Case study Flashcards
Define active customers
The total number of unique customers who have completed at least one transaction within the last 12 months. MTOs consider the sender of money, rather than the recipient, to be their customer.
Define an agent
An individual/business authorised by an MTO to represent it and handle transactions on their behalf.
Responsibilities include: receiving and disbursing funds, answering customer queries, verifying the identities of senders and receivers and marketing
Basically do more than a partner foes and also usually physically disburse funds
B2B and C2C
Business to business (as stated) and customer to customer payments (individual to another)
Client money
for an MTO this refers to funds deposited with pay-out partners and held in segregated accounted separate from standard bank deposits, The money is held in trust by the partner until it is used to settle a transaction.
Corridor
A specific route (between origin and destination country) through which MTOs facilitate payments, For example, transfers from the UK to Egypt would be considered one corridor
Destination country
The country where the recipient of the payment is located and the payment is received
Float
Funds that an MTO holds in reserve in various currencies across different accounts or jurisdictions to facilitate the prompt execution of cross-border payments or currency exchanges.
These funds are deposited into bank accounts in the countries where the operator has presence or has established partnerships, before any transactions actually take place. This arrangement is known as pre-funding.
Know your customer (KYC)
Regulations requiring financial organisations to verify the identity of customers to prevent fraud, money laundering and terrorism financings. These apply to all orgs involved in processing payments and taking deposits in the Uk and in most other countries.
MTO
Money transfer operator (MTO) client facilitating cross border payments charging a fee for doing so
Origin/send country
The country where the sender of a payment is located and where the payment originates
Partners (pay-in and pay-out)
Local business or outlets that enable customers to deposit (pay-in partners) and withdraw (pay-out partners) funds from a money transfer service. These partners are vital for providing an international reach.
They are generally financial services orgs with established payment systems in their home country and have limited contact with the customer
Pre-funding
The practise of MTOs having sufficient funds available in the destination country prior to facilitating the payment, held by their pay-out partner to ensure the recipient can receive money immediately after the transfer is initiated by the sender.
This facilitates fast payment but involves foreign exchange and credit risk for the MTO (funds held are referred to as the float)
Partnership agreements detail amount and frequency of top ups
Post funding
The practise whereby funds are transferred to the pay-out partner after the MTO has received the funds from the sender.
This can lead to slower transfer times than pre-funding depending on the contract in place but it is usually lower-cost to the customer. It can also eliminate forex and credit risk for the customer
Remittances, what are they. How much of the C2C market do they make up?
Usually refers to the transfer (sending) of money by individuals to their home country or region (migrants)
World bank defines as cross-border personal transfers and compensation of employee
Make up 36% of all C2C transfers at US$656 billion per year
Increasing because of increased global migration
the UN are calling for reduction of this charge to 3% from 6.3% to ‘reduce inequality within and among countries’ saving families affected SU$20 billion per year
Settlement assets
The assets used to settle/complete a money transfer between parties where pre-funding arrangements are in place. This is usually cash held as a float in the relevant currency.
Settlement obligations
Amounts owed to recipients of money transfers, or to partners, consisting of monies collected from the sender but not yet paid. This usually refers to post-funding arrangements.
Third party acquirer
Any business that collects payments from customers on behalf of others.
For example, customers often pay with debit/credit cards, in which case the transaction will be verified and processed by the third-party acquirer who is the card issuer.
The TP will settle the transaction with the MTO directly, or with its local pay-in partner.
Fintech
No official definition however used to describe businesses that apply new tech to challenge or disrupt incumbents within certain areas of financial services, notably banks, insurers and credit card providers.
