Predictions abound that emerging companies will dominate the remittance and person-to-person (P2P) payments space and financial institutions will be relegated to being a bystander. While I am not sold on their eventual dominance, I do think that emerging companies are creating positive changes. These changes have included new business models for financial institutions and traditional remittance providers who are able to offer their existing and prospective customers new, efficient payment choices. And as recently released financial and transaction figures show, some traditional players embracing change are poised to remain in their leadership positions.

I recently saw a speaker who said that one particular emerging digital remittance provider is the largest digital remittance business in the United States. However, I think the honor of the largest digital remittance transfer provider goes to a long-term remittance incumbent, Western Union. Though payments volume data are not available, revenue data do provide us with some insight into the size of these providers. According to Western Union's 2015 annual report, its digital money transfer services generated $274 million in revenues in 2015. As a point of comparison, three emerging companies (Xoom, Worldremit, and TransferWise) had combined revenues of $230 million. Though Western Union's online service represents only 6.3 percent of its consumer-to-consumer revenues, the segment grew by 26 percent in 2015.

In June, Chase announced changes to its digital P2P solution that will allow Chase customers to send and receive money in real time through ClearXchange with customers of Bank of America, U.S. Bank, and several other financial institutions. Chase's digital P2P solution has been a feature on the Chase mobile application and online banking website for several years now and was used in 2015 to send $20 billion in P2P payments. As a point of reference, the wildly popular emerging mobile and online P2P provider, Venmo, reported $1 billion in transfers during the month of January, up 250 percent from the prior January. With the additional reach of ClearXchange participants, Chase customers will now be able to digitally send and receive payments to 65 percent of the digital banking population in the United States, placing it in a position to experience significant growth to its digital solution.

With both remittances and P2P payments, online and mobile channels are seizing share from traditional channels. Even though the in-person agent model in remittances and P2P payments via cash and checks will remain a viable solution for many consumers, today's growth is being driven by digital models.

No doubt emerging players are threatening traditional companies for remittance and P2P dollars. However, financial institutions and established money transmitters are evolving, and based on the numbers, remain valuable payments providers. Given this environment, financial institutions and traditional remittance providers that don't evolve to embrace the digital remittance and P2P economy are at serious risk of losing share. And the threat isn't just coming from emerging companies. In fact, you can call me a traditionalist, but I think evolving traditional financial institutions and remittance providers are positioning themselves to remain the dominant providers of P2P and remittance payments.

Photo of Douglas King By Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed