Guest Post: When will international money transfers follow the digital wallet trend of domestic transactions?

Olivia Chow

When it comes to day-to-day domestic transactions, America is moving towards a cashless economy. Recent research conducted by finder.com found that digital wallets are the preferred method for transferring money for 57% of the population with over 60 million American adults reaching for their smartphone rather than their wallets when paying for groceries, paying bills or splitting dinner with a friend.

However, the international money transfer industry paints a very different picture. Analysis from finder.com uncovered that 34% of Americans, or 84.1 million, transfer money overseas. In 2016 an estimated $140.1 billion dollars was transferred out of the country (more than half the amount borrowed for mortgages and more than student loans and credit card debt combined).

Despite the significant size of the industry, reports show that when making overseas payments, the majority of people prefer to do so in person, with cash. Reports from the 2015 IMTC disclosed 80% of international transactions are being conducted this way.

So why do behaviors differ so greatly between what is essentially similar transactions, albeit domestic vs international?

Investigating what consumers go through when making international money transfers formed the foundation of the first ever finder Money Transfer Awards. While many providers stood out, the study also unearthed an industry surrounded by confusion due to little fee transparency and onerous processes. This has resulted in widespread dissatisfaction with consumers reporting in the overwhelming majority (96%) that they are unhappy with their money transfer provider.

While the digital wallets that are dominating domestic transactions – Apple Pay, Venmo, Square Cash to name a few – are not currently offering international corridors, the growth opportunity of international money transfers won’t fly under the radar for much longer. finder.com analysis forecasts industry growth of 3.5% for 2017 with an estimated $145.56 billion to be transferred to other countries this year.

Beyond traditional international money transfer providers, banks and domestic digital wallet apps, the opportunity has attracted the attention of non-traditional players. For instance, social media giant Facebook recently announced it will offer international money transfers, having teamed up with industry leader Transferwise (also a finder.com Money Transfer Award Outstanding Product award winning alongside Circle and Xoom).

One thing is clear from this study, with such high dissatisfaction levels and increasing competition, the time is now for international money transfer providers to embrace digital capabilities and streamline usability to retain and grow market share within remittances.

Olivia Chow is Project Manager and Lead Researcher for the finder.com Money Transfer Awards. She specializes in prescriptive consumer and trend research having been a founding member of the Hanesbrands Inc. Global Trend and Innovation team, consulting for the New York Times, and writing for VICE and Intel’s Creator’s Project.