Digital wallets appear to be so compelling – simplifying life for the customer (check), always present (check), location marketing (check), loyalty and rewards (check), multiple payment types (check), digital delivery (check) adoption…hmmm, not so good.
So why are consumers not flocking to the promised land of Apple Pay, Android Pay and other digital wallets?
Well they are...sort of. You have to look to China to see the promise of a wallet fulfilled, where Alipay has left its humble payment origins behind and now moved into smart cities. It lines up alongside the lifestyle platform WeChat; as well as shopping, paying bills and taxes with WeChat Pay, you can also schedule hospital appointments, order a taxi, apply for a visa or file your taxes. The numbers are staggering: according to this article by The Drum, 420 million people used WeChat to send 8.08 billion “red envelope” digital payments over Chinese New Year alone, almost double the transactions that PayPal had during the whole of 2015. But China is a special case – born straight in to a digital world, wallets arrived without legacy, without competition. Head back to the West and you start to understand some of the challenges – highly competitive markets, fragmented providers, disintermediation fears from banks and card issuers, trust issues from consumers – it’s just not China.
Have you ever sent money abroad and been shocked by the amount the recipient is left with? Why can’t you ever get anything close to the exchange rates advertised on the likes of xe.com?
As a customer, transferring money internationally is often a costly experience. Despite claims of no fees, the exchange rate spreads are often significant. That’s where P2P currency exchange comes in.
Startups such as CurrencyFair, Kantox, Midpoint and TransferWise hope to solve this problem by using the power of peer-to-peer networks to match customers, both individuals and small business, with one another to significantly reduce the cost of currency exchange.
By matching currency orders travelling in opposite directions, these platforms remove the need for money ever having to cross borders, thus avoiding costly international transfer fees. Thanks to low overheads, they also offer exchange rates at (or very close to) the midmarket rate that you see on xe.com. As you can see from Midpoint’s calculator below, the savings can be substantial.
If you’re interested in finding out more about this emerging sector - one that has been backed by the likes of Peter Thiel, Richard Branson, and Andreessen Horowitz - you can read mine and Oliwia’s new report here. The report, the latest in our ongoing series about digital disruption in retail financial services, answers the following questions:
Social lending, or peer-to-peer (P2P) lending, is not even ten yet, but it has caused a great deal of commotion already. Consumers, regulators, and banks continue to be perplexed by a business model which is so emblematic of the digital economy, or of digital disruption. Thanks to digital tools, potential lenders and borrowers can interact with each other online without the involvement of banks, credit unions, and other traditional financial institutions. And nothing epitomizes the confusion about how banks should respond to the phenomenon better than the initial ban of Wells Fargo on its employees investing in P2P loans, lifted only a few months down the line. So is P2P lending a threat to banks or not? We think it is.
Forrester first wrote about peer-to-peer lending in 2006, soon after the launch of the first P2P lending marketplace Zopa. We argued that lending would never be quite the same again and indeed, it hasn’t been. As we write in our new report, a lot has happened in those eight years: