Money 2.0 and Future of Money: Global remittances waiting to be streamlined

Over the weekend, I was reading this month’s cover story in Wired magazine The Future of Money: It’s Flexible, Frictionless and (Almost) Free. The story made me reflect on how money transfer has really gone digital. Some of these technologies online have made really convenient though we continue to use bank accounts and credit cards for traditional financial transactions, and increasingly paypal for online transactions.

Then, I began reflecting on another aspect of money exchange – Forex remittances – that hasn’t quite undergone the same revolution. A Non Resident Indian (NRI) and member of the global expatriate community, I have had my share of travails when it comes to foreign exchange remittances. This includes sending money from UK to India when I lived there, converting pound sterling savings to US dollars when I moved across the pond, occasional remittances from the US to India, remittances from Canada to the US and India when I was working there and last year from my Swiss Bank account to the US along with and some remittances to India when I worked in Switzerland. In case you are wondering, there is hardly much glamour or intrigue to a “Swiss Bank” if you happen to live and work there.

I must admit, almost every currency exchange transaction and remittance had left me feeling I was being shortchanged by the system. Banks at both ends of transaction – my transmitting bank and the receiving bank – wanted a “small” slice of my remittance pie; and so did other middlemen/exchanges through which my money passed. Add to this the uncertainty of exchange rates that change by the minute and the average remitter can be left wondering about the gain/loss he could have had. Of course, banks do agree to ‘lock’ rates for you at the time of transfer, but do so at a hugely discounted rate leaving the consumer to wonder if he wants to take the ‘risk’ of exchange rate shift or go with a predictable, albeit lower rate now?

I guess I am not alone in the remittances saga. Sanket Mohapatra writes in the Worldbank blog that “Inward private transfers reached $27.5 billion in the first half of the current fiscal year, a 4.3 percent increase on a year on year basis.” Hundreds of thousands of fellow expats, immigrants may be in the same boat as me, if not worse.

For smaller transactions, say a few hundred dollars, Western Union and other moneygram services charge a hefty fee. Of course, they provide convenience: outlets at malls, supermarkets and even post offices.

Banks from China, India, Mexico and other countries with large expat populations realize the potential of this lucrative clientale. Many of these banks have established subsidiaries in the US, Canada, UK, Europe, Australia, middle east and elsewhere and also operate branches there. The idea is to target expat populace with ‘familiar’ brands. Why do you think ICICI pays bollywood icon Shahrukh Khan a boatload of money to have his face plastered on banners and adverts in Canada, or youtube? Which to me is a bit delusional: Walk into an ICICI bank in Canada and you soon realize that they operate as a ‘Canadian’ bank, just like TD Bank or Scotia bank, and have very little to do with ICICI ‘back home.’ I remember going to a State Bank of India (SBI) branch in San Jose, California a few years ago to request the manager to attest a document that had to be sent to my SBI branch in Bangalore. The expat Indian manager politely informed me that since this was an American branch of SBI, he was not authorized to attest a document for use in India.

Bottomline: For the average consumer who probably remits money overseas once or twice a year, the market continues to hugely inefficient and fragmented. Though there are several “online” service providers that promise to shave off the currency exchange fee and offer ‘attractive’ exchange fee, hardly anything is set in stone. A common excuse is that the actual exchange rate is calculated only after the funds have cleared, which could take days if not more depending on the speed of your wire transfer and funds clearance.

While I focus on the consumer dimension to money transfer, I am sure the banks, brokers and others have to answer to governments and regulatory agencies. There are whole gamuts of issues that come to play including local, national and international regulations on money laundering, Laws on taxes, anti terrorism etc etc.
Which brings us back to Daniel Roth’s article: can the Future of foreign exchange transfers for consumers become Flexible, Frictionless and (Almost) Free? Probably not anytime soon!

