Revolutionising Money Remittance: The Power of Open Banking

From compliance to customer experience, see how open banking drives efficiency and reduces costs
From compliance to customer experience, see how open banking drives efficiency and reduces costs
April 12, 2024
5 min read

How Open Banking Benefits Money Cross-Border Payments

The financial landscape for currency exchange brokers and money remittance companies is full of obstacles that make it harder to work efficiently and keep customer satisfaction. 

From complex transaction processes to the exorbitant costs of traditional payment methods, these sectors urgently required a transformative solution. 

Open banking is transforming the money remittance industry, making it speedier, more economical, and more efficient.

Difficulties Faced by Currency Exchange and Money Transfer Companies

  • Payment Processing:

Processing international payments is complex and time-consuming due to incomplete information and fraud screenings like AML checks. Manual checks further delay transactions

  • Lack of Transparency:

Parties lack real-time transaction updates, hindering data analysis and impacting customer experience.

  • Legal and Tax Issues:

Differing interpretations of contracts and taxation laws across countries lead to legal and tax complexities, increasing transaction fees.

  • Compliance:

Numerous compliance checks can be time consuming and may vary across payment gateways and banks, leading to transaction declines.

  • Data Protection:

Global data protection regulations vary, these may impact transaction approvals and attracting penalties for non-compliance.

  • Security Concerns:

Varying security protocols among parties increase the risk of data breaches and monetary losses.

  • Operational Systems:

Legacy systems cause settlement delays and lack real-time tracking as well.

  • Fees and Exchange Rates:

Multiple fees including SWIFT messaging and currency conversion fees escalate transaction costs.

Currency Exchange Brokers: Seeking a Superior Experience

FX brokers face significant barriers in funding transactions. Relying on manual bank transfers not only complicates payments but also introduces delays and errors, impacting trade execution and operational efficiency. 

This outdated approach urgently needed a shift towards more streamlined solutions.

Money Remittance Companies: Escaping Card Charges

Meanwhile, money remittance companies struggle with the financial burden of card payment charges. 

These expenses, combined with security risks and the inconvenience of manual data entry, underscore the need for a more cost-effective and user-friendly payment alternative. 

According to the World Bank, the average cost of sending remittances is 6.20% of the amount sent. 

Sending remittances through banks incurs higher costs than through digital channels or money transfer services, making an alternative option appealing.

Open Banking and Cross-Border Payments

The challenges faced by both sectors (FX and money remittance) highlight the need for innovation. 

Open banking emerges as a promising solution, offering an improved user experience, significantly reducing operational costs and improving onboarding experience making it way faster. 

You can picture it this way:

Sending money across borders becomes as effortless as sending an email. Open banking APIs (Application Programming Interfaces) enable direct A2A Payments, eliminating costly bank intermediaries. Picture quicker settlements and more satisfied customers.

Compliance becomes seamless. Open Banking APIs seamlessly integrate with existing KYC/AML systems, automating checks and simplifying onboarding processes, freeing you from manual paperwork and regulatory hurdles allowing one-click verification for users.

Beyond traditional banking, innovation is booming. Open APIs foster a vibrant ecosystem of financial businesses collaborating to enhance your digital banking platform with fresh ideas and agile solutions, catering to diverse customer needs.

Understanding Open Banking and Its Advantages for money remittance

Open banking breaks down traditional banking barriers by enabling third-party financial service providers to access a customer’s bank account data or initiate payments from their account, all through secure APIs. 

This data-sharing ecosystem has spurred innovation, offering increased transparency, competition, and choice to consumers, ultimately fostering a more customer-centric financial landscape. 

The global value of open banking transactions hit £43 billion in 2023, with a significant rise anticipated in the coming years.

Open Banking is the new way for consumers to pay. 

Customers pay by secure bank transfer, sending funds directly from their bank account to the merchant. It is fast and secure, all with no cards and no data entry, only with one click.

Enhancing the Customer Experience

Open banking-powered cross-border companies transform the customer experience into a seamless digital journey. 

Unlike traditional methods that can take days to complete, financial institutions integrating open banking can provide quicker transaction finality, thanks to intuitive interfaces and automated processes.

This improvement provides safe and faster access to funds, real-time updates on transfers, and even personalised advice based on unique circumstances. 

As customers demand more tailored experiences, open banking’s capabilities align seamlessly with these expectations, enhancing loyalty and satisfaction.

Driving Efficiency and Reducing Costs

One of the most notable benefits of open banking is the potential for cost reduction. Traditional processes are often burdened with additional fees and manual workloads prone to errors. 

By embracing this new possibility, financial institutions can automate processes, significantly cutting costs. Experts estimate that up to 60% of money remittance costs can be slashed through open banking-powered solutions.

Utilising Data for User Verification 

In the age of data, open banking unlocks access to permissioned financial data, enabling financial institutions to gain a deeper understanding of customers’ economic behaviours and needs.

This insight translates into a more personalised customer experience, fostering loyalty and revenue growth.

But that’s not all, that also enables One-click user verification, which leverages the power of open banking, collecting key data points with a single click from users, easily meeting regulations by verifying user details and source of wealth efficiently.

Ready to Use the Power of Open Banking-Powered Cross-Border Payments?

Open banking is reshaping the way we conduct financial transactions and presents an extraordinary opportunity for fintech institutions to thrive in this dynamic environment.

As you innovate in payments, we invite you to explore the full potential of open banking-powered money remittance. 

Our team of experts is prepared to guide you through this transformative process, helping you enhance customer experiences, streamline operations, and stay ahead of the curve.

Let’s shape the future of finance together.

Request a meeting with our open banking experts.

Volume Payments Limited is a private limited company with company number 12431529

Volume Payments Limited, is a distributor of Modulr FS Limited, a company registered in England and Wales with company number 09897919, which is authorised and regulated by the Financial Conduct Authority as an Electronic Money Institution (Firm Reference Number: 900573) for the issuance of electronic money and payment services. Your account and related payment services are provided by Modulr FS Limited. Whilst Electronic Money products are not covered by the Financial Services Compensation Scheme (FSCS) your funds will be held in one or more segregated accounts and safeguarded in line with the Electronic Money Regulations 2011. for more information please see the Modulr safeguarding letter

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