When was the last time you bought something with physical cash or wrote out a cheque? In fact, how often do you even have to do transactions on your laptop rather than your phone? When did you last have a one-on-one appointment with your insurance broker? Pick any area of finance and you’ll likely find similarly big changes over the past couple of decades.
The technology driving those changes is broadly referred to as fintech (a portmanteau of “financial technology”). While the term is older than most people imagine, dating as far back as 1967, it only really hit public consciousness in the 2010s. That’s not an accident, either. It was around that time that fintech startups started coming into their own and directly taking on banks and other traditional finance providers.
Since then, many fintechs have gone from upstarts to household names and indispensable tools. Internationally, apps like Revolut, Monzo, and CashApp have changed the payments and transaction space, while the likes of Robinhood and Acorn have transformed savings and investments. Locally, Yoco and Snapscan have led the way in empowering tens of thousands of small businesses, while Naked and Pineapple have breathed fresh life into the insurance industry. But what is fintech’s next big frontier? According to Future Forex CEO Harry Scherzer, there’s a strong case for it being international money transfers.
“What fintechs have done in other sectors shows what’s possible in the international money transfer space,” says Scherzer. “While considerable progress has been made in sending small remittance amounts across international borders, there is still significant room for improvement when it comes to the experiences of businesses and individuals moving large sums of money internationally via traditional avenues.”
According to Future Forex’s CEO, most people and businesses tend to use their banks to make international payments. He cautions, however, that several pitfalls come with doing so.
“Unless you’re a large corporate or enterprise-scale business, chances are your bank doesn’t care much about your international money transfer needs,” he says. “In part, that’s why so many of the processes involved with these transactions are manual or outdated. The banks feel like they have a captive audience, and so they aren’t in any rush to evolve their offerings. It may also explain why they don’t put a lot of effort into customer experience on these kinds of transactions.”
According to Scherzer, this sense of a captive customer base, along with a general lack of customer education, also explains why banks aren’t transparent with the fees they charge on international transactions.
“As a result of that lack of pricing transparency, customers can end up paying far more on each transaction than they should,” he says. “For their part, the banks are more than happy to take the additional profit.”
It’s an attitude which played a large part in Scherzer's decision to co-found Future Forex with his Chief Technology Officer (CTO) Josh Kotlowitz.
“We realised that with a simple combination of transparent fees, automated processes, and excellent customer experience, we would significantly beat the banks’ offerings,” Scherzer says. “Of course, we knew we couldn’t just build a product and hope customers would come. That’s why we’ve also always emphasised customer education. People and businesses need to know that they’re not getting the best possible deal from their bank and that there are other options available to them.”
While Future Forex has respect for its international counterparts, Scherzer is proud that the company is built and rooted in South Africa.
“South Africa is home to some of the most incredible finance and technical knowledge in the world,” he says. “The people with that knowledge increasingly have global experience too, allowing them to compete with highly sophisticated international offerings. Small wonder then that several local fintechs have won international awards.”
He’s also not afraid of the increased competition that’s likely coming to the international money transfer space.
“The more competitive the space is, the better we’ll all be forced to innovate further,” he says. “And while banks may have enormous resources at their disposal should they choose to turn around their international money transfer products, they don’t have anything like the agility those of us in the fintech space have. As such, we’re well positioned to stay one step ahead of them.”
Ultimately, Scherzer says, the goal is for people to be able to transfer money internationally as quickly and easily as they can now make investments and pay for goods and services.
“The international money transfer space is on the cusp of major transformation,” he says. “And as has been the case with so many other areas in the financial services sector, fintechs will be at the forefront of that transition.”
PERSONAL FINANCE