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Money Transfer: 5 Hacks to Nudge Consumers

Money Transfer LifeHacks

“The end may justify the means as long as there is something that justifies the end.”

― Leon Trotsky, Their Morals and Ours

So you built a mobile app for international money transfer, got seed funding, engaged few hundred early adopters, and are now ready to go after those outdated-bureaucratic-price-gouging incumbents. How hard could it be? But a year goes by and your cumulative revenue has barely scratched $100K. The dream of new office digs and sharing success story with schoolmates is getting delayed while investors are starting to be more inquisitive about the timing of “hockey stick”… and it is all because those strange migrants keep clinging to their existing providers.

Well, don’t fret, we have gathered 5 “best practices” for nudging those close-minded consumers to embrace your service. Most of cool FinTech kids are doing this and even some incumbents and banks sample them at times, so it must be perfectly legal and not too immoral… at any rate, it is for consumers’ own good, right?

Talking points

Remember that by repeating something again and again it will eventually become true. Even if you don’t feel comfortable saying something without any evidence, please keep in mind that integrity does not pay for your kids’ private school or for a fun team outing. Focus on growth at all costs because that is how everybody succeeds. To get started, tell your Marketing/PR lead to include these top-10 list in all communications going forward:

  • Fintech offers 5–10x lower rates than incumbents that charge 10-20% fees

  • Market size is $500 billion to $2 trillion

  • Consumers are naive and being taken advantage of by incumbents

  • Bitcoin/blockchain is much more than just another rail for remittances

  • There is a fundamental difference in operating models of Fintech providers vs. digital arms of incumbents

  • Only Fintech/blockchain startups care deeply for underbanked

  • P2P is a gamechanger for remittances

  • Western Union is about to collapse

  • In the next several years, digital remittances and mobile money will gain 50% market share

Done? Now, let’s apply more sophisticated techniques.

1. Discrediting competition

This technique works great because of its double advantage: consumers not only learn something bad about your competitors but also subconsciously assume that your startup must be pretty good on that dimension. How can a regular person suspect that you have enough guts or legal cover to badmouth competitors for something where you are not much better?

Learn how to get this done – here is TransferWise in interview with BBC:

“… independent money transfer giants such as Western Union and MoneyGram, charge about 5-8% in fees when transferring money abroad, and these fees are often concealed within the exchange rate.”

In one sentence, TransferWise masterfully combines 3 negatives about incumbents: they are hulking, expensive, and sneaky! Here is another of their PR mantras in this article:

“…Western Union and MoneyGram, known to take as much as 20% of individual transfers… (later)… it is literally is about food on the table, so there’s an even deeper moral problem to address”

Now, you might have a fresh college graduate on your marketing team who sheepishly suggests that all these statements are false: the remittance industry is highly fragmented, incumbents fee in the online space is much lower, and any pricing information is shared upfront. Ignore it – such naive souls typically come around or leave soon, and allure of FinTech is strong enough to send plenty of eager employees your way.

TransferWise is considered one of the most successful FinTech startups – do they get concerned about so-called “facts?” Look at the table below for a typical send amount in one of the world’s top corridors, USA-to-India (you can check different amounts-destinations with SaveOnSend app):

Comparison of Providers - USA-to-India, $1,500, bank-to-bank, May 22, 2017

Comparison of Providers – USA-to-India, $1,500, bank-to-bank, May 22, 2017

So TransferWise is 50+% more expensive than incumbents. Now, look at this snapshot from its landing page:

TransferWise Landing Page, Aug 16, 2015

Some fact-checkers might complain that TransferWise “conceals” that its margins could be much higher than “0.5%,” but those types of folks are unlikely to be your potential customers, and TransferWise’s $116 million in fundraising could be the market way of saying, “Onwards with whatever works!”

WorldRemit, another FinTech darling, also doesn’t shy away from this popular technique – here is what it declares in June 2015 (!) in this article:

Until now, the U.S. remittance sector has ill-served customers sending money back to many parts of the world…”

The fact that WorldRemit is among the more expensive providers (see the table below or check with SaveOnSend app) doesn’t stop it from positioning itself as a long-awaited savior. Why should your PR strategy be any different?

comparison-of-providers-usa-to-philippines-usd-php-500-bank-to-cash-dec-5-2016

Comparison of Providers: USA to Philippines, USD-to-PHP, $500 transfer, bank-to-bank linked accounts, December 5, 2016

But why should WorldRemit worry about accuracy when its growth is slowing down and valuation is stalling? Instead, let’s build on stereotypes about a backward incumbent (see full article here):

“… Western Union is their main competitor at the moment. They have got the legacy, the brand, and the experience, but its lethargic adaptation to new fintech is allowing WorldRemit to progressively bite more and more off its plate.”

Reviewing so-called “facts,” one might notice that during 2014-2017, Western Union’s digital arm has actually expanded its lead over WorldRemit, but, hopefully, WorldRemit’s investors are lethargic enough to miss it:

Money Transfer Providers Digital X-border Revenue Comparison 2014-2017 Q3

 

2. Disinformation

This might sound bad, but you are not completely lying in this case. You are only knowingly presenting a fact which is not really applicable… but it is still a fact. For example, what is a silly way to define a market size of international money transfers across consumers based on this chart?

