Despite being the largest financial market in the world, Forex markets are replete with jargon, conventional models and complex processes, making it difficult for both B2B and B2C segments to truly understand it. Various asset classes like debt, equities and commodities have numerous players and a transparent ecosystem, but Forex still remains a closed market in India and other global markets.
The complexity was deliberately imposed on foreign exchange by intermediaries to hide the missing transparency, neglected seamless experiences, deliberately delayed transactions and overcharged costs. There were a large number of people who needed FX services, but had to contend with what the banks offered.
Nobody wants hard-earned money to fly away fast
Foreign exchange is one of the prime money minting area for banks as the business communities and consumers continue to pay obnoxious forex spreads on decent size transactions, losing a few hundred thousand rupees every month. This is one area where money vanishes in air without writing a cheque. A simple mark-up of 20 paisa on export process of $400,000 makes you poorer by Rs 80, 000 without separately debiting your bank account.
Future of Forex market will be in safe hands of fintech disruption
The future of Forex is yet to expect a huge transformation but thanks to the Fintech revolution that now the landscape is rapidly changing. Innovative ideas and disruptive technologies are challenging the conventional models of Forex. Business communities as well as individuals have successfully experienced the fintech revolution in payments, lending, personal finance, wealth management and various other segments. This has given an extra push to the demand for disruption in Forex. With the entry of new enablers equipped with advance technologies and in-depth understanding of consumer requirements, foreign exchange in India is opening new dimensions for seamless and transparent transactions.
Consumers are demanding for efficient and seamless processes
This disruption is now pushing India’s Forex markets from its dark ages of traditional systems and processes to newer technologies that can better serve the needs of today’s customer. There is little resistance in the foreign exchange market. Customers are asking for efficient system, seamless experiences and on-the-go transactions at lower transaction costs and better profit margins.
The solution to this rising consumer voice for transparency and efficiency is now in the hands of passionate fintech startups that are willing to take the Forex sector to a completely different level. Fuelled by the consumer demand for lower charging fees and increasing need for one click solutions, disruption in Forex is expanding from B2B to C2C. With the advent of online forex market places, connected devices and world class applications, the fintech sector is successfully offering superior consumer value propositions.
Disruption will lead to fall of hidden costs and overcharged fees
Fintech companies are attempting to disrupt the foreign exchange process by providing comprehensive products and solutions such as rate alerts, real time updates, automated information platforms, single click transactions, forex research reports, online risk management etc. The automation of the entire process reduces the risk, eliminates the role of intermediaries therefore minimising the transaction cost and enhances price transparency for consumer.
With an advanced ecosystem, digital going mainstream and disruptive technologies like Artificial Intelligence, Machine Learning, Blockchain, Cloud etc the next generation Forex market in the country will be able to provide a wider choice for transactions, faster and cheaper payments and control on risks.
In conclusion, disruption has just started in foreign exchange but certainly over charged transaction costs and opacity are on the way out. The industry potential is huge with one million small and edium enterprises and 20 million individual customers using banking services to transact in foreign exchange market. Better profit margins of banks from both B2B and B2C segment is under risk due to information arbitrage by intermediaries, lack of transparency and reliable platforms. I am confident that with this craving for reliable platforms and the new evolving ecosystem, disruption in Forex will lead to the demise of overcharges and hidden fees.