From Bricks To Clicks: How The Pandemic Is Reshaping Remittances

The pandemic has upended daily life – and in payments, it is moving analog, face-to-face transactions toward the digital realm.

In an interview with PYMNTS, Michael Bermingham, co-founder and chief business officer for Nium, said the pandemic has been changing the very nature of cross-border payments.

That’s due in part to the fact that across the globe, businesses have shuttered in the wake of lockdowns and government mandates – including money transfer agents and locations.

“People have had to find other alternatives for sending money back home or for their businesses to pay [paper] invoices abroad,” he noted. “A lot of people are coming toward firms like ours to conduct cross-border payments.”

That means changing the very mechanics of the transactions themselves, said Bermingham. In the traditional brick-and-mortar remittance models, “people are sending money on the very day that funds need to be sent, or close to that timeframe,” he pointed out. In that case, individuals conduct physical money transfers by showing their ID to an agent and handing over cash. And then, on the other side of the transaction, recipients show their ID to pick up physical cash.

For digital players like Nium, said Bermingham, individuals must be able to open accounts and provide the information required to satisfy local, countrywide and global regulations for online transactions.

“There are many different ways you can onboard a client today,” he said. That includes uploading documents, scanning documents with a phone, or even using biometrics or OCR (optical character recognition) technologies.

On the backend, noted Bermingham, companies must gauge the risk of an onboarded client by asking certain questions or posing challenges for verification – security efforts that are made easier with by the aid of advanced technologies. Once the information has been verified, senders can make the transaction immediately, and the recipient, with the support of real-time capabilities through the provider, receives the funds within the next minute or so.

As cross-border transactions move toward digital conduits, it becomes easier for platforms such as Nium and its bank and financial institution (FI) clients to scale rapidly. The platform model is critical, “as the cost of onboarding a client is greater than most people realize,” Bermingham stated. “The amount of time that goes into building out the systems is important to providing the client with a seamless process. You want to make sure to do it correctly.”

Against that backdrop, FIs and banks need to embrace a range of technologies that can help them gain a better view of who their clients are – and whether individuals and businesses are able to transact legitimately.

“We’re asking these questions to protect the client’s identity and protect the global economy, and to mitigate the risk of fraudulent funds from being sent,” Bermingham noted.

As cross-border payments increasingly go digital, he said, banks and FIs benefit from transparency, speed and cost. In traditional processes, intermediaries had deducted funds (as fees) along the way, and it was often difficult to know when payments would settle.

In one example, Bermingham cited that when someone would send $1,300 between the U.S. and Australia, the recipient in the latter country would walk away with $1,260 in hand (in AUD) after fees.

“The only way you’d know that the money had been received was if the person on the other end informed you that they had been,” he said.

That friction-filled continuum of sending and receiving money has led Nium to connect with banking partners via application programming interface (API), allowing the firm to track transactions along the way, be transparent on rates and settle across 90 countries – 65 of them in real time.

Looking ahead at the broader remittance landscape, The World Bank and other observers have estimated that cross-border payments may fall as much as 15 percent to 20 percent this year – but Bermingham said there is likely to be a rebound, and he said he believes the shift to digital will be permanent. He said we will likely hit an inflection point and then a resurgence.

Technology (as offered by FinTechs to streamline and make compliance more efficient) will transform how people send money, said Bermingham.

“The need to go inside a place and walk up to a window will be diminished,” he said. “They can just log on. And increasing the ease of remittance payments will increase growth in the industry.”