German savings banks have joined forces with the Bank of New York Mellon (BNY) to support customers with international money transfers.
The financial institutions, or Sparkassen-Finanzgruppen, are planning to work with BNY to process customer transfers of up to EUR 3,000 to recipients outside of the EU, according to sources familiar with the matter cited by Reuters. Currently, the initiative is in a testing phase at two smaller German savings banks, with the financial institutions aiming for a broader launch in the upcoming months.
Winning back customers from fintechs
With this move, the German banks seek to withstand low-cost competitors that have brought concerns over the sovereignty of Europe’s financial services sector. Minimising the fees they charge by as much as 75% aims to enable the financial institutions to get back business which was lost due to competitors such as Revolut and Wise, among others. Additionally, the collaboration with BNY intends to capture a scaling segment of German residents, namely migrants who make low-value transfers abroad to their home countries.
As detailed in a BNY document seen by Reuters, the joint project with the savings banks, which reportedly goes under the name of Crossmo, allows the German banks to compete more effectively with fintech companies. At the time of writing, the savings bank in Hanau, close to Frankfurt, is testing the new system, following the receipt of information that many individuals are making transfers abroad to support their families. After doing research, the savings bank found out that many people were turned off by high fees, choosing to withdraw money and leverage less expensive alternatives to send it. With this project, customers can make a transfer to a recipient at a bank outside of the EU using the Sparkasse website for a fee of EUR 5.5. Previously, the charge for such transfers was EUR 22.
However, the initiative comes during a period of increased criticism over Europe’s reliance on US finance infrastructure, including Visa and PayPal, with experts saying that financial institutions and companies should actually start thinking about European alternatives or projects and place them as top priorities. Representatives from the savings banks’ national umbrella association DSGV addressed these comments, stating that the issue of sovereignty does play a role here. Despite this, they think that the savings banks require partners who have a global network with extensive country coverage and who can also provide secure and cost-effective transaction processing.
