FinTech Daily: Huge Profits Earned By Big Banks On Overseas Money Transfers; Hong Kong Launches Bloc
Revealed: The Huge Profits Earned By Big Banks On Overseas Money Transfers
When senior Santander executives gathered in the principality of Andorra in January this year, the bank’s “innovation director” warned that a large chunk of its profits were at risk – because the juicy margins it earns on money transfers could be destroyed by new competitors. The documents supporting these claims have since been leaked to Guardian Money, and reveal that Santander made €585m from money transfers – equal to nearly a tenth of its 2016 global profit of €6.2bn – and that it charges six times as much as rival TransferWise for sending £10,000 from the UK to Spain. What the documents expose is just how much the big banks are making from giving customers poor exchange rates, with the bulk of their profits coming from the so-called “FX margin” rather than the fees directly charged. The FX (foreign exchange) margin is the difference between the exchange rates available in the money markets and the rate that a bank offers a customer. In a warning flashed up on screens, Santander’s executives were told: “10% of the group’s profits at risk when international transfers repricing takes place.” They were told that while TransferWise, a relatively new start-up in the money transfer business, was charging €64 to move £10,000 from the UK to Spain, Santander charged €394 – six times as much. Taavet Hinrikus, an Estonian tech entrepreneur, set up TransferWise in 2011 after moving to London to work for Skype, and becoming increasingly infuriated at how much he was being charged to send money home. TransferWise now employs 600 people and claims to have grabbed an 8% share of the UK international money transfer market, shifting £800m a month. Hinrikus says he was pleased to see Santander namechecking TransferWise in its internal documentation as one of the leading “disrupters” of the current money transfer market, although he says that all the main banks are overcharging. “It’s a massive consumer rip-off, but the Santander document doesn’t surprise me. What does surprise me, is how long they’ve been able to get away with it. This is a major issue – three-quarters of consumers who regularly send money abroad can’t work out the final cost when fees are factored into the exchange rate. Consumers and businesses are losing £5.6bn a year in the UK because of rate mark-ups.”
Hong Kong Launches Blockchain Trade Finance Platform With Deloitte, Top Banks
With Deloitte as one of the Big Four auditors, the Hong Kong Monetary Authority (HKMA) and the region’s top five banks have officially launched a Blockchain platform for trade finance. Earlier this month, HSBC, Bank of China, Bank of East Asia, Hang Seng Bank and Standard Chartered co-introduced a proof of concept Blockchain platform for use with trade finance operations which include lending, issuing letters of credit, factoring, export credit and insurance. Joshua Kroeker, the senior product manager for global trade and receivables finance at HSBC, stated that the Hong Kong government along with Deloitte and partner banks launched the Blockchain platform to demonstrate the technology’s potential in the conventional finance industry. More importantly, Kroeker emphasized that HKMA and the five participant banks are aiming to utilize Blockchain technology to increase efficiency, transparency and security in trade finance while eliminating the possibility of fraudulent activities by automating most processes. The vast majority of operations in trade finance are handled or settled manually due to their sheer complexity. Because multiple parties can be involved in a single operation or the settlement of a contract, companies within the trade finance industry manually approve the settlement of each operation. In addition, the wide range of services offered within the trade finance industry forces companies to maintain several servers and databases that each handles different operations.
Tech Moves To Canada After Trump, Brexit
Because Trump was elected US president partly on an anti-immigration campaign, interest in moving to Canada has skyrocketed. The University of Toronto saw a 70% jump in applications from American students at the end of 2016, according to the Toronto Star — and that was before the president began efforts to bar immigrants from seven majority-Muslim countries. More recently, after a decision to delay the H-1B visas used by American businesses to hire skilled workers, the Canadian government under Prime Minister Justin Trudeau announced in March an expedited work-permit process for the same kind of foreign talent. And while London is the world's largest center for financial technology, or fintech, immigration policies are equally uncertain there ever since Britain's 2016 decision to leave the EU. As a result, Canada's startups are seeing a jump in job applications — especially from workers in the US. "Certainly the geopolitical environment right now and what Trump has alluded to in terms of his new immigration policy and his perspective on H-1Bs — I think that has made some people nervous," said Salim Teja, executive vice president of venture at MaRS Discovery District, a Toronto venture program helping position the city as the next great startup destination. Because of its large footprint in the Canadian startup scene, MaRS — which says it is the world's largest urban innovation hub and home to 1,000 startups within its venture program across the health, finance, energy, and education sectors — is often the federal government's go-to adviser on policy surrounding innovation. And it isn't just home to startups. MaRS, which spans 1.5 million square feet in downtown Toronto, houses 250 larger organizations that lease its space, including outposts for Facebook, Airbnb, and PayPal. "We play an important role in connecting partners to the startup ecosystem — those could be international investor partners, those could be international corporate partners," said Teja, who spent six years in Silicon Valley before returning to Canada and helping to build MaRs. "We match incoming talent from both around the world and locally here in the ecosystem to our companies that are growing."