B2B cross-border payments remain challenging for businesses and financial institutions because transactions must navigate different markets, regulations, banking systems, and business practices. Improving the speed, predictability, cost, and transparency of these payments has therefore become a major focus for payment networks and other participants in the global financial system.
Visa B2B Connect is one approach designed to address these challenges. The multilateral network enables payments between participating banks while supporting technologies such as ISO 20022 messaging and APIs. At the same time, Visa has incorporated more traditional messaging and file-transfer options to accommodate financial institutions at different stages of their technology modernization.
In a recent article from the Trade Finance Global, there’s a discussion of cross-border B2B payments challenges. As readers will likely know, cross-border is a highly visible topic these days. Many initiatives are underway across the globe. These aim to improve the experience and cost associated with these transactions among all use cases. The solution mentioned in this particular case is Visa B2B Connect. We discuss this in our newly released report on B2B cross-border payments. In the report, we discussed some of the same things as is in this article.
Level of Complication in B2B Payments
We mention, as a challenge, the level of complication presented by B2B cross-border payments. These occur across multiple markets with various regulations, disparate business practices and the ever-differentiating need for data. This data accompany—and must match—the payment-related documents involved (POs, invoices, remittance data). Ben Ellis, Global Head of Visa B2B Connect, who was interviewed in the piece, mentions some recent Visa research that suggests up to 70% of businesses surveyed have cross-border payment pain points. These include payment predictability, value clarity, and visibility (tracking where and when).
Need for Flexibility
Visa built the B2B Connect solution as a multilateral network (transfers can occur between any two banks in the network). It has the de-facto new global messaging standard ISO 20022, as well as being API native. However, feedback from the banking community indicated that readiness for these features was not yet widespread. So Visa included MT (message types) and standard file transfers as part of the build to accommodate the need for flexibility as a bridge to the future. The network can also be connected to directly by financial institutions or through PSPs.
As far as the future is concerned, the expectation is for continued innovation between all parties in the chain of transaction flows (network, PSPs, banks) to continue with a collaborative approach and reduce the pain points over time. As we stated in our previously mentioned report, as well as in various postings on these pages, this is a space that is undergoing continuous improvement.
Modernizing B2B cross-border payments will require flexibility as banks, payment service providers, and businesses transition from legacy infrastructure toward newer technologies and standards. Solutions must improve payment visibility and predictability while also supporting the increasingly important data that accompanies commercial transactions.
Visa B2B Connect illustrates how payment networks can bridge existing and emerging technologies while financial institutions modernize at different speeds. Continued collaboration among networks, banks, and PSPs should help reduce longstanding cross-border payment pain points and gradually create a more efficient experience for businesses operating internationally.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.
