Santander launches money transfer app in UK to fend off competition from fintechs

Santander on Thursday launched a money service app in the United Kingdom that will initially be free of fees for transfers of up to 3,000 pounds ($3,740) due to the coronavirus pandemic as lenders try to fend off competition from start-ups in the payments industry.

Santander said its completely owned PagoFX, a low-cost international money transfer service, would be available via a mobile app and allow UK residents with a debit card issued by any UK bank or financial entity to send money abroad from their smartphone with low costs and using real-time foreign exchange rates.

Banks, which are already struggling to lift earnings due to low interest rates, face rising competition from tech start-ups like technology platform PayPal PYPO.L and the likes of London-based TransferWise that offer foreign exchange payments to retail and small-business customers with lower fees.

On Thursday, Santander said the service will also be rolled out to sole traders and small and medium-sized enterprises in the UK via the PagoFX website and mobile app in the near future.

Cedric Menager, the chief executive officer of PagoFX, told Reuters in phone interview that the plan was “to expand in key markets in Europe this year and then within three or four years we plan to be in more than 20 countries.”

According to a report by professional services firm Accenture from September, banks are set to miss out on as much as $280 billion in revenue from their payments operations by 2025, as new start-ups muscle in.

Menager, who did not give any short or mid-term goals, said that given the coronavirus outbreak we “felt it was even more important to have a proposal like this to send money at the lowest cost.”

Until 16 June 2020, PagoFX will waive international money transfer fees on transactions up to a limit of 3,000 British pounds per user, Santander said in its statement.

Above that limit, it would charge fees of between 0.70% and 0.80%.

Santander said this new service was part of its digital transformation outlined in 2019, which envisages investments of over 20 billion euros ($21.72 billion) in technology over the next four years.