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Money Transfer Goes Social-The Facebook Land Grab

April 24, 2017

 

Last week both MoneyGram and Western Union announced the launch of SendBots that use artificial intelligence (AI) to bridge the gap between digital and brick and mortar. 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.

 

First, Facebook Messenger is a communication tool that was spun out of the traditional Facebook app. It allows a user to reach out directly to other users and provide text, voice and video files. With over 1 Billion active users it represents a vast network of interconnected people around the world. But it is more than just messaging, it 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 which automate the beginning of a transaction that is then transitioned to the MT digital platform. The actual transfer happens on their complaint, 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 the Facebook's Wit.ai Bot Engine, which can turn natural language into structured data. It is a form of artificial intelligence that allows the bot to get smarter with each interaction.  That type of functionality is exactly what digital money transfer services have been seeking and now that have a way to access it in the largest social network in the world.

 

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 changes in the industry.

 

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 their in-house domestic MT 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 MT 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 MT 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.

 

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 FX will always be a consideration, but ease of use wins in the digital world. So if the underlying MT 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 MT provider that can remove the friction from a MT while remaining compliant and mitigating risk will win.

 

What was old is new again.

Money Transfer as we know it has been around for over 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 NYC 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 LA. In this interconnected world, you will see a proliferation of MT hybrid business models and an uptick of overall remittance volumes. As MT providers increase their focus on newer markets like Facebook, Snapchat and Pintrest there will be renewed effort on speed to market and share.  Like the race to connect the US 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.

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