Dear Luc: Should I offer multi-currency accounts to cover post-pandemic travel?

In Dear Luc, we answer the questions the industry’s fintech founders are too afraid to ask, and solve the problems they don’t want their VCs to know about.

From regulation readiness to technology teething troubles, our start-up agony uncle, Luc Gueriane, is here to help.

Luc has over seven years’ experience working with flagship fintechs like Revolut, Transferwise, Monzo and Curve.

His expertise and extensive work in the fintech ecosystem mean that Luc is able to offer unique insight into the building of a successful fintech company.

Confession #6: Going multi-currency

Dear Luc,

“With the world opening up again, do I need to start offering multi-currency to my customers?”

We’re still a long way from a pre-pandemic “normal” but many countries do seem to be on the road to recovery thanks to the success of vaccination programmes. As such, it makes sense to consider developing new products or services to pre-empt changing customer behaviours as things open up. And as people begin to travel, there will be demand to use multiple currencies.

However, with multi-currency offerings, you must think carefully before diving in. Many products in the market claim to offer multi-currency for users who want to spend money abroad. However, all that’s being offered is the ability to spend on your card in multiple countries for an added fee, without the transaction blocked. This is essentially what any Mastercard and Visa card can do and it isn’t what I’d call a “true” multi-currency card.

True multi-currency cards are the next step in the evolution of travel money, eliminating the need to carry cash, travel money cards or travellers cheques. This is where you have a balance in currencies you hold and the cardholder can move balances between different currency wallets based on where the transaction is taking place – or simply what currency they would prefer to use.

Wise (formally TransferWise) and Revolut are examples of companies doing this really well as they actively promote the benefits of spending abroad without any hidden fees.

Offering the ability to receive, send and spend money using a multi-currency account is a great convenience for users travelling abroad. But there are many considerations to think about before deciding if this is the route for your offering. Let’s look at just a few of those…

First, think about your end customer. If your product is already in the market, what’s included in your offering and why are customers signing up with you already? Where are they and what do their spending habits look like?

Whilst I appreciate that the last year isn’t an accurate reflection of international spending, you need to understand if true multi-currency accounts are needed by your users and if this is going to become a key element of your proposition.

In the UK people took an average of 3.9 holidays per person in 2019 according to Statista research. So, although the number of holidays abroad was on the rise, does the work involved warrant the potential use when your customers are spending on your card domestically anyway?

On the other hand, if you haven’t introduced cards to your existing business model but you have a customer base of international travellers with exposure to multiple currencies – DeVere is one example of a company in this situation – it makes complete sense to seamlessly link a multi-currency card to your offering.

Understanding your customers is also especially important as the card schemes have introduced policies to limit the number of multi-currency propositions unless they believe it is a true travel product. Therefore, you would need to prove your reason for needing multiple currencies to be accepted by the schemes.

Second, I’d encourage you to think about your partners. Taking your product in a new direction involves working with your partners to ensure you’re operating correctly from not only a regulatory standpoint but also a technical one.

For example, you would need to ensure that your selected issuer and processor has the functionality to be able to provide the experience you’d like. If your customer has £100 and €100 in their wallets, but they try to spend £200, some processing partners will not have the functionality set up to be able to cascade funds to make the payment.

You must discuss your plans with all your payments partners to understand what restraints you may experience, any additional development work which might be needed, or if any new partners are required (for example a dedicated FX provider).

Third, you need to think about customer service. Revolut has an amazing UX, it makes a conscious effort to set the standard for the industry so others benchmark against them.

However, with margins being relatively small when starting out and profitability being a well-publicised problem for fintechs, you need to ensure the cost of delivering new multi-currency isn’t outweighed by the cost of supporting customers with using that service.

Exchange rates and fees are not something that everyone understands, so even though the unicorns in this space are doing very well, they will still be experiencing high volumes of questions through customer service.

The cost of answering a simple question such as “why has this spend gone across two different balances?” will likely be more than you made from that transaction. You want to ensure you provide adequate educational information and that your customer service balances are simple to use, and don’t cost you money.

Final thoughts

There are many positives to having a multi-currency programme, but as with any new project, you must consider the reason you want to make a change. With the fintech world shifting so frequently, it is very easy to get caught up in what additional features you could be providing your clients. However, sometimes it is better to focus on your core competencies rather than offering too many things and spreading yourself thin.

Do you have an embarrassing question you want answered, or a seemingly unsolvable problem you’d want help with? Post an anonymous comment below, or email FinTech Futures’ Alex Hamilton in confidence.

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