International Money Transfer - Volumes and Revenues change 2015-2025

If you responded that the market size of this industry is a sum of revenues of all playes, hence, it is equal $30-40 billion, you might be technically right. But that is less than revenues of the Coca-Cola company and how many industry “experts” know the definition of “revenues?” Instead, you should use a cooler way to measure your market, by transfer volumes. Learn your talking points from the best:

  • Azimo: “…saw an opportunity four years ago to disrupt the $600 billion remittance industry.

  • WorldRemit investor: “The $550 billion global remittance market is undergoing significant disruption…”

So the market is HUUGE, but you might already know that margins are so-so. What would be a naive way to describe this chart below?

WorldBank Ave and WAve Price Index till Q2 2017

Source: https://remittanceprices.worldbank.org/sites/default/files/rpw_report_june_2017.pdf

You might be thinking to share the latest data point for Global-Weighted Average and, even more unnecessary, honestly mention that the margins have been declining for a while, and then, coincidentally, with the arrival of Fintech startups the decline has stopped. But what would you gain from such approach except informing potential customers that they might not be ripped off by incumbents? Instead, learn how Stellar, which mission is “to expand financial access and literacy worldwide,” does it in this article:

“A typical transfer can cost 10% of the total remittance; when you’re living on $2 a day that lost $0.20 is a direct cut to basic needs like food, healthcare, and education.”

Impressed? Not just using a decade-old data point, Stellar bravely double-downs accusing top providers of endangering livelihood and future of recipients. If nonprofit Stellar with the mission focused on literacy can act like this, who are you to contemplate a higher moral ground? But maybe not everyone is as misleading as Stellar. Let’s review marketing materials of Bitcoin/blockchain remittances startups – they have a reputation for being do-gooders who just want to help poor people and make a world better place. Nope, they need to raise money too and repeating “10-20% fees” mantra seems unavoidable:

Or let’s say you ordered a research, asking couple thousands consumers lots of questions in hopes of getting answers to your advantage. Instead, you got something pretty balanced, like “83% of people felt it would be unfair if their [bank] did not inform them of all the costs involved…” Replace “bank” with “provider” or “TransferWise” in same research, and you would get the same result. But try harder – here is how TransferWise takes this trivial survey response and turns it into a rallying cry in this PR campaign:

“It’s deeply unfair for banks to advertise foreign exchange as free to consumers when in fact they just hide their fee in the mark-up they add to the exchange rate… Customers just want to know what they’re getting – surely that’s not too much to ask? That’s why we are asking the Government to deliver on its pledge to stop misleading pricing in foreign exchange before 2016.”

Surveys are really a goldmine for manipulating understanding public opinion. Make sure they are part of your marketing rotation:

3. Apples and Oranges

FinTech remittance players are taking full advantage of this millenniums-old manipulation persuasion technique. It compares two incomparable statements, but almost none of your customers would know such details about the remittance industry. See how Remitly applies it in this article:

“… on average, customers pay a 7.9 percent fee to send money internationally, but Remitly’s charges average 2 percent.”

As many other successful FinTech players, Remitly is applying an advanced communication approach of using two consumer nudging techniques at the same time: “Disinformation” and “Apples and Oranges.” Using an arithmetic average rather than weighted average across all methods of sending remittances and comparing it with pricing for its digital-only send method, Remitly looks four times better than a typical provider. The real comparison would have been much less appealing:

Comparison of Providers - USA-to-Philippines, USD-PHP, $500, bank-to-bank, Feb 17 2017

Comparison of providers: USA-to-Philippines, USD-PHP, $500, bank-to-bank, Feb 17 2017

Unfortunate fact is that Remitly is much more expensive than one incumbent, about same cost as another and less expensive than the last one. Sharing such information with potential customers might be the right thing to do, but would likely lead to a tense phone call with a junior member of your VC. You have enough stress as-is, right?

Besides, almost every FinTech remittance startup is doing this. Look at Azimo in this article boldly comparing its digital pricing with some random high number for Western Union:

“They estimate it generally costs about 2% as compared to Western Union’s 9%.”

Well, let’s compare two snapshots below taken at the same time for exactly the same transaction. Guess which one is Azimo and which is Western Union:

Comparison of Western Union and Azimo: Sending 100GBP from UK to India via bank transfer

Comparison of Western Union and Azimo: Sending 100GBP from UK to India via bank transfer

UKIndiaWU100GBP April 16

Does it matter that Western Union’s digital pricing is on par with Azimo’s or sometimes even lower? If you are valuing truth about fame & fortune – maybe, but then why are you reading this article? And stop looking for truth among this season’s disruptive technologies like Bitcoin and blockchain. Their founders are also regular humans who dream of owning a Bentley one day soon, so they really don’t have a choice but to get with a program. Look how quickly these kids are learning:

zebpay-misleading-comparison-of-remittances-from-usa-to-india

4. Anchoring

This is a popular negotiating technique which could be also applied for confusing guiding consumers. The idea is to come up with some meaningless but impressively sounding yardstick, something that superficially differentiates your startup from competitors. Let’s look at its practical application by WorldRemit in this article

“The company is also differentiating itself from its competitors by existing entirely online.”

