations efficiently and effectively with fast, reliable, and convenient white-label international remittance software.
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