Why Fintechs are championing transparency in payments
Hardik Shah – Group Head of Product, Currencies Direct
With the European Union recently publishing new regulations relating to online and card providers being clear on the total cost of sending money in the EU, discussions about transparency in the international payments process have never been more timely.
Transparency in payments is a key consideration in a number of areas. We now have full, up-to-the-minute sight of the funds in our bank accounts and the domestic payments process, but this doesn’t translate to the international payments forum. Lack of clarity persists in area such as the fees charged by providers, the choice of providers and their offerings, as well as the tracking of payments end-to-end. Consumers deserve visibility in these areas.
For many, transparency in international payments has come to mean transparency around fees, with considerations around practice among providers and tracking payments taking a backseat. This focus on fees is justified, but legacy issues mean that the payments industry has fallen behind when considering the bigger picture. This is where the focus now needs to be.
So where are we now? What needs to be done to further improve payment clarity? And why do the smaller disrupters in the industry stand to lead the way?
The fight against hidden fees
While the new EU regulations are a welcome step, so far they only cover online providers and are limited to intra-EU payments.
Unfortunately, this will do little to curtail the activity of traditional banks, who are often the most egregious offenders when it comes to hidden fees and costs – something that continues to erode overall consumer confidence in the entire payments industry.
Many Fintech firms have made strides towards increasing visibility around the payments process, but there are still a few outliers who are not entirely upfront about their services and associated costs. With that said, the trend around transparency is increasingly gaining ground, with customers demanding higher levels of visibility. Those organisations that persist in trying to sweep their fees under the rug risk being left behind.
The importance of transparency
Today’s consumers are savvy when it comes to their money and are increasingly conscious of financial firms trying to pull the wool over their eyes with hidden fees. And with increasing numbers of new, agile, tech-based solutions from small Fintech challengers, it’s now easier than ever for customers to find the best deal at the right price. Put simply, the big banks no longer have a monopoly on transfers.
Transparency is also about choice and here the power is increasingly on the consumers’ side, with many turning to market comparison sites to get a clear rundown of what a firm is offering and how it stacks up against the competition in order to get the best value for money.
In the payment industry, transparency also involves offering greater visibility regarding payment timeframes, as well as detailing the route a customer’s money will take during the payment journey. Providing sight of when and how a payment will be processed is increasingly in line with customer’s expectations. This includes notifying customers at key steps in the payment process, including when a client’s money is received and when it reaches a beneficiary’s account.
Think of it this way – these days it’s possible to order a pizza and track it every step of the way, from preparation to delivery. Customers are increasingly beginning to expect this level of detail as a matter of course, and the payments industry is no exception.
How is the industry tackling its transparency problem?
Without a doubt, Fintechs are leading the charge when it comes to championing transparency. As a rule, these smaller organisations are more agile and can rapidly build and deliver new technology to provide a better customer experience in all aspects of the payments process. Larger banks, by contrast, have to contend with the challenge of aligning far more moving parts before development of a new solution can even be conceptualised. Despite the resources at banks’ disposal, Fintechs often beat them to the punch when it comes to bringing these solutions to market.
The digitization of the financial services industry brings with it a range of tech innovations that are helping this process, with AI integration, improved data analysis and blockchain developments all playing a role in improving visibility. This process is ongoing, with the potential applications of some cutting-edge tech still being identified. Suffice to say that the impact of tech like blockchain and AI stands to have a seismic impact on the payments process over the coming years, with the first steps being made in areas which could ultimately change the face of the payments industry.
One such example is Currencies Direct’s trial with Ripple whose xCurrent payment protocol allows end users to track their payments at every stage of a transfer, providing unparalleled visibility of the payment.
Developments like this are the future of international payments and demonstrate how cutting-edge technology can greatly improve the customer experience. However, there is plenty more work to be done to maximise visibility in the payments industry. The challenge now is for the entire industry – including both large and small players – to work collaboratively to change for the better. Until then, the transparency that customers need and deserve will remain a theoretical dream.
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