PSP’s vs. SWIFT Network

Picked up from

Turns out the SWIFT network, which has been around for decades as a means to transmit monies around the world in multiple currencies was hacked.  When I first started in the asset management worked circa 1995, SWIFT was touted as the forefront of secured, speedy information transmittal.  SWIFT was how all major financial institutions transmitted monies to each other.  But I should have seen this hack coming.

In the last 3 years of working with and for retail-facing Margin Trading Product (“MTP”) companies, the amount of “bank wire” deposits has been dwarfed by the number of and notional volume of Payment Service Provider (“PSP”) payments.  Especially from less-developed regions of the globe.  China, SE Asia, Eastern Europe, Latin America…..all these regions are seeing a rapid shift to PSP’s as a means to transmit monies.  Everything from trading accounts, to buying toilet paper is not happening via PSP’s.  Think of PSP’s as a less-regulated version of PayPal; but not as sophisticated as cryptocurrency accounts.  Users can open PSP accounts easily with one of hundreds of providers, and there is little ability for regulators to demand and enforce Know Your Client (KYC) laws.

The PSP companies can pop up almost overnight and can shut down just as quickly.  There is little oversight.  And there is a value chain of larger and larger companies that ends at the top with the global credit card companies like Visa and MasterCard.  So clients end up paying a healthy transaction fee, but it gives a moped/taxi driver in Indonesia access to fund trading accounts or to purchase home goods that he could never previously get access to.

My thoughts are that the PSP world sits right in-between crypto-currencies and bank wires; there are features that users like and just enough control that regulators are not pounding at the door to be let in.  The space will continue to grow rapidly until the time comes that a massive-level company goes out of business and takes client funds with them.  But until that point, there is lots of room to grow in the PSP space.



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