Considering that every incumbent has a digital unit which provides online services, this sentence seems odd, but most of consumers might not know that and could believe that their current provider is behind the times.

Incumbent themselves are eager students of this technique. Here is how Western Union does it:

Western Union: ad for zero fees, August 2015

Western Union: ad for zero fees, August 2015

While “zero fees” is an irrelevant data point since Western Union is charging an FX markup, most of consumers would perceive it as an indicator of very low prices. Many of SaveOnSend app users were surprised to find out that their favorite provider like Western Union or Xoom is actually making good money of them on the FX markup – such was a strong effect of “zero fee” propaganda. Banks also refuse to give up on misleading consumers by actively PRing “no fees” as the real benefit:

cibc-promotion-of-no-fees-for-international-money-transfer-october-26-2016

PR article: https://www.finextra.com/pressarticle/66783/cibc-eliminates-fees-for-canada-us-money-transfer

But of course, it takes a passion of a Fintech startup to take this technique to a whole new level. Rather than playing with a piecemeal marketing, they have courage to build the whole company around this anchor. Of course, they charge users a comfortable FX markup, but wouldn’t customers feel better if they thought that they are getting services for free? TransferZero’s evident response is “Hell Yeah”:

“…we, care about our consumers and their needs. We try to approach take the most of the technology for customers and their loved ones. TransferZero is the first Spanish Remittance Fintech 100% online, the service provided is easy, fast, secure and FREE!”

TransferZero Front Page Nov 25 2017

Xoom is teaching us another way to apply “Anchoring” technique. In July 2015, Xoom began publishing this ad for the USA-to-India corridor:

Xoom Twitter Ad - Aug 3, 2015

To unpack this a bit, a provider’s exchange rate depends on a) interbank’s exchange rate and b) provider’s FX markup. The higher the (a) and the lower the (b), the better provider’s exchange rate is. Let’s now look at Xoom’s exchange rate, dollar-into-rupees during this period:

Xoom India Exchange Rates Summer 2015

Let’s now compare it with the interbank exchange rates during same period:

USD INR interbank exchange rate July 15 - Aug 14 2015

USD INR interbank exchange rate: July 15 – Aug 14 2015

Both graphs have almost the same shape, but it didn’t stop Xoom from proclaiming “best rates ever!” making its customers feel that the company had something to do with this.

Xoom is also a master at emotional anchoring. They remind us every time how deeply they care about poor consumers without an access to banking services, also known as “unbanked”:

Does it matter that they provide no services for those consumers? Obviously not. Who has time for a detailed analysis of their segment and product strategy when their message makes everyone feels re-assured that someone is taking care of those poor folks in Africa? So keep your PR anchoring on an emotional connection to humanity while your colleagues take care of well-off folk with $2,000+ transfers. Learn from the pros on how to talk about unbanked like if you really cared:

5. Lying

This is a tough one. While most of FinTech stars are comfortably applying Techniques 1 through 4, very few are ambitious enough to make a blank false statement.

As often, TransferWise, such a rebel, sets an example of goal-orientation. As you remember, for the USA-to-India corridor TransferWise is one of the most expensive providers. How does #8 among global disruptors handle it? With gusto:

TransferWise: Facebook Ad, April 16, 2015

TransferWise: Facebook Ad, April 16, 2015

Not only TransferWise promises 90% savings, it claims to be “the cheapest” provider. Considering that TransferWise is outperforming other FinTech startups, sped past Xoom, and caught up to MoneyGram, can you really afford not to follow its approach in every detail?

Other Fintech startups are starting to follow this courageous technique. Remitly really wants to grow fast, so its capable team even came up with an interesting twist on a first-time-customer promotion, offering a very favorable exchange rate, sometimes above interbank:

Remitly first time offer India January 2017

Not bad, but how would you make the most of this one-time promotion if lying is ok? With Forbes help, Remitly claimed that it is actually their standard pricing:

Remity Quote Above FX rates Jan 14 Forbes article

Remember why you got started in the first place: probably wanted to help some people, make the world a better place… but what if it means less bragging rights? The balance between money-fame and integrity is always up to you.

In Conclusion

If you feel that our article is biased in any way and/or doesn’t mention other providers which use the same techniques, please provide proof in the comments section below and we will gladly rectify any inadvertent omission.

If you are a customer of these providers and feel misled, please share your experience in SaveOnSend app and in the comments section below. You are also welcome to contact appropriate government agencies in your country. For example, in USA it is FCC and CFPB.

  • Debbie Robert

    Here’s a link of a legit Hacker!
    cyberstallions@techie.com
    I worked with him twice, didn’t had any problems.
    I sent the payment before (bank transfer) he delivered what he promised in 4 days

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