EditorSpeak: Money Transfers and Web 2.0

EditorSpeak: Money Transfers and Web 2.0

The question every money transfer operator or bank wants answered is: where is the future of the money transfer industry headed? For the medium term, there are many potentially right answers and one of them just may be Web 2.0. Lending, borrowing and sending money is becoming a reality on the web, with social networking sites such as Facebook, virtual communities like Second Life and services like blogs making it possible. Traditional or brick-and-mortar banks are also taking advantage of the technology in order to attract a new, young customer base.

While many web services are keen to develop into online banks to garner revenue from the lucrative money transfer business, traditional banks are investing in Web 2.0 services in order to remain competitive and leverage a huge customer base. Interestingly, there are reports that US banks Wells Fargo and Chase operate blogs to offer loans and financial aid to students; ABNAmro and Danish bank Saxo have virtual branches on Second Life; and the use of podcasts or RSS news feeds for bank customers is common.

On the flip side, social networking mammoth Facebook is leveraging its 70 million-strong subscriber base to facilitate money transfers. PayPal has launched money transfers via Facebook, as have several application providers. Also, a credit card called Revolution Money provides money transfers between Facebook members. Another idea creating buzz has been specialised lending sites for user-to-user borrowing such as Prosper and Zopa. While these services are cutting edge, there are serious issues to consider such as appropriate risk management and eventually, compliance. A payment provider will need a dedicated team of experts to look at security management issues. Appropriate levels of compliance will be required because where there are money transfers, regulation will come in.

Reports claim that over 180 million people spend an hour a day or more on Web 2.0 sites in the US alone. While these sites may have a readymade customer base for the service, adoption will probably be contingent on a trusted brand name from the banking service industry. They will need the experience and management expertise of established players in the money transfer arena. The way forward may be more partnerships with the websites providing a critical mass of subscribers and the MTOs drawing in the customers and managing the backend operations of the actual remittances.