Are services like P2PCash or Abra close to disrupting the international remittance market?
Cross-Border Payments
Asked by Question Bot03/Oct/20161 answer
1 Answer
F
Faisal Khan
Answered 03/Oct/2016
I cannot stress this enough, nothing is free. Just because it says it is free, does not mean it is. What an average user probably cannot see or decipher is how a company may be making money somewhere in the transaction value chain.
Some companies introduce a promotional time regime where they will subsidize the cost of the transaction, because it is cheaper that way to acquire a customer versus say traditional customer acquisition methods. But that would be time limited. For sure.
Facebook's payments are not free. They are onboarding clients. Once enough clients have been on-boarded they will spend money at merchants, and this is where Facebook Payments will make money. Brian Roemmele has already covered this in:
Payments within the same ecosystem can very easily be made free, as it is nothing more than a container movement of record. Quite a few companies offer international remittances for $0 fees, and equally no fees charges on the receiving end, but this also means, that money has to be made somewhere, and that somewhere is the Foreign Exchange Rate (FX). So if one company says, it is $0 to send, rest assured, they are making money on FX, which implies the FX rate is not the very best.
The free-send model was started in Pakistan and is the basis of perhaps 25%-to-30% of all remittances coming in. (See: Faisal Khan's answer to What does "free send model" in remittance/money transfer imply?)
P2PCash nor Abra are not disrupting the international remittance market. The free-send model, the pre-fund instant model, the 3-day settlement-instant pay model, etc. all have been there for a while now. Its just that companies are trying to repackage the same with different payment rails, marketing or payment routes.
The real-disruption will come when crypto currencies etc. are legalized in the all the countries/territories through which they traverse.
The ability to do value transfer does have it advantages, but the opposing force is licensing and legal reforms.
Some companies introduce a promotional time regime where they will subsidize the cost of the transaction, because it is cheaper that way to acquire a customer versus say traditional customer acquisition methods. But that would be time limited. For sure.
Facebook's payments are not free. They are onboarding clients. Once enough clients have been on-boarded they will spend money at merchants, and this is where Facebook Payments will make money. Brian Roemmele has already covered this in:
- Brian Roemmele's answer to How can Facebook Messenger payments be free?
- How Facebook Payments Will Become A Micro-Merchant Payment System And Change Everything.
Payments within the same ecosystem can very easily be made free, as it is nothing more than a container movement of record. Quite a few companies offer international remittances for $0 fees, and equally no fees charges on the receiving end, but this also means, that money has to be made somewhere, and that somewhere is the Foreign Exchange Rate (FX). So if one company says, it is $0 to send, rest assured, they are making money on FX, which implies the FX rate is not the very best.
The free-send model was started in Pakistan and is the basis of perhaps 25%-to-30% of all remittances coming in. (See: Faisal Khan's answer to What does "free send model" in remittance/money transfer imply?)
P2PCash nor Abra are not disrupting the international remittance market. The free-send model, the pre-fund instant model, the 3-day settlement-instant pay model, etc. all have been there for a while now. Its just that companies are trying to repackage the same with different payment rails, marketing or payment routes.
The real-disruption will come when crypto currencies etc. are legalized in the all the countries/territories through which they traverse.
The ability to do value transfer does have it advantages, but the opposing force is licensing and legal reforms.