International Money Transfer Operators (IMTOs) mostly use international banking network to carry out high-speed transactions. Licensed IMTOs, in their initial stages, were considered as a subsidiary of banks. However, because of multiple factors, migrants, NGOs, businesses are turning down the banks. In this blog, we will put 7 reasons why IMTOs are being preferred over international money transferring banks.
1. Alternative to High Cost and Processing Time
Banks used to levy a ridiculously high transaction fee (8-10%) for international transactions and also, take a week to send money to Nigeria from USA.
But banks are not the only option to make international transactions anymore.
2. IMTOs Provide More Personalized Experience
Since IMTOs cater to a very limited audience, as compared to banks, they can easily make considerable changes in their operations. Banks, being process-oriented organizations, are more likely to follow a specific protocol and are adamant to any drastic changes.
So, basically, it is the difference between a traditional legacy and innovation.
Right from improving the mobile experience to timely tweaking the platform, and giving better customer support, IMTOs have the capacity to use their innovative ideas and strategies to overcome the incumbency. Actively participating in reforms and giving value to customer feedback allows IMTOs to explore the market. They are overcoming the traditional methods by proving them as tangible differentiators to become better. Consequently, the ultimate beneficiary is the customer, who can select from a pool of competitors dedicatedly trying to upgrade their game.
3. The Derisking/De-banking Blunder
Derisking pushed millions of formal transactions from a regulated environment into an opaque space. Most of the licensed IMTOs were asked by the Central Bank of Nigeria to discontinue their services which created a lot of uproar from not just the businesses but also common people. The common people stood by the side of IMTOs and the CBN then had to reform its policies.
It is evident that online money transfer scams have increased multi-fold in the past decade. And this was one of the major reasons to take such a drastic step. However, there were more side-effects than the advantages of this step.
De-risking or de-banking caused a notable ripple in the ongoing process of a global objective. Low-Income individuals from poverty-stricken nations such as Latin America and Carribean countries faced a huge blow as remittance is one of the major sources of their overall income. So, the only way is to find a solution instead of taking a drastic action like de-risking and creating more problems when there are already many.
It is, therefore, the responsibility of money transfer services to take banks and financial regulators into confidence. Both need to work in synergy to avoid such scenarios in the future.
This is where AML/CFT laws can ensure that every individual or business making an international transaction is identified and verified. This would help achieve the ultimate objective – to curb Money Laundering and Terror-funding.
4. Distrust in Banks
Underbanked individuals simply use their bank accounts to receive salaries and then transact the money all at once. On the other hand, unbanked do not own a bank account at all.
Because of the high level of corruption and political instability that keeps hovering above Nigerians, it is difficult for them to get over the past. However, IMTOs give them a ray of hope. MTOs ensure that the middlemen are cut short altogether. Additionally, if one is formally associated with an MTO by providing proper documentation, he or she can rely on the organization itself that it would safeguard his or her personal and financial interests.
Authorities and banks, in collaboration, have always been opposing the rise of IMTOs. I have thoroughly debunked their arguments in multiple blogs.
It’s not that the Government of Nigeria (GOK) and CBN are not doing their parts. In fact, CBN has claimed to bring the underbanked rate to 20%. Even this is not a very good number for a promising nation like Nigeria. However, it is, apparently, much better than 40%.
5. The Fear of Missing Out (FOMO)
The digital age has brought with it – Peace, prosperity, and convenience. However, its a shame on the part of the government as well as the MTOs that they have not been able to spread awareness of the benefits that economically and socially backward countries are missing out on.
Because of the internet boom, it is not easy for even poorest societies of the world to stay completely unaware of the important discussions, especially the ones affecting them. Still, this section of the population deserves to get the information. Banks and government institutions have got a long way to go to earn the trust of the general public.
And this benefits the IMTOs too. Overcoming the incumbency of banks, IMTOs have indeed made a mark in the remittance market. And the FOMO effect is encouraging more people to sign up for something better than what they already had. Reason being, those who have opted for this change, a majority of them, if not all, availed the benefits much more than they had expected.
6. IMTOs Focus on Details
Banks have a specific policy, i.e. to expand their horizons and audience. On the other hand, the primary objective of emerging MTOs, like FAZRemit, is to enhance their verticals.
Instead of tapping into multiple countries, FAZRemit, at present, caters to specific demographics and operated within limited remittance corridors. For all the individuals who want to transfer money from USA to Nigeria, Ghana or Kenya, the online money transmitter provides a flexible (customer-driven) yet highly secure platform.
This strategy, when implemented in the best manner, earns the trust of a specific community. In the long run, it helps emerging organizations to repeat the same feat while expanding. On the other hand, banks already have widespread connectivity and affiliation due to which most of them have similar market penetration. It could be good for business and even the stakeholders. But now, the trend is shifting.
7. Competition Among MTOs
IMTOs are constantly competing with each other. For every single international financial corridor, there are hundreds of online money transfer services. While they cut down their operational costs with the help of technology, their primary emphasis on Research and Development enables them to take a step ahead. Instead of choosing between a well-established IMTO and a bank, a customer sending money to Nigeria deserves more. He or she needs instant money transfer from USA to Nigeria at the cheapest rates with the ease of accessibility plus an assurance of high-grade financial security. This is where FAZRemit stands out of the rest.
Furthermore, an exponential increase in entrepreneurship and innovation has accelerated our progress. While some of the big names in the industry always try to set their monopoly, there are some who are different.
The virtual reality is taking over all the businesses and making them accessible to everyone instead of a specific set of people. Therefore, making an argument that in the future, all international transactions will be as convenient as opening a browser, is not a far-fetched estimation. We are on the way to make bill payment in Nigeria, and all sorts of funds transfer extremely accessible without compromising with global security. It may take time to reach that point but it’s not too far away!