A recent announcement by money transfer business (MTB) LemFi highlights a growing trend in the UK remittance market. Along with other providers they now offer zero fees on some transfers, coupled with competitive exchange rates. LemFi’s promise is zero fees for transfers from the UK to India. As the remittance market grows and competition increases, this sort of deal is becoming more common. Like the rise of ‘free’ banking on the UK high street, it may not last forever. For the moment, though, it is a significant factor shaping the sector.
How to manage costs with zero fees
For MTBs, zero transaction fees are a powerful marketing tool. It attracts customers seeking value without costs, and can help build a customer base quickly. Yet this begs a question: how to sustain profitability without charging the customer? Some “free” services cross-subsidise fees from corporate clients; others operate on scale, so make marginal profits through many small gains on exchange rates.
However, an MTB’s real measure of success isn’t just its ability to attract customers. It also needs operational efficiency. Maintaining profitability in a fee-free model requires streamlined operations, particularly in back office and compliance functions. For small and micro MTBs, the financial burden of expanding compliance teams can be overwhelming. Which means the efficiency of these functions is paramount.
Top quality compliance services are essential
Streamlining compliance isn’t about cutting corners. Instead, it requires robust automation of routine tasks. A comprehensive compliance service can transform the back office from a cost centre into a strategic asset. Key features that MTBs should seek in compliance services include
- thorough Know Your Customer (KYC) protocols, which encompass up-to-date checks for anti-money laundering, anti-terrorism funding, sanctions lists, and Politically Exposed Persons
- in-depth identity verification,
- further checks against stolen or resold ID documents,
- sophisticated transaction monitoring that builds profiles of typical and atypical behaviors, to flag up suspicious activity, and
- to complement all of these functions, a built-in and continuous audit trail.
Another critical element is a customizable rules engine, allowing businesses to fine-tune their scrutiny levels according to their specific risk profiles. Scalability is also vital, ensuring that as the business grows, the compliance functions can adapt seamlessly.
The benefits of the best compliance provision
While there are numerous compliance packages in the market, all are not created equal. Opting for basic provision can be a false economy, especially in terms of additional staff required for essential functions. On the other hand, the advantages of selecting a top-tier service are seen in:
- smoother operations,
- improved cost-effectiveness, and
- an enhanced customer experience, all of which lead to
- greater profitability.
In this context, it makes sense to opt adopt a service that delivers high levels of compliance by default. Of these there are relatively few. One of those to note is Compli from Essiell Compli. As a, a leader in fintech and compliance Essiell Ltd offers a robust suite of services designed to meet the needs of every MTB.
Play a long game for sound growth
By choosing a comprehensive and reliable partner, MTBs can adhere to stringent regulatory requirements and position themselves for sustainable growth. This approach to compliance ensures that businesses can focus on their core offerings without the looming threat of inefficiencies and rising costs. However long the zero fees environment lasts, and beyond, smooth operations will remain the heart of long term profitability.
By Declan Morton, staff writer at Essiell Compli.
For reference: LemFi Now Enables Instant, Low-cost Payment Transfer Services to India (Asian News International, 16th May 2024).
