Tuesday, 28 May 2024

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Uncertain times call for predictable cross-border payment experiences

5 min read

The uncertainty stemming from the COVID-19 pandemic has necessitated more efficient and predictable experiences when moving money across borders, says Alan Koenigsberg, Head of New Payment Flows at Visa

Amid the economic impact of COVID-19, opportunities made possible through digital transformation are enabling a way forward. The removal of the physical customer, disrupted supply chains, remote workforces and social distancing measures have compelled businesses to welcome digital transformation. Businesses embracing this change are not only weathering the storm, but also adapting for a future where businessas-usual will look different.

The pandemic has intensified a shift towards digital-first experiences, but never has making and receiving payments quickly, securely and predictably been more important than in today’s global B2B payments landscape.

Looking specifically at B2B cross-border payments, uncertainty is perceived as one of the biggest challenges faced by banks and corporates alike. Uncertainty around the amount being transferred, the required time to complete a transaction or the overall cost involved – these are all unacceptable in any normal business environment, even more so in the unsettled time we live in today. Beyond that, banks must respond to businesses that are demanding secure, cost-effective and predictable cross-border payment experiences.

There is a lot of pressure for the industry to innovate and solve these challenges. Fortunately, new technology solutions offer banks and their customers new ways to process cross-border payments and completely reshape the way in which these payments are made.

An opportunity for innovation in B2B cross-border payments

Banks are in an excellent position to take advantage of emerging technologies, such as distributed ledger technology, tokenisation, artificial intelligence and cloud, which bring greater innovation to cross-border payments. Leading-edge solutions designed to reshape B2B cross-border payments will enable savvy banks to meet clients’ shifting demands. Emerging networks are tapping into next-generation technologies that can facilitate financial transactions on a private, permissioned, and highly secure network. This network is made up of known participants and utilises secondary screening for enhanced payment security.

When it comes to B2B cross-border payments, banks and their customers view expanded optionality in the marketplace as a very positive development. Innovative new solutions are enabling efficient cross-border payments through a multilateral relationship structure. This type of structure overcomes the restrictions of the traditional bilateral approach that relies strictly on correspondent networks. Corporates are looking for the same high-quality experience across all the corridors in which their business operates regardless of the bank’s international footprint. A single connection to a global network with no intermediary fees can enable banks to provide this service efficiently. Cost savings is an important benefit of adopting a multilateral crossborder payment solution, as expenditures associated with managing intermediary bank relationships are eliminated. Take nostro accounts, for example. The average annual cost of maintaining these accounts among global banks can amount to $1.5 billion, while maintaining just one of these accounts costs a US bank $27,270 each year. That’s a lot of money

Another benefit of innovation is the ability to gain access to important data. In the current model, much of the data related to cross-border payments does not ultimately make it through to the beneficiary. Without this data, bank clients struggle to reconcile payments. Any solution that ensures a full stream of data accompanies payments throughout its lifecycle can begin to deliver on the highly-sought-after goal of straight-through reconciliation. Predictable payments enable suppliers and buyers to effectively manage their liquidity and onward commitments, which are critical to navigating the cash flow challenges driven by the COVID 19 environment.

The evolving future of B2B cross-border payments

As business continues to seek cross-border opportunities, innovative solutions are emerging that reimagine how B2B cross-border payments are made. These evolving solutions are offering important advantages to banks and their customers – providing greater optionality, increased predictability, enhanced compliance, and better access to vital data.

Modernisation is here for cross-border payments, and that’s a good thing for everyone involved.

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