With more of us than ever enjoying global lifestyles and sending and receiving money in more than one currency, innovation in the area of multi-currency bank accounts might seem like a no brainer.
These accounts are a simple enough idea, accounts that allow you to send and receive money in more than one currency — useful if you have a second home abroad, are a frequent traveller, or have family in another country.
As well as being convenient, they are also often touted as a way to avoid expensive bank fees on sending and receiving money in foreign currencies as one-off transfers.
Big name banks, especially those that offer services for expats, have traditionally held sway in the multi-currency account market, but many of their offerings are expensive and have very high barriers to entry. Lloyds Premier International current account, for example, requires either a sole annual income (or currency equivalent) of £100,000 per person, or a deposit of £100,000 to save or invest with Lloyds within six months of opening. It also charges a 2.99 per cent currency conversion fee. Another example is Citi Bank has a $200,000 (£144,000) income requirement.
Many multi-currency accounts are also relatively old-fashioned, with many requiring customers to visit a branch to open them. Most don't offer any debit or credit card. The customer can only send and receive money and they can only withdraw cash on the desk at the branch.
What’s more, customers are at the mercy of the banks’ own exchange rates, which are unlikely to be the best on the market.
Step forward the disruptors
Perhaps, given the scenario above, it is unsurprising to see the fintech businesses taking a punt in the multi-currency space. Travel money observers will have noticed the arrival of the Transferwise Borderless Account, the WorldFirst World Account, as well as offerings from well-known names like Revolut, Starling Bank and Monzo. What do these companies have in common? Unlike the banks, they aren’t trying to fit multi-currency into the old bank account model, constrained by bricks and mortar and traditional deposits over the counter. These products are certainly not for those who want a cheque book with their multi-currency account.
They outpace their more traditional rivals, though, in terms of price and features. Transferwise’s Borderless account is free, for example, and currency conversion fees are between 0.35% and 1.5%. What’s more, with its app, customers can see and switch between 29 currencies instantly.
The Worldfirst account, currently for businesses only, has similar advantages, while Revolut’s Personal service allows you to spend abroad with no fees, free monthly ATM withdrawals as well as the ability to send money globally for free.
In all cases there’s no need to visit a branch, no minimum income requirement, and all come with cutting-edge technology that allow customers to see their currency pricing while on the go.
They are also far quicker to open. There’s no need for proof of address or to fill in applications or sign documents.
The future for multi-currency
While fintech for multi-currency accounts is still in its infancy — Transferwise’s debit card, for example, is still ‘by invitation only’, these early entrants into the market are only the start.
If banks want to compete with the disruptors, they are going to have to take a hard look at what they are offering, this can be done through foreign exchange benchmarking and bespoke research about what customers want when it comes to money transfers and multi-currency accounts.
Lessons from money transfers
Consumer Intelligence’s insight into the money transfer market is a good place to start when looking at the multi-currency market. Here, it’s clear that banks are already losing their footing to the fintechs.
Consumer Intelligence’s most recent study into money transfers shows that disruptors, such as Transferwise, are gaining increasing brand awareness, scoring higher than Lloyds, HSBC or the Post Office for spontaneous awareness from customers. 51% of people last having used a specialist provider, rather than a bank for transfers, compared with 37% using a bank.
Working out what the customer wants
There are lessons here, too, for those banks who want to hold onto multi-currency business in the light of competition from TransferWise and WorldFirst.
The study showed clear generational divisions, with younger people wanting to use apps on their mobile phone to send and receive money from abroad. Younger people prioritise rates and speed when transferring, and are not concerned about speaking to a human being. These are all attributes that favour nimble, AI-powered fintech brands.
The advent of Open Banking will favour fintechs further, allowing them access to customer data to make their multi-currency offerings smoother and more personalised.
A gauntlet for the banks
Fintechs are throwing down the gauntlet in the multi-currency market. While this is clearly the early stages for them, our studies show they are providing what customers want - speed, automation, good rates and mobile apps.
Banks that want to keep their dominance in the multi-currency space would do well to take note.
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Andy Buller, Key Account Director and Head of Travel Money
Andy has over 20 years’ experience within the financial services sector and has worked predominantly within the FX, wholesale bank notes and prepaid industries. In previous roles Andy has managed key relationships with many of the leading financial institutions including Commerzbank, Credit Suisse, American Express, RBS and Travelex.
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