Looking back on 15 years of cross-border payments and Tranglo
As I sit down to pen this article, I can’t help but let my mind wander back to 2008, when Tranglo was founded and the cross-border payment industry was in its infancy.
Fintech and cross-border payments were relatively new concepts, especially in Asia. Blackberry was still the premier business phone, and Apple had just launched the 2nd gen iPhone with 3G.
Traditional financial institutions dominated the money transfer space, but fees and processing times left much to be desired. With few options and little competition, many of these bigwigs resisted change and innovation. It was a time when maintaining the status quo was more pertinent than challenging.
Alternative payment providers were emerging but lacked the scale to convince. Deprived of stable regulatory and technological frameworks and denied by experience, fintech start-ups found it difficult, if not impossible, to compete on a level playing field, much less disrupt the market.
The time for airtime
Most would remember airtime as one of the pioneering cross-border payment models. Between 2009 and 2014, airtime transfers were pivotal to improving financial access, especially among migrant workers in South Asia. For businesses and consumers, airtime was ideal for many reasons.
First, it was perfect for moving small amounts. This meant better margins per transaction for companies and suited the usage trend of workers, who would send just enough airtime top-ups as needed back home. Second, fewer regulatory restrictions made it a friendlier arena for fintech startups.
The 2008 economic crisis and its aftermath also spooked a lot of institutions and investors, creating a perfect storm for the remittance industry as users hedged by sending small amounts in airtime.
As airtime matured circa 2015, fintech challengers and incumbents knew they must solve fragmentation to see vast improvements in the cross-border payment industry.
I remember working closely with financial institutions to build regulatory confidence and establishing non-banking partnerships to build technological trust. These 2 forms of partnerships would be the first of many attempts (the industry is still driving this effort) at fixing fragmentation.
From using innovative technology to developing integrative platforms to connect multiple partners and payments, the cross-border payment industry continued trying. Unfortunately, fragmentation continues today, perhaps more so considering the saturation and competition. Still, it has come a long way via automation, AI and blockchain.
The rise of digital payments and derisking
As mobile technology proliferated between 2015 and 2020, people and businesses switched to digital payments, especially when physical borders closed due to conflicts and pandemics.
I remember seeing rising digital fraud curtailing confidence in the industry in the mid-2010s (and continuing to do so today). Countries and banks fought back with stricter AML and KYC rules, dampening market sentiments. Derisking was particularly painful for fintechs, which cannot avoid banks in the cross-border payment ecosystem. Fintechs are neither a participant in the clearing and settlement system nor domestic payment, thus continue relying on banks for FX transfers and last-mile domestic payouts.
However, with challenges came opportunities. Many fintech companies, including Tranglo, focused on internal development, such as setting up cross-country compliance teams and regional regulatory advisory controls. Knowing the limitations allows the fintech industry to position itself ahead of the curve.
Many players also needed financial resources to increase headcount and improve liquidity during this time. Tranglo received 2 significant shots in the arm - first, an RM54 million investment from Ekuinas in 2015, Malaysia’s leading private equity firm, which then divested its 60% stakes for RM114.9 million in 2018.
Funding opportunities had revitalised the industry.
Cross-border payments of today and tomorrow
Fast-forward to 2023, and this is a different world compared to 2008. Cross-border payments have continued to evolve digitally and replaced brick-and-mortar strategies. Neobanks are greying the separation of financial and lifestyle services.
When once we talked about airtime and Swift money transfers, we’re now exploring CBDCs to replace fiat, using blockchain as the go-to remittance tech, and pushing NFT and alternative payments to the forefront.
Partnerships and cross-country collaborations (Singapore’s Paynow and India’s UPI and ASEAN cooperation) are increasing the viability, interoperability and accessibility of these services.
We’re seeing broad adoption of the new ISO 20022, which is remoulding old processes into multifaceted points of entry to balance system improvement and implementation.
This rapid digitalisation has resulted in unprecedented growth. Tranglo’s API, for example, now supports payout to 30 countries via cash pickups, real-time account transfers and direct e-wallet debits.
Over 2,000 global partners, including unicorns, fintech aggregators and incumbent institutions, use Tranglo’s payment solution daily, sending billions in life-changing funds.
Like my trusty phones, which have improved since 2008 (I finished typing this on my new 5G smartphone), cross-border payment technologies have also advanced, but the core purpose remains.
Fintechs have and will continue to drive financial access, just like smartphones have and will continue to encourage greater connectivity and communication.
I am optimistic about the industry's resilience against headwinds and improving lives through greater financial access.