If one thing is sure, this pandemic will change how we address our issues, personally and professionally. This week we spoke to Luis Cambronero, co-founder of TransferZero. We wanted to analyze with him the impact of the COVID-19 crisis on cross-border payments companies. Our main question is: What are the challenges and opportunities money transfer and payments companies face BC and AC, before and after coronavirus?
First, a quick introduction to Luis. A business major from Spain with a diploma in International Business, through his family, Luis has been in the money transfer world since he was 16. After several jobs in the sector he co-founded TransferZero in 2016 —the first fully digital remittance company in Spain. Later, the company was acquired by AZA, an established cross border payments platform for African markets, which in 2019 reached one billion dollars in volume, a sum they already surpassed in 2020. AZA operates in 10+ countries, and over 30 partners are connected to the TransferZero API. With a bird’s eye view on the effect of COVID-19 on the African continent and the remittances industry, Luis shared with us his mind.
Florencia Miller: What were the most significant challenges and opportunities you faced when starting the company? And how has this changed as it grew?
Luis Cambronero: Most of our challenges were in building proper infrastructure and acquiring the licenses for developing our business model. In Spain with TransferZero, these things were difficult to get, but with AZA in Africa accomplishing these things within a whole region, the challenge has been enormous.
It’s a game of balance. Because our business model is so disruptive, we’ve needed to educate regulators and, in some cases, co-create legislation. For example, in Uganda, we received the first digital remittance license, which took nearly three years. Because we operate in over 10 African countries, we’ve worked hard to engage regulators when entering a market or work with already licensed partners.
Sometimes regulations become a chicken or egg problem because banking partners want licenses before you sign with them, and regulators want to see banking partnerships before they give you a license. This is where our other licenses, such as by the FCA in the UK or the Bank of Spain, come really handy.
When we started TransferZero, we understood that the opportunities were tremendous, but there was another challenge: education on the benefits of digital options. This is one of the challenges that traditional MTOs are facing today: how can we convince customers that are used to cash remittances to try digital?
The money transfer world is extremely fragmented. It’s now made of digital networks, cash networks, banks and non-banks, mobile wallets and mobile ecosystems, all looking for ways to operate with one another. At AZA, we’re looking to increase interoperability, helping all these different networks work together.
We’re lowering the cost of adding new digital channels to existing, trusted providers, which encourages customers to try something new the next time they’re sending money. Through this, step-by-step, we are enabling MTOs to provide better experiences and cheaper transfers, attracting customers away from risky black market solutions.
FM: What are the challenges facing remittance platforms like TransferZero during the COVID-19 crisis?
LC: For us, the COVID-19 crisis has been more about understanding the challenges our clients are encountering. All of the MSBs, MTOs, and fintechs that use our platform are facing problems. First, their customers are unable to visit the agencies due to the lockdowns. But the more worrying issue is the job situation for migrant workers. They are the most vulnerable since many of them do casual work, which is the most affected by the lockdown. There is a very sudden decrease in their income; therefore, they are sending less money back to their families. Without savings, without governments helping them, with unemployment, it will take time to go back to new normalcy after the crisis.
Because we were born as a digital company, we believe that digital services will be the beneficiaries of the crisis, and we see the transition to digital has accelerated. We feel that some of the more traditional companies have been trying to move to digital without a proper transition, which can be challenging at best, detrimental at worst. It’s much better to partner with existing companies who have been in the market and have digital expertise.
FM: What measures did your company take to adapt to the current global situation?
LC: On the sending side, we reduced FX margins to zero and lowered transaction fees, which reduces the charges for the end customer. Secondly, we have reduced our revenue margins to help those companies that are struggling to survive by helping keep their volumes up.
At the same time, we are trying to share the knowledge and experience we have on digital challenges. We are running co-marketing campaigns alongside partners, sharing marketing budgets, and sharing knowledge of how they can persuade their clients to use digital channels.
FM: How do you expect the situation to evolve in the medium and long term? Do you think COVID-19 has changed the industry? If so, how?
LC: Everything goes back to what we were talking about before. I think most MSBs will have to move to digital or at least have a digital solution, and they must spend enough resources on that. We see some MSBs, even larger ones, building now their digital solutions; are those solutions at the same level as their regular cash service they are offering?
After COVID-19, companies will have to spend more resources to build outstanding solutions. And they will also have to spend resources on educating people on how to move to digital. That’s one of the changes I believe we will see in the medium, even short term.
Another change I believe that we will see is companies like us that are on the receiver side will have to prioritize the different digital payments channels —such as mobile wallets, bank accounts, credit cards. At the same time, a dialogue with regulators and governments is essential as they need to face the need to increase the support for digital payment channels. It is a need for many countries and an urgent need for the population.
FM: Do you think the change will last, or will it fade once the pandemic is over?
LC: Even if the virus fades away, the change will stay with us. There will be other pandemics and crises in the future, and we need to be resilient. People are buying things on digital platforms like Amazon and streaming movies on Netflix, so we need to be at the same level of delivery with remittances, right?
We have already seen more conservative segments starting to use digital channels because they are afraid of cash or being outside. The world is moving to digital, and finance is taking too long. Still, I believe this change cannot be achieved only by MSBs themselves. It’s a work of governments, MSBs, financial companies, financial institutions, and banks together.
FM: What are some steps remittance companies can take to improve remittances in general?
LC: Remittances companies need to digitize all their processes. I’m not only talking about their product offerings but the company culture as well. Remittances are extremely important for the global economy, which means the companies in the industry need to be adaptable and agile. Today, many companies are struggling because they were not ready to work remotely and don’t have enough digital solutions to assist people in their homes.
For digital to truly compete with cash, the digital services and products need to be high quality. That’s what we’re doing at TransferZero. When a partner connects to our API, the first thing they get is instant payments in all of our channels. They also have real-time status of the payments and completely diversified payment channels in the countries we serve.
Of course, we also utilize cash networks, but our heart and soul is in digital. Africa is an incredible place for digital to keep its growth pace. Countries like Kenya, Uganda, and now Ghana, have built in the past decade many digital solutions, gaining many followers. Mortgages, mobile wallets, loans are all done digitally. Digital solutions are the future, and we intend to help companies get there.
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