The money transfer world is getting more competitive by the minute. Not only is the landscape filled with different actors, but the time, materials, and financial resources required to stay up to date is exhausting for many people.
There are thousands of small and medium independent money transfer companies around the world. Most of them are struggling and the constant threat of closure is a very serious matter.
Here are some problems for small businesses:
• Maintenance costs for licenses
• The money you need to expand your sales and marketing activities
• It takes money and human resources to invest and keep up to date with technology
• Invest in better customer service
• Continuously increase compliance costs
• Online presence
Q1: How close or far are you from the competition?
Are you ready for the game? Are you nearby? When talking about established players like Western Union or MoneyGram, how do you stand up? What about players like Transferwise, Xoom, WorldFirst, etc.? If you’re a Level III player, it’s no secret that established players are jealous. Not only are you jealous of the players again, but you secretly despise them for lowering their prices.
We found out: you hate them! You are seriously guilty of losing your profit. The truth is, you are too scared to admit reality alone. It is with the competition that prices fall. Eventually, they will fall well below the threshold you have set for survival. This is how the industry works. Newcomers exert downward pressure. This is not a hidden secret. In fact, you already know, everyone knows. The World Bank has literally published quarter on quarter for the past decade, indicating that the costs of sending money are on the decline.
Q2: How strong and important is your presence on online social networks?
The world is moving online. If you disagree. Stop reading and go back to what you did.
I give my example of an internal study. Let’s take a market like the United States and select a specific segment, for example, Latin America. Here are the figures for the Latin American market in 2017:
• 84% of all money transfers took place in a physical offline location (non-bank)
• 6% of all money transfers are made online by NBFI (non-bank financial institutions), your MSB / MTO / MSO
• 10% of all money transfers were made by banks (online, offline, over the counter, telephone, internet banking, etc.)
Q3: How much money do you spend on online advertising and affiliate programs to acquire customers?
Sign up as a Transferwise partner and you can earn up to $ 50 for every user you refer. The TW Affiliate Program has 1,000 participants who enjoy our content on the Internet in hopes of attracting new customers. It is not a problem to pay a $ 50 transferable fee to acquire a new customer. The estimated cost of acquiring a new Western Union or MoneyGram customer is less than $ 15 per customer.
For others, they are not so happy. Economies of scale do not benefit them. They have to compete for customers. Several analysts estimate that the actual cost of acquiring a new customer via Transferwise could be as high as $ 75 per customer (if you include costs such as advertising, etc.)
Q4: How much money do you spend on front and rear technology?
Building relationships is one of the main differences between people doing business with you, but it depends a lot on technology. Technology is the most important internal distinction. Without a stack of solid technology, most money transfer operators struggle to make things work. Ask someone if the IT team is good and the answer I always hear is “My IT team is the best”. This couldn’t be further from the truth. IT teams are generally good. They are not the best. Level III simply cannot hire or maintain the best IT.
The economy just doesn’t work.
Keeping up with technological advancement literally requires a small team (read: army). Today you need information architects, API specialists, database specialists, cyber / network security specialists, full-stack developers, UI / UX specialists, and mobile application programmers. Small money transfer operators sometimes live by check after the check or struggle to save. It would be an economic nightmare that would bankrupt them and invest $ 100,000 in technology investments year after year, again and again.
Q5: How many beneficiary countries can you access while still competitive?
Most money transfer operators work at Level III and have a very specific ethnicity and geography. Some do a little more as they progress, but most Tier III MTOs know their niche. They have been working for years in their target market. As more players re-enter, they see the race threaten their runners. Furthermore, even Tier III entrepreneurs lack the time, resources, and capital to expand into other markets. I personally know suppliers who claim to work in Bangladesh and Pakistan and when I ask them why they don’t expand to India, Nepal, and Sri Lanka they tell me they don’t have the bandwidth to do so.
The same goes for Tier III suppliers serving Tanzania and Kenya. Why don’t they go to Ghana, Rwanda, and Ghana? Always the same variant of the story. It has no capital or technology to expand. It’s not that Tier III suppliers aren’t aware of collectors, but they do reason anyway and I believe collectors generally can’t offer a competitive rate to conduct business.
Q6: Are you considering expanding your license to other states and territories?
Applying for a permit is expensive when you are young. If you have enough traction and your market research supports expansion, do it anyway. The reality is that most financial services companies (MSOs) are about to expand. Getting additional licenses means you need to use more human, technology, and capital resources to achieve the goal. An option that most Tier III money transfer companies simply can’t use.
Even if it is licensed, the effects of marketing and sales need to be resolved. You quickly realize that this is a chicken and egg situation on many fronts.