Weekend musing on Toyota

My first car in the US was a (used) Toyota Camry that I kept for nearly a decade before selling it on eBay. Not surprising, since Japanese cars – especially Toyotas and Hondas, to some extent Nissans and Suzukis – are/were the perennial favorite of new immigrants, especially Asians. Given the recent recalls over Steering, Brakes, floor mats, electronics and the Mea culpa by management, it is still hard not to feel nostalgic about Toyota. A few eclectic thoughts on the car and company:

• Regardless of the recent recalls, the company still makes some of the best automobiles in the world
• Yes, even one accident caused by malfunction is one too many. As it turns other auto manufacturers’ are also signaling problems with their electronics, gears and the like.
• Toyota is multinational, with a global footprint and supply chain, including dozens of manufacturing plants in North America.
• While the company will recover from the recent fiasco, how it does, and where it goes is a topic the business press is going to watch very closely; and so will business-school professors writing case studies and legions of B-school students looking to learn from the live case study being played out
• And speaking of modern automobiles and our dependence on them for commute and transportation asking how reliable can/should the automobiles be is not even a philosophical question. But I guess automation of automobiles is a topic the technologist and Software Architect in me is pondering over. This is a topic I have had endless debates with peers and clients about: the cost of quality.

Where does the recent Toyota fiasco leave cost-conscious global immigrants moving to the west, looking for reliable ‘wheels’ that will hold value for years? Would my next car be a Toyota? Wish I had a looking glass…

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Ps: On the human side, a nice post by Basab Pradhan (My Son and Asperger’s Syndrome)

American Missionaries and Hikers: why are Americans flouting global immigration laws?

A couple of recent incidents are making one reflect on dual-standards of globalization; one for westerners (including Americans) and another for the ‘others’ in the globe
Case A) U.S. Baptist Group in Haiti Charged With Child Abductions: Ten Americans who tried to take 33 children out of Haiti last week without proper documentation were charged with child abduction and criminal conspiracy, the New York Times reports. The group, made up mostly of members of a Baptist congregation in Idaho, said they were transporting the children to an orphanage in the Dominican Republic. “We did not have any intention to violate the law, but now we understand it’s a crime,” NYT quoted Paul Robert Thompson, a pastor who led the group in prayer during a break in the session.
Question to self: Sure, there is a strong humanitarian motive here. But what the heck were these Americans thinking? A third world country ravaged by natural disaster is a case study to “rescue” orphans, take them across international borders without papers, and get some brownie points from the one above?

Case B) A few months ago, the media in America was all over the story of three American hikers who were arrested in Iran after “straying” across its border with Iraq.
Again Question to self: What the heck were these American “kids” doing, “hiking” in such a volatile part of the world, especially without the right papers/visas?! Reverse the situation; what would happen to a couple of hapless Iranian “kids” who "happen to stray" into American borders while hiking in the Canadian Rockies or in Mexican-US border near Rio Grande? A very hypothecal question I guess since few Iranians will get visas to come “hiking” in Canada or Mexico. And the rare few who do will probably not be foolhardy to stray near American borders without American visas. Given this, why did it surprise the American media when “Iran Accused U.S. Hikers of Espionage”

I completely sympathize with the helpless individuals in both situations who find themselves at the receiving, finding themselves in Iranian or Haitian prisons, especially if they were innocent.

There again, if a crisis is an opportunity, here it is: Americans who have the time, energy and wherewithal to go out to the world and solve others problems could reflect on the humanitarian aspects of immigration and closed borders back home?! Just a couple examples:
• Spouses and minor children of American Legal Immigrants (Green Card holders) have to wait at least 4 -5 years before being granted an Immigrant visa to enter the US legally! Would ANY American missionary be willing to sneak in a spouse or child of a legal resident on “humanitarian” grounds?
• Workers in America living legally, paying taxes have to wait years before their Green Card applications are processed. How many missionaries are willing to stick their neck out here

Doctor heal thyself is an old adage comes to mind. But what am I saying, aren’t American Doctors and healthcare workers trying to heal the system? Well, that’s a different story in itself.