Fascinating post, Cordelia!
Effectively, TransferWise is building a marketplace model of currency transactions, and removing the middleman such as banks or money transfer agents. Since they do not actually transfer the currency, their cost reduces. Also, not maintaining an inventory of currencies would minimise their hedging costs, which is another reason why banks and agents charge a significant markup.
One question which arises is how they will deal with the ticket sizes, i.e. will they have set packages for transfer (e.g. $100, $500, $1000, etc.) or will any denomination be allowed? In the latter case, how will they marry demand and supply?
Would love to know more about the secret sauce which lets Interswitch provide low cost services to its consumers. For instance, how are they able to offer lower fees on international transactions, given a lot of the costs remain nearly the same for them and competitors?
Interesting post MayC. I wonder how this industry would be affected by cab aggregators such as Uber entering into the driverless cars space. Would it still be incentive enough for both parties if instead they could simply use the Uber service. I believe that the size of the pie will not increase, and instead this service will be cannibalised by driverless cars.
A question crops up from your assertion stating “you still need to get cash somehow”. Do you indeed?
Is it possible that the entire cash economy could be replaced with digital payments and banking. Apps such as Venmo and Paypal could replace the use of cash, thereby eliminating the need for ATMs and other cash dispensing facilities in banks. Or is cash something so central to human behavior that it can never be eliminated. Either way, this could completely change the business model of banks such as BofA, and I wonder how they are thinking about it.
It will be interesting to see if Facebook allows competing apps such as Google or Twitter to join the platform, like you mentioned. If indeed the “technical requirements” are not a major barrier to entry and any website or app can join the platform, most of the concerns with this initiative could go away and it could be as transformative as Zuckerberg claimed it would.
LG, what are your thoughts on Facebook masquerading this as a philanthropic and visionary initiative? If it were indeed a business interest, it should not have been repackaged into something “noble”.
Both very good points, RG! I just want to highlight how important openness, transparency and innovation have been to the internet as we know it today.
(Who are you btw? :P)
AJ, by favoring certain websites and thereby disadvantaging others, this initiative would move us in a direction in which there will be limited product innovation, less incentive to drive prices lower, and possibly price gouging by the favored websites. This would be detrimental to the consumer.
Very good point. If cost was indeed a concern, as you rightly pointed out, there could have been a restriction on the time or bandwidth. That is very similar to mobile phone companies giving data packs with limits. The fairness issue crops up when the restriction is based on specific websites.
That is always an interesting dilemma. I believe the answers lies somewhere in the middle – let railways grow and serve people more, while it takes environment-friendly initiatives which do not necessarily hurt its growth.
Agree with you Alex. In fact they are already taking measures such as using bio-diesel, solar energy, and wind energy, as I had mentioned in my post. I believe they should keep pushing on using these renewable energy sources.
Fair point Ranj. And since IR has such high amounts of fuel and water consumption and owns so much land, the effect of its initiatives will hopefully be significant in magnitude.
Smitha made a great point in a similar analysis, that although most of the water is used in the upstream processes of beer manufacturing, industry leaders such as ABInBev prefer changing their internal processes, which has lower impact but they have more control oover the processes. What do you think about it?
One of the issues which places such as Ladakh is that while they do not contribute significantly to environmental damage, they are a major victim – this skewed cause-effect profile for them, and similar but inverted for others, creates wrong incentive structures and is one of the major complications in environment control. For instance, someone emitting greenhouse gases in another country will have little but tangible effect on Ladakh and hence may not bother about conserving its climate.
As an Uber customer, I think their business model is an excellent opportunity for reducing carbon emissions because of increased utlization. Specifically for UberPool, as you mentioned, the fact that a car can serve anywhere between 1-4 sets of customers, thereby reducing the number of actual car rides and hence the fuel burnt, can be very effective in curbing climate change. I hope more such business models based on effective utilization can be built in other spaces too.
The first thing which would come to an investor’s mind is the return which these bonds offer. Would it be similar to a comparable bond which invests in projects that are “not green”? If not, what is the difference and how will an investor get convinced to invest in a project with potentially lower returns? Can a business case be made for this to convince an investor?
Thank you for this great piece of analysis .
Do you think that ITC should also try focusing on making some of its products environment-friendly? For instance, have they made significant progress on making biodegradable detergents, smokeless cigarettes, etc.? Since their scale is so huge in India, making sustainable products alone will have a major impact on climate change.