hyper

‘Eating one’s own dog food’ is a term familiar to all technology CEOs;  we all throw it out casually in conversation when in the company of non-technology types, mostly to sound cool, but sometimes with a genuine right of usage.   Since 2001 I’ve been bragging about how I use hyperWALLET to pay my rent, and we’ve always paid exployee expense claims using our own service,  so I’m not an complete poser in this regard.  Actually, most other technology CEOs aren’t posers, either:   dogfooding is natural when your products or service is designed for people just like you, and built by people just like you. It leads to superior solutions and rapid innovation.

But what of the the remittance part of our business? What happens when your product or service becomes targetted at ‘the others’?   Suddenly your C-suite and product teams have lost that visceral connection to your customers – the kind of innate connection which can only exist when KYC is a lot more than something you do simply to fulfil a regulatory requirement.

I’m starting to wonder if this might be where one of the key challenges blocking true innovation in the remittance business comes in to play.   I haven’t met many Financial Institution decision makers who are first generation immigrants living on $1,200 a month, and who are remitting $200 of that $1,200 across the sea to support an extended family.   Same goes for technology companies like hyperWALLET.  Ditto for the incumbent Money Transfer Operators, and re-ditto the financial services regulators…Maybe the remittance corner of the financial services market can’t possibly consume the dog food it produces, because it’s run by cats.

At least identifyiny true innovation in the remittance business is easy. I define it like this:

Remittance Innovation exists in a market when
the cost of cross-border funds transfers
become no more than
2X
the cost of their domestic equivalent.

I’m proposing that 2X become our industry’s price mantra for a few reasons, one of which is actually logical:  If it costs X to deliver funds to a domestic recipient, then the additional regulatory burden and FX exposure of an international remittance should not add more than one more X to the equation.  I believe that the international bit should only attract 1 more X because for the last several years we’ve all upgraded our capabilities to deal with strengthening domestic KYC and AML/ATF regulatory obligations – - – so meeting foreign obligations entails little more than reformating an existing report to another XML dialect, or at worst,  modify a few lines of SQL in some underlaying database query.

If we accept 2X as the goal of ‘true’ innovation in the remittance business, here in Canada this means we can’t crow about how our collaborative national psyche and the efficiencies of our clearing systems have come together to lead the world, until the Phillipino nanny who looks after our kids all day pays no more than $4.00 CAD each time she sends $200 home.   According to the world bank, between fees and FX,  she’s paying over $20 now, so we’ve got a long way to go.  (Nb: The world bank isn’t using my 2X metric;  it has set a more modest 5% end-end total fee target, so interim bragging rights can go to any service offering a $200 remittance with a fee of <=$10.)

But back to the theme of this post:  Cats vs Dogs, Technology people vs Financial Services people, and eating one’s own dog food.   Or in my case, eating at my own words.  At the Canadian Payments Association Conference earlier this month, I said that Canada’s financial services providers should be ’shamed’ by our average 10.7% remittance fees.   In response it was pointed out to me, by Mo Jansons of RBC, that Canada’s banks do care about their depositers and do take their social responsbility mandate seriously – Most banks have identified retail remittances as a desired service to introduce, and some have already launched products of various stripes.  All have been grappling about the best way to meet the last mile delivery challenge where that last mile is 4,000+ miles away, and do I have any useful thoughts as to the best way we collectively solve this challenge?

Now, its one thing to be shamed at a conference, but quite another to be shamed by one of those you seek to shame.   I came back to the office determined to show that an independent MSB like hyperWALLET can compliantly and profitably introduce services which meet the world bank’s 5% fee target, with just a little creativity and managerial commitment.  In the upcoming months I’ll post the results of our efforts, and outline more thoughts on realistic ways to get to the $4 / 2X place of innovation.

(1) they are or come from a reliable source; and (2) they are publicly available for free.

While some of these sources may seem self-evident, it is worthwhile actually taking the time to browse through the entire list of publications on their websites, as you can find real gems including a statistic or two that can possible assist you with a payments-related business decision.

1. The Bank for International Settlements (http://www.bis.org/) is an excellent source for research, statistics, and in-depth publications. One of my favorite reports from this site is called Statistics on Payment and Settlement Systems in Selected Countries – Figures for 2008” that was published in December 2009. Prepared by the Committee on Payment and Settlement Systems of the Group of Ten Countries. This report presents a variety of interesting payments related statistics on a per country basis with comparative tables at the end. The focus is on developed countries (13 included). Statistical data include items such as settlement media used by banks and non-banks in each country, electronic money institutions, available payment card functionality and indicators of the use of payment instruments.
2. The World Bank (http://www.worldbank.org/) currently has 913 reports on payment systems and infrastructure available for free download on its site. This is in addition to the country specific reports and other data and research you can find there. I recommend making this site a permanent feature of your radar screen. Some outstanding reports worth mentioning include:
   • Payment Systems Worldwide: A Snapshot, Outcomes of the Global Payment Systems Survey 2008. This report contains extremely valuable information on payments systems and instruments in over 200 countries. Need to find out what retail systems are prevalent in India or what ATM availability is like on Fiji? You can find it here.
   • General Principals for International Remittance Services – if you’re a remittance provider, this report provides useful insight into the aspects of the remittance business that the World Bank suggests in-country regulators focus on.
   • Remittance Prices Worldwide. This is actually a website in and of itself and not a report (http://remittanceprices.worldbank.org/). Here you can find data on the cost of sending and receiving small remittances from one country to another complete with lists of remittance providers, their fees and the average FX margins that they charge.
3. The International Monetary Fund’s site (www.imf.org) contains some payments related data (including their country specific Financial System Stability and Financial Sector Assessments both containing date on payment systems.
4. Regional organizations such as APEC (www.apec.org), EBRD (www.ebrd.com) often publish region specific payments data and reports on their sites.Central Bank websites are excellent sources of free information concerning aspects of the payments industry in their respective countries. More often than not these sites are in English as well as the local language. Examples include Central Bank of Russia (www.cbr.ru), Banco de Mexico (http://www.banxico.org.mx/sitioIngles/index.html) and the People’s Bank of China (http://www.pbc.gov.cn/english/).
5. Local Clearing and Settlement System sites are a good place to browse if you are researching a country’s settlement capabilities or whether you want to know, for instance, if your bank is a member of a particular in-country clearing system. Some examples are MEPS (Malaysian Electronic Payment System) www.meps.com.my, the Korean Financial Telecommunications and Clearing Institute (www.ktfc.or.kr/end), and of course we shouldn’t neglect to mention the Canadian Payments Association (www.cdnpay.ca) or NACHA (www.nacha.org).
6. Last but not least don’t forget to check out professional and industry-related blogs such as the Association for Financial Professional’s “Payments” blog (http://blogs.afponline.org/blog/tag/payments/), Global Treasury News (http://www.gtnews.com/payments/default.cfm), and Payments News (http://www.paymentsnews.com/payments_blogs/index.html).

So we wish you happy information hunting! As you come across new gems during your own research processes, we’d be delighted if you’d care to share them with us.

We believe that inclusive and frictionless commerce can improve the lives of billions of people around the world, and that payment service innovations are a basic building block of inclusive and frictionless commerce.

This site is sponsored by hyperWALLET Systems Inc, and although  members of our own staff will be frequent contributors,  we also hope to solicit ideas and commentary from a broad selection of like-minded and contra-minded people.