As the world becomes a truly international economy, both companies and individual workers are increasingly looking to move money to different companies. When doing so they have many options, each with their pros and cons, Peter Shore said.
Mr. Shore is the US general manager for Transpay, a global payments service providing businesses with a scalable, secure, and fully compliant cross-border mass payout solution, making it easy to send funds directly to the local bank accounts of vendors, business partners, freelancers and others in more than 200 countries.
Given the number of different payment methods and the different laws in each country, it takes work to provide options that are both convenient and fully compliant, Mr. Shore said. Transfer payments, bank wires, cash disbursement, prepaid, e-wallets, cheques, money transfers…what option is best in any situation?
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“The goal of payouts from a company perspective is to make it quick and cost effective for both the company and recipient to send money anywhere they need to,” Mr. Shore said.
And don’t try to shoehorn all customers into accepting your favorite method because in today’s climate it is all about choice, he added. So break down each method, which solves the same issue in its own way, he advised.
SWIFT wire transfers are one of the oldest methods, with high volume processed across a widely recognized global network. The messaging is strong and it’s a known entity with familiar procedures.
But it has its warts. Transfer times can be much slower than more modern methods, and the cost higher as every intermediary along the way takes a cut. The initiating bank also loses brand visibility.
Then there is the influence of in-country clearing houses with policies and procedures that can make processing times and total fees a guessing game.
Mr. Shore said an interesting challenge for his industry is in finding effective methods for the growing number of gig workers in emerging markets to receive pay from different parts of the world. In some cases the sums are small by North American standards, so paying a fee at multiple stops makes no sense.
“You’re dealing with difficult markets to get payments to,” Mr. Shore said.
This growth in the gig economy is happening as many banks are de-risking by leaving markets entirely or limiting their offerings.
Prepaid options where value can be stored have been around for a while and their effectiveness depends on your viewpoint, Mr. Shore said. If a company is paying into a prepaid wallet, there’s near real-time settlement in American currency which recipients in countries with volatile currencies like. They can spend the money soon after receipt. On the negative side consumers have no visibility into the process until the very end. Governments need to be wary of people using the prepaid cards to avoid taxes.
Money transfer services have good and bad aspects, Mr. Shore said. The money can be almost immediately available and get cash to the unbanked. On the other side vendor reach is unpredictable, several fees are attached throughout the process, and there is little transparency.
E-wallets bring a sense of security because no private information is passed, Mr. Shore said. A middle company manages the accounts so that simplifies the process for the two end parties.
“To me it’s a tech play that allows safety and security for the two companies if they don’t want to be engaged,” Mr. Shore said.
But there are points to be mindful of, Mr. Shore cautioned. The funds are essentially trapped until withdrawals are initiated, leaving transaction costs unknown until the end. There are also huge security concerns as wallet companies are not regulated like banks are and their compliance responsibilities are still unknown.
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