This week - Airwallex, Alipay, Curve, Ebanx, ING, MFS Africa, Moneycorp, PayPal, Revolut, Skrill, Wirecard, WorldFirst
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New data, new insights on cross-border payments. Every week.
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Following the recent digital boost that cross-border payments has received, we look at the rising trend of digital wallets, a fast-growing segment of the market. 

As the fallout from Wirecard continues, we provide some first thoughts on what this means for the sector. How broadly will this hit the fintechs and will we all go back to the banks? 

Digital wallets are thriving

Within the payment sector, digital wallets are increasingly being offered as a new product feature and are being utilised on both ends of cross-border transactions. Different from multi-currency bank accounts, digital wallets do not have bank details linked to them and are a tool to store money. The funds can come from a bank account, a payment card, payments from other wallet holders or cash top-ups.

Very common in peer-to-peer domestic payments, this week we look at how wallets fit into the cross-border payments space.
Why wallets matter:
  • Digital wallets are a bridge to those without bank accounts
    According to the World Bank's Global Findex database, 1.7 billion adults were unbanked in 2017. Opening a bank account is difficult for people who are out of the labour market or live in rural areas. Digital wallets, instead, are easy to get and can provide the unbanked or underbanked customers with a way to receive and exchange money bypassing the need for agents and banks.
  • They offer a different treasury approach for businesses
    Access to local payment networks is a critical point for businesses trading cross-border. Multi-currency wallets, like Airwallex's and WorldFirst's, make it possible for businesses to exchange payments with foreign partners without the need to create local bank accounts globally. On the consumer side, using third-party wallets as a way to either send or receive money allows payment companies to have a larger reach of global customers and to make payments faster, more accessible and cheaper than the traditional cash and bank transfers.
  • QR codes are expanding usage
    In addition to facilitating online payments, digital wallets are also making point-of-sale cross-border transactions easier. Using digital wallets improves the rate of acceptance of foreign payment methods and card networks around the world. The implementation of payments through QR codes, which many wallets embed, reduces checkout experience friction.
In the near future, we expect to see many more players in the space connect into these wallets around the globe, especially in Asia and emerging markets. A smaller number of players with core customers who would really benefit from a wallet will likely follow with their own offerings too.
Get access to wallet's pricing data

First thoughts on Wirecard

First, credit where credit is due. The Financial Times continued to report its allegations about Wirecard for years, facing a barrage of criticism and lawsuits. In the end, it proved to be right and this is a great lesson in truth-seeking and perseverance. 

As the dust is settling on the rest of whatever Wirecard's life now is, we can reflect on a few points:
  1. This was not a Covid-19 related collapse
    The timing is simply coincidental but the allegations for fraud are now a criminal matter. Wirecard first postponed and then missed a deadline to file accounts (which EY wouldn't sign off on) and had to admit what was going on.
  2. Wirecard was processing payments for many known fintechs
    (Payoneer, Curve, Revolut and plenty of others)
    The questions every fintech should be asking now is what is my redundancy plan and how quickly could I put it into effect? More importantly, how much is it going to cost?
  3. How will trust in fintechs be affected?
    Wirecard was worth over $20bn at its peak and it was listed in Germany's prestigious DAX30 market, where many pension funds in Germany simply invest in all players. Although Wirecard itself and the German regulator BaFin liked to call the company a fintech, it's been argued that it was more like the bank behind the fintechs. 
  4. How much can you blame the regulators and the watchdogs?
    A lot is probably the right answer. It is clear that regulators wanted Wirecard to be a success, both independently and for the fintechs it was supporting. Many forward thinking regulators around the globe such as the UK's FCA or Singapore's MAS have been great at giving springboards and room for new fintechs to grow. Fintechs bring new products to market, increase competition and virtually always benefit the end customer. But will more oversight now be needed and should some freedoms be limited?
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Do we all go back to trusting the banks?

To answer this, let's look to the words of Revolut, one of Europe's most valuable fintechs (Revolut recently raised over $500m reaching a valuation of $5.5bn).

When Revolut needed to comfort its customers over the past week as Wirecard filed for bankruptcy and Wirecard's UK assets were temporarily frozen, well... Revolut had to turn to the banks. See for yourself...
The Top 100 Players - Who are Revolut competitors
On our radar this week:
Curated by FXC Intelligence's Team
TransferWise's investment product
TransferWise gets an additional license from UK regulators and plans to offer investment products in the future
PayPal launches QR codes in Canada
QR codes have been popular during the pandemic. PayPal rolls them out in Canada connecting to its wallet
MFS Africa buys Beyonic
The digital payment hub buys Beyonic to expand its offering and bring cross-border payments to African SMEs
MFS Africa
Moneycorp secures Irish licences
The E-Money and MiFID Irish licences are a strategic response to Brexit and part of its European market expansion
Yahoo Finance

Missed the last few weeks?

Will big tech be stopped in payments (here)
Raising money in a downturn (here)
Western Union's pricing premium (here)
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