Facebook entry into cash transfer service hots up competition

"Our mission is to bring faster, cheaper, and more convenient international money transfers to everyone in the world and building the TransferWise bot for Messenger is a great step in that direction," stated Scott Miller, TransferWise Head of Global Partnerships.PHOTO:COURTESY

Facebook last week revealed that its users in the United States, Britain, Canada and Australia can now send money to each other as they chat without additional costs.

This follows a partnership by the financial technology startup TransferWise and Facebook Messenger and is another marker of the next wave of disruption expected to hit the financial services sector.

"Our mission is to bring faster, cheaper, and more convenient international money transfers to everyone in the world and building the TransferWise bot for Messenger is a great step in that direction," stated Scott Miller, TransferWise Head of Global Partnerships.

TransferWise was launched in 2011 and has more than one million users on its network transacting over $990 million (Sh99 billion) monthly.

The developers behind the firm stated that commercial banks levy hidden costs to users sending and receiving money internationally, making overall costs expensive.

Taavet Hinrikus, one of the first employees of TransferWise and a founding employee of Skype, states that sending and receiving money should be as cheap as sending an email. The success in M-Pesa's disruptive model hinged on allowing users for the first time to send and receive money to each other in real time on their mobile phones.

Over the past few years, however, financial technology start-ups have experimented with various models that can be used to replace the agent at the middle. Safaricom Chief Executive Officer Bob Collymore believes there remains a lot of opportunity for disruption in the payments sector for financial technology organisation like TransferWise.

"We know that disruption is coming and payments technologies evolve like in the case of M-Pesa which started off as a means of making micro-loan payments," he explained.

"Cash still accounts for more than 90 per cent of transactions in the economy, which indicates opportunity for someone to come in with a service that can work along or disrupt M-Pesa," he stated.

In the case of Facebook's new service, this is achieved through a chat bot – an autonomous software- that connects two users through their Facebook Messenger app and facilitates the transaction.

TransferWise works by having bank accounts in markets it operates. A user sending money from the US to the UK for example sends dollars to the TransferWise account in the US and almost immediately the recipient withdraws the money in pounds from the TransferWise account in Britain.

The new transfer service through Facebook Messenger is only available to customers of TransferWise but is set for launch in 50 other countries globally in the coming months potentially reaching most of Facebook's 1.6 billion user-base.

Leveraging on social networks, chat bots like the one launched by TransferWise last week, can scale much rapidly. Chat bots further eliminate physical agents, ATMs or other similar physical point of sale devices cutting operation costs significantly.

Security has however been raised as a concern and Facebook is seeking to reassure users of the security of their data given recent concerns of the company infringing on users' privacy. "We use secure encryption systems to secure the connection between you and Facebook as well as your card information. Users can further add an extra layer of security like PIN code or Touch ID," the company said in a statement.