Digitalization In The Money Services Industry
By Angela Cheong | While technology, including FinTech, has transformed many aspects of the way we live, there are industries that have not seen the same rapid pace of change. One example is the money services industry, a legal term used by financial regulators to describe businesses that transmit or exchange currencies, which largely operates as it did decades ago.
While the industry has known some consolidation, it is still dominated by thousands of small family-run brick-and-mortar companies, with only a single place of business. In the emerging markets especially, many of these businesses run their entire operations using paper-based record keeping and handwritten rate boards, and have no online presence.
These businesses lack the scale or knowledge to invest in technology to keep up with the changing times. Increasingly, they will have a hard time staying afloat, let alone competing with the efficient and streamlined operations of the larger and more technologically sophisticated players.
Globally, money services businesses are coming under the spotlight for compliance risk management. Regulators, who in the past focused on financial institutions that presented the highest systemic risk, have now turned their attention to smaller players.
Increasingly, stricter new requirements when conducting customer due diligence have been put in place to deal with money laundering and terrorist financing. Small businesses that cannot afford to set up a separate compliance department will have difficulty adhering to these myriad new laws.
Finally, the world is trending towards e-wallets and digital payments, as the percentage of electronic versus cash payments goes up. The digital disruption caused by new online services and FinTech will be a threat for businesses that are unable to support new modes of payment their customers demand.
The money services industry is now at a crossroads – businesses can continue with their traditional way of doing business manually, or opt for a brighter future with digitized business operations that can serve as a gateway to better efficiency, compliance and relevance. One path may lead to financial ruin, and the other, new opportunities and growth.
Short-term Solutions, Future Innovations
At 4xLabs, we develop business and technological innovations for money services businesses through a SaaS platform called Biz4x that serves as a delivery mechanism for a whole gamut of services to help our customers become more efficient, compliant and relevant.
Biz4x provides reliable market data, state-of-the-art tools to cope with ever-increasing compliance requirements, a fully audited transaction management system, and customer acquisition features. This is made available in one central console for greater convenience, ease of use, and accessibility.
Biz4x enables the digital transformation of traditional money services businesses by streamlining their daily operations through an integrated system that increases efficiency. It provides greater control and oversight over all aspects of their business with management reports such as profit and loss to monitor the health of the business.
A single sign-on allows users to conveniently access consolidated online services such as a compliance database and live market data, to make better business and pricing decisions. Often these are only available elsewhere in disparate systems. As a single point of input for rates, customer details, stock and transactions, Biz4x ensures consistency, standardizes processes and reduces errors.
Biz4x automates many of the compliance checks needed for customer due diligence that are required by regulators. The flexible system is created with best practices and a global audience in mind so it can be customised according to local regulations.
Money services businesses can set a minimum amount for triggering record keeping requirements, export regulatory reports and store customer or corporate identification documents for easy reference in a document repository.
With the compliance module, running Know Your Customer (KYC) checks on suspicious individuals or high value deals can be mandated through a process that is fully integrated into the transaction management system. The search history of these checks is automatically saved for convenient submission to the authorities.
Being on Biz4x allows money services businesses to not only keep up, but often stay ahead of the frequently changing laws of a regulatory landscape that has to adapt quickly to the challenges of new technology, such as FinTech.
Many money services businesses do not have a website. Through Biz4x, they can acquire customers globally by displaying their buy/sell rates online. As we continue to develop new features for these businesses, we are helping them to prepare for a more digital, and potentially cashless future.
One benefit to our cloud-based solution is the fact that we are able to roll out updates regularly. Once money changers are on the Biz4x platform, it serves as a gateway for them to access new innovations. In the near future, Biz4x will allow businesses to deal in cryptocurrencies and other forms of digital payments with pay in/out solutions.
The latest innovation 4xLabs is bringing to the money services industry is the world’s first wholesale marketplace for physical banknotes. Today, the vast majority of wholesale trades are performed over the telephone. The current method being used is over three decades behind the state-of-the-art technology in electronic trading markets.
The Biz4x Marketplace replaces the traditional telephone system with an electronic multi-party request-for-quote trading platform, which streamlines the process, provides transparency and eliminates inefficiencies. Individual money services businesses are able to reach a larger number of market participants hence lowering their average cost of stock.
Wholesalers – typically regional banks or large money services businesses – can service their customers at lower cost, hence improving their bottom line. Finally, all trading activity is logged in the system so regulators have a clear view of the market and reports are readily available in the event of an audit.
What The Future Holds
Ultimately, 4xLabs’ vision for the money services businesses is to democratize and bring to our larger global community access to opportunities and technological innovations that traditionally have been possible only for larger enterprises.
We will continue to develop our platform with best practices and the latest regulations in mind, so these money services businesses need only be on our platform to be compliant, and access the latest technology for greater efficiency and relevance.
While FinTech is often used to create new online communities, it can also be used to ensure traditional industries that support global economies can effectively adjust to changes in society that are wrought by technological innovation. There continues to be enormous investment in FinTech globally, however some industry sectors receive more focus and attention than others.
The fragmented money services business industry is one clear example of an often overlooked sector. However, it is clear that the traditional businesses that are threatened by FinTech, can be saved by FinTech.
Through FinTech, 4xLabs is connecting the average money services business to the greater global online community, and breathing new life into these age-old cornerstones of our travel and business economy. This levels the playing field for smaller money services businesses to compete globally and leverage innovations to ensure their future sustainability.
About The Author
Angela Cheong is the Chief Marketing Officer of 4xLabs, a FinTech based in Singapore with regional offices that develops technology and services to bring together communities of money service businesses and travellers. She has a decade of marketing experience in content, social, digital, product, corporate communications and public relations. Angela has broad international experience working with cross-functional teams in Silicon Valley, UK and the Asia-Pacific region in technology companies. She graduated with a Masters in Digital Marketing from Hult International Business School.