How Fintech Companies are Simplifying Cross-Border Remittances

According to a statement released on 07, February 2023, LeRemitt, a financial technology startup, has formed a partnership with Yes Bank to launch a cross-border platform. This platform allows micro, small, and medium enterprises (MSMEs) to carry out international transactions in major currencies, such as US dollars and euros.

According to the statement, the platform not only provides support for multiple currencies but also offers transparency, efficiency, and cost advantages for small businesses participating in worldwide trade. This makes it easier for MSMEs to access the platform.

LeRemitt - established by Jain, Mahesh Kumar Barate, and Hari Ambati, functions as a platform for cross-border remittance and provides assistance to MSMEs in sending and receiving payments, in addition to offering a range of other services.

“We are excited to introduce our cross-border platform in partnership with Yes Bank. This collaboration highlights our dedication to empowering MSMEs by providing a seamless, efficient, and cost-effective international payments solution,” Sheetal Jain, cofounder and CEO of LeRemitt, said.

Transferring money internationally does not necessarily involve being taken advantage of with excessive fees or enduring long waits for the transfers to be processed. Cross-border money transfers have become faster, more affordable, and easily accessible, all thanks to the advancements in financial technology (FinTech).

Based on the information provided by BCC Research in January 2023, it is projected that the worldwide cross-border payments industry will see an increase from $176.5 billion in 2021 to more than $238.9 billion by 2027. FinTech disruptors are propelling this expansion by utilizing digital platforms, blockchain infrastructure, and creative messaging and settlement systems to revolutionize conventional wire transfers. In this article we will look at how fintech solutions have transformed the cross-border money transfer industry.

Lower Costs & Enhanced Convenience

Financial technology applications remove the need for traditional intermediaries such as banks and agents in the outdated models of money transfers. FinTechs can provide low fees, frequently below 1% of the transferred amount, due to the absence of these additional expenses. A few global money transfer services even offer transfers with no charges. As an example, TransferWise enables transfers to more than 70 countries and charges an average fee of 0.61%.

Users can organize transfers completely online or through mobile apps on FinTech platforms, eliminating the need to visit physical branches. Furthermore, the process of transferring funds across borders is made easier through the use of smooth user interfaces, automatically filled details, and simplified onboarding.

TransferWise was the first to introduce a transfer system that allows people to send money to each other directly, avoiding the expensive fees imposed by traditional banks for international transfers. Users can effortlessly transfer money to more than 70 countries using its affordable online platform. TransferWise employs mid-market exchange rates and ensures complete openness regarding fees.

Improved Transparency

Real-time visibility into the whereabouts of funds and approximate delivery schedules are provided by sophisticated tracking dashboards. A few financial technology companies utilize blockchain technology to provide full transparency. WorldRemit, for instance, offers services for monitoring transfers and providing estimated arrival times.

WorldRemit's primary focus is to provide services to individuals who do not have access to banking services or have limited access to them, regardless of their geographical location. Its application, which is connected to mobile money services, enables recipients to receive transfers in the form of cash. Transfers can be initiated by senders with just the recipient's phone number.

Speed & Efficiency and Security & Compliance

FinTech allows for almost instantaneous or same-day transfers by utilizing digital assets and blockchain technology instead of conventional settlement systems, which typically require several days for completing transfers. Azimo is a prime illustration of how transfers are completed within an hour for numerous channels.

To enhance the security of user funds, FinTech platforms employ robust encryption, two-factor authentication, and additional security measures. They also conform to international standards of compliance. For example, Remitly employs encryption of the highest security level and retains only essential customer information.

Accessibility and inclusion & Biometrics and Identity Verification

FinTech services have an advantage over banks as they can be easily accessed by people without bank accounts through partnerships with mobile money platforms. This allows equal access for everyone to fast and affordable methods of sending money across borders. One example of WorldRemit's service is the connection it establishes with M-PESA mobile money, allowing cash pick-up even without a bank account.

Cross-border money transfers are being transformed by FinTech innovators who are utilizing advanced technologies. The revolution in global payments is being propelled by innovative technologies such as blockchain, artificial intelligence (AI), and biometrics.

“Financial institutions must go beyond the traditional mobile/online payments and digital marketing-related activities to truly digitize their back-end platforms using robotic process automation and other generative AI techniques. Socially responsible approaches are increasingly table stakes in the design of financial services products,” says Ram B. Ramachandran, Professor and Vice Dean, O.P. Jindal Global University.

“Financial services products themselves have been commoditized and the next few years will see trends towards ‘invisible banking', open banking and decentralized finance. Integration of nonfinancial platforms like Amazon, Google and Apple can truly help scale financial inclusion as well as modernize the financial infrastructure,” he adds.

Blockchain & Cryptocurrencies and AI & ML

The transparent, secure, and nearly instant cross border transactions are made possible through the use of blockchain's distributed ledger technology. Major money transfer companies are incorporating blockchain protocols such as Ripple in order to carry out instant financial transactions. Bitcoin and other cryptocurrencies are enabling low-fee global peer-to-peer transfers.

Automated identity verifications, transaction tracking, and personalized recommendations are enhancing the convenience of cross border fund transfers through the use of AI tools. Machine learning algorithms additionally identify fraudulent activities and guarantee conformity to regulations.

How successfully FinTech innovators cater to customer needs will determine the future progress and trajectory of the cross-border money transfer industry. With the increasing demand for effortless digital encounters, the dominance in the future will be held by platforms that prioritize putting users at the center of their attention.