Call it remittance on a global scale, or P2P without borders.
PayPal said on Monday (July 15) that it is launching Xoom, its international digital money transfer service, in the United Kingdom and 31 markets spanning Europe.
The company said “the service will benefit millions,” including more than nine million people living in the U.K., and will pay out remittances to other individuals living in Nigeria, India, China, the Philippines and beyond, across 130 countries.
The announcement follows an expansion of PayPal’s send-side capability into Canada late last year.
PayPal’s customers in those nations are able to use their login credentials to send money directly across borders and into recipients’ bank accounts, or for cash pickup and delivery through Xoom.
As Julian King, general manager of Xoom, told PYMNTS in tandem with the launch, “Overall, PayPal’s Xoom business – and PayPal itself – has seen a long-term secular trend in the digitization and now mobilization of the management and movement of money. In the specific case of the Xoom services, we saw that it was a market segment that was materially underserved, for whom there had not been appropriate, meaningful innovation.”
The Xoom expansion, King said, should be placed amid the larger context of estimates by the World Bank that as much as $700 billion annually will change hands in P2P remittance transactions. When adding other payment types and wire transfers, that brings cross-border transactions into the trillions of dollars.
All of that volume, he noted, “is ripe for innovation.”
The Monday announcement comes as 80 percent of the company’s transactions originate (to send) on a mobile platform. Drilling down a bit, there are different preferences across various markets for how payments make their way across different corridors between countries. In reference to the range of services, PayPal has said that depending on the receiving country, users can deposit money to a bank account, send cash for pick-up or have cash delivered directly to recipients’ doors.
As King recounted to PYMNTS, “If you roll back the clock 20 years, 100 percent of transactions originated in cash – meaning someone walked into a Western Union. And 100 percent of the transactions were paid out in cash, meaning somebody walked into a bank or a financial services location and picked up cash.”
Each Side of the Transaction
Things have changed, of course – and now, the executive said, on the send side of the payments equation, a typical corridor, such the one between North America and Europe, has seen a shift to the digitization of cross-border services.
“That said, there is still a sizable portion of the market that is originating in storefronts today,” he noted. “So we believe there is a lot of work left to bring convenient, safe, fast and affordable digital origination to our send markets,” which has spurred the company to expand into the aforementioned countries.
Circling back to the idea of instant deposit and payout, PYMNTS raised the question of security of transactions – after all, the quicker the payment, the faster fraudsters might be able to disappear with ill-gotten gains. King said that PayPal and Xoom have earned a “great deal of trust” from customers, and that “if for some reason something bad happens, we are going to keep our customers whole.”
On the receiving side of the transaction, King told PYMNTS that each corridor sees a unique mix of disbursement, spanning cash or digital options and preferences. As an example, he said that a corridor like the U.K. to India may see recipients opting for funds to be deposited in bank accounts – where, say, a computer engineer in Paris may move money to family members back home or to his own bank account there.
In another example, in the Philippines, PayPal has integrated with the top banks to offer instant deposits (instant deposit and payout remains an overarching goal of the company), but cash pickup is available at banks and in malls with financial service retailers. King said his company has 12,000 locations across the Philippines geared toward cash pickup.
The Challenges – and Scale Matters
Catering to corridor-specific preferences is no easy task, of course, and not without challenges. As King told PYMNTS, there needs to be a platform in place that can scale globally and that, in his words, can “internationalize and customize the experiences to the nuances of any particular market.” There also needs to be country-specific processing activity that takes into account the local regulatory and compliance obligations.
King noted that PayPal indeed has that scale, with 277 million active customers spanning its markets, adding that the transaction limits across the just-announced expansion stand at just under 9,000 GBP. In addition, the current transaction limits in the U.S. business stand at $50,000.
“We expect that very quickly, we are going to build those transaction limits in Europe to numbers that are very similar to where we are in the United States,” King said.