Uphold entered the Indian market and reached cooperation with banks again

Last week, Uphold announced a partnership with India’s IDFC Bank to allow Uphold customers to conduct cross-border transactions from the fastest growing economy in the country. Today, Uphold announced another partner, Yes Bank.

Shangchi is not a bank, but its goal is to innovate the traditional financial services industry. Traditional financial institutions are also necessary partners for Shangchi.

Robin O'Connell, executive vice president of development and partnerships at Uphold, said Uphold aims to innovate with financial technology companies, and that the existing banking infrastructure that payments rely on may not be needed in the future.

“From a banking perspective, every company is going to be connected to the banking system in some way,” O’Connell said, explaining why Uphold is working with the traditional banking industry as part of its innovation.

“There are two types of banks,” O’Connell continued. “Those banks see fintech innovation as troublesome and wish it didn’t exist. They expect to control the industry, and if they do, they will try to find as much profit as possible.”

These benefits come from the 3% to 5% foreign exchange conversion fees that banks can charge when making cross-border transfers, usually as a fixed fee that is transferred between the banks involved.

O'Connell describes this as the payment process entering a "black hole" surrounding the banks, as payers and recipients wait in the dark until the funds come out the other side.

“There’s a real lack of transparency and it makes it difficult to do these transactions because of the length of time they take,” he said.

But there is an emerging group of products from financial institutions that understand these needs and find new ways to generate revenue as fintech shakes up payments — especially international payments.

“After that, we think you’re going to see the other side of banks that are more forward-looking and see them changing,” O’Connell said. “Demographics are changing, technology is changing, the way people interact with their assets is changing.”

He also said it was a way for banks to legitimize themselves by working with fintech companies and helping them develop technology, rather than competing with them outright.

It’s a shift away from the banking system that has recently spurred cross-border transactions, leading to what O’Connell describes as “astronomical foreign exchange currency conversion fees” for companies and consumers.

India and the Future

Last Tuesday, new data showed that India has now surpassed China to become the world's fastest-growing economy, with the National Bureau of Statistics predicting 7.6% growth this year.

Once the figures are tallied, India's economic growth is expected to reach 7.3% in the three months to December 2015, surpassing China's 6.9% in the same period.

Naturally, this is an ideal time for fintech companies to partner with Indian banks.

“If you look at India from a remittances perspective, it’s the largest inbound remittance market in the world, and it’s also the fastest growing economy in the world,” O’Connell explained. “It’s a particularly innovative and entrepreneurial country.”

With high demand for international payments from India, Uphold will quickly capture market share with its largest partners. Of course, competitors will do the same.

O’Connell is aware of the growing demographic in the cross-border payments services space.

“We’re not the only company trying to solve this big problem,” he said.

The problem, however, is that suppliers and other business partners may become reluctant to log into different payment platforms to get paid the way the buyer wants. However, O'Connell said he has not been involved in this incident recently.

“I don’t think any of the innovative companies here are making that much of an impact,” he said, adding that at this stage of the game, the biggest competitor and the biggest difficulty is changing the way payments are made.

That doesn’t mean ShangChi isn’t competing. “We’re not that short-sighted,” O’Connell said. “There will be some picking and choosing” when global payment platform companies and their partners will help succeed.

Expansion into new territories — such as India and, soon, Mexico, Central America and other Latin American regions — will be Uphold’s strategy to win the race. O’Connell said he also hopes to convince businesses to use the service not just as a cross-border payments tool, but also as a platform to hold funds in different currencies, rather than taking their money out and depositing it into their own bank accounts.

For example, the company model again raises questions about whether fintech companies such as Uphold are competing with banks or working with them to change the global payment system.

O'Connell stressed that as Uphold considered pursuing its own banking license, the financial institution's openness to working with innovators meant Uphold could stay within the regulatory perimeter.

“It’s interesting,” O’Connell said. “We’re innovating in banking, and the fact is we’re in a highly regulated space.”

It seems that both fintechs and banks are looking to save the costs, time and friction associated with cross-border transactions. But while companies like Uphold take away some market share and a profit stream for financial institutions, O’Connell says they are also introducing another profit stream to the industry — if they want to gain market share.

“It’s not true to say that banks aren’t innovating,” O’Connell said. “There are a lot of companies outside of banks that want to learn.”

Original link: http://www.pymnts.com/news/b2b-payments/2016/uphold-dives-into-india-with-bank-deals/
Editor: Meng Dada
Source: Babbitt Information