Navigating Through Money Movement

Reinvent your business constantly. The end goal may be the same, but the tools and methods are constantly evolving. -Ken Tucker        

Payments, loans, remittances, deposits, wire transfers… they all move money from A to B.? One key difference between these operations is the regulatory scheme they need to comply with.? For example, I may pay you $1000, and that money movement is regulated in such a way that if the product you sold me is defective, I get a refund according to the applicable regulation. Payment and refund money movement may not be using the same “system” since I could have paid with my credit card and the refund could be a bank check. If those $1000 are a personal loan sent as a remittance, it is still a money movement, but a refund may not be enforced by the same regulation as a product purchase and maybe there is no applicable regulation.??? On top of this, moving money through the bank accounts may require such things as KYC/KYB, but paying with a card (debit/credit) may only require some sort of proof of ownership of that card. ?These considerations may vary from state to state, in the US.? Add another layer of complexity with cross-border money movements.

“For companies in search of how to launch a financial service, the path was lengthy and filled with multiple, costly hurdles. Such a venture required Money Service Business (MSB) registration and applying for state-by-state monetary transmission licenses (MTLs) in the US (which may take up to 2 years) — then the startup company would need to find a partner bank. This separate process required applying directly with a bank, who may ask to see large amounts of capital raised before starting their evaluation process (of 12–18 months). This path also required the startup to build out technology in-house (or outsource to a 3rd party) for the user interface and onboarding, regulatory and risk controls (such as Know-Your-Customer), and periodic agency audits or government reporting requirements. With high upfront costs, investment capital required, and a timeframe of over 1–2 years just to test the market, firms were eager for a faster, low-cost solution.” Source: Fintechtris

How to Tackle this Complexity

-how do you eat a watermelon?  -bite y bite.  An ant talking to another ant.        

Let’s take a bite on what system you are using to transfer that money.? We start this discussion with a common scenario: transfer money between bank accounts while maintaining compliance with U.S. regulations. ??Notice we are still talking about “money movement” since we will not discuss the nature of the money movement (payment, benefits, remittance, etc.), given it is something very specific to your business model scenario; a topic we can review later over a cup of coffee.

When it comes to platform banking, banks and financial institutions must embrace certain digital trends to succeed, grow, and differentiate in the platform banking competitive marketplace.? Platform banking is a digital marketplace operated on an app or software and owned by a bank or non-bank entity to provide banking and non-banking services. ??

From home mortgages to car loans, corporate banking, business loans, and more… banks, financial institutions, and credit unions can use a digital marketplace to provide more financial products: loan origination, help match up customers with appropriate homeowners insurance programs or home maintenance services, for example. This makes it far easier for traditional banks to partner up with other organizations to provide unique and custom banking products to their customers. All in all, digital banking services generate more revenue and create a better customer experience.

At Digital Geko we believe that a new business or even a new business model (within an existing company) should spend less time on “the plumbing” and more time on planning and implementing those features that deliver your unique value proposition to your customers.?

When it comes to banking, there are many platforms and players involved in the movement of funds, sharing of information, security, etc. To communicate with each system, you can only use the system layers and services that the organizations have made openly available. That is “plumbing” that some platform banking providers have already implemented so that you don’t need to reinvent that wheel.?? And with almost 5,000 banks in the US and half a dozen of mayor interbank networks, there is no business reason why you would like to implement that connection by yourself but instead rely on a banking platform.

By not worrying about “the plumbing” you can enable a seamless integration of financial services and products into other kinds of customer activities, typically on non-financial digital platforms. Consumers increasingly use these platforms to access services such as e-commerce, travel, retail, health, and telcom. The financial service could be someone taking out a small loan when they pay for a holiday on a travel site; or the instant calculation and sale of micro-insurance for newly purchased jewelry.

Your customers also give this “basic plumbing” for granted, and want you to devote more time and effort in features that make a difference.?

Banking platforms play a supporting role in current money movement systems. And as more technology emerges, we see more secure technology that is already acting as a crucial player in enabling more sophisticated scenarios: banks are integrating fintech or other financial service vendor products into the banking journey, while non-financial companies are embedding banking products into their own services.

Due to their security, banking platforms are perfect for financial services. They can connect to credit cards, online banks, and more; to issue online payments, in-person payments (POS systems) and other money transfer technology services.?

How can we Help?

We, at Digital Geko, have been working with SILA as a banking platform for some years.? With SILA you can use the platform to send and receive money in the U.S. and also send global payments. With SILA’s secure API connections, including API and third-party vendors to complete ID verification and bank account linking, you can build a financial money transfer app capable of sending money to hundreds of countries all over the world. The world of global payment systems is vast and complicated, but it doesn’t have to be for you.????

If you want to go into details, feel free to get in touch with us at [email protected] to learn more about how we can support you modernizing your digital services.??

Digital Geko es una empresa de tecnología con más de 15 a?os de experiencia en el desarrollo de software en Guatemala. Nos dedicamos a hacer realidad la transformación digital de empresas y organizaciones, liderando en nuestra región y siendo un referente en tecnología, adoptando continuamente nuevas tendencias y tecnologías emergentes. Con un equipo sólido de más de 70 personas dedicadas y apasionadas, trabajamos para clientes en Centroamérica, Europa y Estados Unidos.