Money Transfer Goes Social: What the Facebook Land Grab Means
By Drew Sullivan, PaymentExecutive.com
This month MoneyGram and Western Union announced the launch of “sendbots” that use artificial intelligence (AI) to bridge the gap between digital and brick-and-mortar transactions. The expansion of Messenger “bots” at the F8 Facebook Developers conference was just one of the areas of focus for the two-day event. However, this technology has now created quite a buzz in the money transfer world as the two largest international remittance companies have entered the fray.
What does this mean for the industry? Well first let’s understand what Facebook Messenger is and why this technology is important.
Facebook Messenger is a communication tool spun out of the traditional Facebook app. It enables a user to reach out directly to other users and provide text, voice and video files. With more than 1 billion active users, it represents a vast network of interconnected people around the world. But it’s more than just messaging—it also automates conversations.
“Bot” is a generalized term used to describe any software that automates a task. The most common are chatbots that automate the beginning of conversations. Now money transfer companies are building sendbots that automate the beginning of a transaction that is then transitioned to the money transfer digital platform. The actual transfer happens on their compliant, secure platform and then the notifications are pushed back to Facebook Messenger. It is all seamless to the user who enjoys the same familiar interface they expect from Facebook.
These bots use Facebook’s Wit.ai Bot Engine, which can turn natural language into structured data. It is a form of artificial intelligence that helps the bot get smarter with each interaction. That type of functionality is exactly what digital money transfer services have been seeking and now have a way to access it to the social network.
But What Does This Mean for the Industry?
While there are constant press releases from both organizations touting their online expansion and commitment to digital strategies, the sendbot announcements signal a few important changes.
First, exclusivity is coming to an end.
WU and MoneyGram have dominated the brick-and-mortar world with exclusive contracts with large networks. They have effectively elevated the cost of entry into the market and limited competition to regional players. When Ria signed Walmart for the retailer’s in-house domestic money transfer service, that was the beginning of the end for retail exclusivity.
In the digital environment, exclusivity is rare given the Internet’s distributed and open access, but both traditional and upstart money transfer companies have strategies to reap similar benefits. Because integrations historically have been time consuming or costly, online partners have tended to choose one provider at least initially. That gives the money transfer company a period of exclusivity. However, with both Western Union and MoneyGram announcing sendbots on the same day, exclusivity is effectively over. I don’t envy the strategic account director who has to negotiate the next major network renewal.
Second, the company with the best user experience wins.
If you are a sender on Messenger, you now have choices. WU, MoneyGram and Mastercard all have sendbots. Which one will customers choose to use and why? Well price, corridors and foreign exchange always will be considerations, but ease of use wins in the digital world. So if the underlying money transfer platform is more difficult to use than the competitors, you are going to see high abandonment rates. Companies like Amazon have dominated e-commerce because they remove the friction from checkout. The money transfer provider that can remove the friction from a transaction while remaining compliant and mitigating risk will win.
Third, what was old is new again.
Money transfer as we know it has been around for more than 160 years and it is still the Wild, Wild West. Social networks have changed the way people interact with each other and have bridged the miles between New York City and Manila. With Google Translate, a store owner in Denver can converse with a buyer in Romania in their local language. And with Skype, a content provider in Indonesia can attend a staff meeting in Los Angeles. In this interconnected world, you will see a proliferation of money transfer hybrid business models and an uptick of overall remittance volumes.
As money transfer providers increase their focus on newer markets like Facebook, Snapchat and Pinterest, there will be renewed effort on speed to market and share. Like the race to connect the U.S. continent with telegraph wires, Western Union is seeking to use social networks to connect global remittance users. But they are not alone.
The land grab is underway and industry disruptors like Xoom and Venmo may get the press, but don’t rule out the old guard just yet. Consumers still value a strong retail network and access to cash. Executing on a strong social strategy is the key. Let’s see who does it best.
Drew Sullivan is the founder and president of PaymentExecutive.com a consulting firm focused on prepaid, remittance, bank products and cross-border payments. Drew has more than 25 years of experience in business development, account management, business strategy, compliance and product management in the payments industry. He may be reached at email@example.com. This article originally appeared onPaymentExecutive.com.
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