How to Tackle the Top Remittance Problems in Banking ?
Remittance is a key sector for every single nation in the world. Since cross-border payments drive the economic growth of countries, it is actually the reason behind keeping even the other sectors thriving. Not just this, these transactions even strengthen international ties by building both personal and commercial relationships.
As the importance of remittance continues to grow, so does the demand, and hence the sector is expanding with each passing year. Still, most people from almost every part of the world are stuck with the traditional methods of remittance, primarily formal banking channels.
Unfortunately, banking institutions are failing to actually evolve as quickly as the sector itself. As a result, remitters continue to face the same age-old issues and even more than that due to the inability of banks to adapt to modern needs. Read on to explore the top challenges with bank-based remittance transfers and the practical solutions to overcome them!
Understanding Bank Remittance
Bank remittance is actually the transfer of money from the sender to the receiver located overseas through official banking networks. These channels are indeed reliable, yet they involve multiple entities.
Thus, the cross-border payment, which seems as simple as a transfer from Individual A to Individual B, actually includes the sender’s bank, intermediary or correspondent banks, and the recipient’s bank.
Top Remittance Challenges in Banking And Their Solutions
Let’s go over each of the challenges associated with bank remittances that stress the remitters and solutions that actually work:
Use of the Slow And Weak Legacy technological infrastructure
Banking institutions are still using the legacy payment systems that are powered by outdated frameworks and technologies. These operating systems are slow, vulnerable to attacks, and even present costly downtimes. Besides, they are not built to process instant transfers, so they can’t actually do that.
But here’s more! These system frameworks cannot be easily upgraded by integrating modern technologies. Their rigid architectures fail to support advanced systems like blockchain, AI, or real-time processing.
Solution: A modern remittance platforms that have a strong infrastructure and the latest protocols can enhance the experience for remitters. Cloud-based systems equipped with APIs and support for blockchain technology can facilitate secure and faster payment processing.
Delay In Transfers
Due to outdated legacy frameworks and complex remittance networks like SWIFT, banks often take days to process money transfers. In addition, methods like batch payment processing and manual verification further slow down the entire process. Although settlement times have improved to a few hours in some cases, banks still fail to meet growing expectations of customers for instant real-time transactions.
Solution: A sophisticated remittance platform that connects with real-time payment systems can actually be a big game-changer when it comes to the speed of international payment processing. In fact, the latest payment methods like Visa Direct, RippleNet, and SWIFT gpi (Global Payments Innovation) provide almost instantaneous international transfers. They can even work directly with regional payment partners to avoid delays.
Hidden and Excessive Remittance Service Charges
Bank remittances, of course, incur charges due to platform fees and exchange rates. However, these costs are absurd. Also, there is a lack of transparency in their remittance fee structure.
Banks add hidden fees and charge unfair exchange rates. Furthermore, as banking remittance systems include numerous intermediaries, each bank, clearinghouse, and service provider in the remittance chain adds its own markup.
Solution: A digital remittance platform that outlines all fees before confirming the transfer can improve transparency in remittance. Digitizing operations reduces the number of unnecessary intermediaries and their associated service charges. Blockchain-based payments can also be employed, as they are peer-to-peer transactions.
Furthermore, providing fair exchange rates without adding unnecessary fees can help remitters understand the true value of the transfer.
Limited Access To Banking Remittances
In many countries, mobile banking remittance services are still out of reach in certain regions. This is frequently brought on by tight banking regulations, inadequate digital connectivity, and limited infrastructure. In today’s world, when people can access almost anything from their mobile devices, whether it’s entertainment, shopping, or anything else, the lack of mobile-based remittance apps is a major disadvantage.
Additionally, some institutions offer outdated apps that do not prioritize user experience. It makes it extremely difficult to use for people who aren’t good with technology.
Solution: A remittance platform that comes with web as well as mobile accessibility can help deal with the issue. Regardless of technical expertise, the application is simple to use for all users.
Poor Transparency in Tracking Transfers
Aside from the lengthy processing time, there is a lack of visibility into the status of transfers. Most bank systems do not provide real-time tracking or information on transfer status.
Firstly, remitters need to wait for days for the transfer completion, and they have no idea when the money will actually arrive due to multiple correspondent banks being involved.
Solution: A futuristic remittance system keeps track of the entire journey of funds and provides customers with complete transparency. Not only that, but its alert and notification feature provides real-time updates on transfer status via various modes such as email, text, and push notifications. Users are actually aware of whether a transaction has just been started, authorized, rejected, or received!
Cumbersome Onboarding
Adhering to Know Your Customer (KYC) and anti-money laundering (AML) regulations is essential for banks to remain compliant with financial regulations and ensure the security of their platforms. But these procedures often require significant time, extensive paperwork, and considerable effort. This is quite frustrating for both users and banks.
Solution: Modern remittance platforms include AML and KYC protocols to automate and streamline the KYC and anti-money laundering processes. They use biometric technologies such as fingerprint authentication, facial recognition, and automated ID verification.
Wrapping Up
The global remittance sector is evolving. Yet Financial institutions are failing to actually adapt and provide customers with safe, quick, and transparent remittance services. In a time that demands immediate, digital-first solutions, they are still held back by outdated systems, absurd pricing, and slow processes.
Tech Remit is the leading remittance software development company that builds remittance platforms aimed at addressing the challenges posed by traditional banking systems. Our white-label remittance software is specifically designed for banks, remittance firms, and financial institutions. The platform includes integrated features such as AML/KYC compliance, fraud detection, instant fund tracking, multi-currency support, and many other functionalities. Book a demo today to see how Tech Remit can transform your remittance operations.
Also Read : How to Choose the Best Remittance Solutions Provider For Your Business?