MIAMI — Payment technology (paytech) companies are moving beyond domestic payment services into cross-border money movement, digital wallets, marketplaces and other activities that place them closer to the infrastructure through which payments are routed. That changes what they need from a bank. A paytech handling money for other customers brings product, licensing, compliance and transaction-monitoring requirements that differ from a conventional corporate payments relationship, particularly as it expands across markets. Anand Natarajan, Managing Director, Global Payments Solutions at Bank of America who runs its paytech business, said the bank created dedicated coverage to bring expertise from different parts of the organisation around clients with those common characteristics. “The idea behind creating this segment was to say, let's bring together the expertise that we have across the different parts of the bank,” he said. The business question is therefore not simply how to bank fintechs. It is how Bank of America can support paytechs as their own payment flows become more global, while deciding where those companies are clients and where they may also become partners in the payment chain. Dedicated coverage follows paytechs across markets Natarajan said many fintech relationships were historically domestic, but paytechs have increasingly expanded into cross-border payments. That makes a country-by-country banking approach less suitable. “We can no longer approach it from a single country perspective,” he said. The segment includes remittance providers, digital wallets, marketplace payment providers, neobanks and digital-asset companies. Their models differ, but they share the fact that they move money for other customers and therefore require closer attention to the flows, licences and counterparties underlying their activity. Natarajan said growing paytechs also want scalability and consistency so they do not have to assemble a different banking solution for every market. Bank of America's proposition rests partly on its ability to support collection and payout flows across multiple markets through its clearing access and banking network. The dedicated model therefore follows the architecture of the client's payment flows rather than the boundary of a single domestic relationship. The last mile makes local clearing part of the cross-border service As paytechs expand, Natarajan said they increasingly want to initiate a payment in one market and deliver it into another through a domestic payment method rather than use a cross-border wire for the entire journey. “Clients want to be able to make a payment into a domestic market, but not as a cross-border wire because that is too expensive.” That puts greater emphasis on access to domestic clearing systems. Natarajan said Bank of America's product development and investment are increasingly focused on last-mile payouts and cross-border real-time payments, particularly for large volumes of relatively low-value transactions. He cited gig-economy workers and travellers as examples of users whose payment needs can involve multiple currencies and faster local delivery. Natarajan also expects greater interlinking of domestic instant-payment systems by central banks to support adoption by increasing speed and transparency while retaining the trust associated with regulated infrastructure. The problem paytechs are asking the bank to solve is therefore not only crossing the border. It is reaching the recipient through an appropriate local rail at sufficient speed and cost. AI is changing routing and monitoring inside the paytech Natarajan identified two areas where artificial intelligence is already changing how paytechs operate. The first is intelligent payment routing. A paytech may be able to send a transaction by wire, automated clearing house or a local real-time payment method. He said clients are increasingly using AI to select the route based on factors such as currency, corridor and recipient type. “Decisioning around payment routing is a big component,” he said. The second is transaction monitoring. Paytechs processing tens or hundreds of thousands of transactions a day need to determine whether merchants and customers are using their platforms for the intended purposes. Natarajan said AI can apply rules and algorithms to merchant activity, corridors and transaction patterns to identify activity requiring intervention. These applications change the operating model of the paytech, but they do not remove the regulatory and compliance responsibilities that sit at the centre of its banking relationship. Paytechs can be both clients and partners Natarajan said the relationship between banks and paytechs can run in both directions. Fintechs need banks where they lack banking licences or direct access to regulated payment infrastructure; banks may rely on fintechs where they do not have direct reach or where building their own capability is not economical. “Banks may end up relying on fintechs in places where they cannot reach directly,” he said. That creates a make-or-partner decision. Bank of America can invest directly in a market or use a fintech where the expected volume and scale make partnership more effective. Natarajan said Sibos itself increasingly reflects that two-way relationship, with more fintechs attending both to sell capabilities to banks and to find banking partners that can support their own expansion. The same company can therefore be a banking client, a user of clearing infrastructure and, elsewhere in the payment chain, a potential provider of technology or reach. Scale is attractive only within the bank's risk and licensing boundaries Dedicated coverage does not mean Bank of America will support every paytech seeking to expand. Natarajan identified three considerations in evaluating a relationship. The first is whether the underlying business model aligns with the bank's risk appetite. The second is whether the company has, or plans to obtain, the licences required in the markets where it operates and whether those licences cover the services for which it wants to use the bank. The third is scalability. “Obviously, we want to work with fintechs who are actually expanding and looking to grow the business quite a bit,” he said. Those criteria define the boundary around the opportunity. Cross-border reach and high transaction volumes make paytechs more relevant to global payment infrastructure, but the same characteristics increase the importance of licensing, compliance and transaction monitoring. Bank of America's dedicated coverage is therefore an attempt to scale with the paytech sector without treating it as a conventional corporate-payments business: follow the client's cross-border flows, connect them to local clearing where possible, and remain selective about which companies become long-term clients or partners.
