The title of this referenced brief article, which is published in International Banker, echoes one of the ongoing themes under which we develop our member agenda.
In the upcoming CEP Outlook for 2020, which will be released shortly, globalization is one of the four key themes for the upcoming year and beyond. Subthemes include the ability to offer better experiences in many areas, but cross-border payments is, of course, one of the prime focal points.
The author of this referenced piece, a Visa exec, provides a succinct picture of a root cause:
‘Organisations across the world increasingly expect global access to finance in real-time. They also expect finance to be consistently available in a way that works for them in any country and currency, without the process being held up by the historical constraints of national boundaries. And they want the banks and financial institutions they work with to make this a smooth, seamless process for them. ..Today, despite the rapid progress we see on the consumer side in areas of payments processing, cross-border B2B payments remain complex and difficult, touching many intermediaries and often resulting in delays – the duration of which are difficult to predict. The traditional correspondent banking network operates on a largely bilateral relationship structure that is invariably perceived to be unwieldy and unreliable, typically offering limited visibility on the status of a transaction.’
In recent research we have done on both B2B faster payments as well as the relative ubiquity of integrable business payment solutions to improve cash cycle performance for almost any sized organization, among the use cases discussed are cross-border scenarios, for which several new networks and products have come to market this year alone.
We have blockchain networks for access and digital asset value transfer (fiat-based and free floating cryptos), direct account transfers through card networks, bank-sponsored stable coins, and plans for connectivity between sovereign real-time payment systems. One must not forget the need for safety and compliance along the way.
‘Regulation, especially around Know Your Customer (KYC) and Anti-Money laundering (AML), is also helping to fuel this change. The level of regulatory risk created by money laundering can be significant in some countries but the tightness of controls and regulatory adherence varies per country. Across most of Europe, AML controls are more established. In parts of Africa however, including North Africa in particular, the risks are a lot higher as controls may be less defined or rigorous. This means the chances of money being delayed due to AML problems are higher. It is also key, of course, that any new approach enables banks to reduce the risk of money laundering happening in the first place.’
One might say that it’s an interesting time to be involved with payments in the global arena. Collaboration between traditional and new players in financial services is creating strong solutions for even the smallest businesses and banks to participate in the interconnected economies more directly than in the past.
The easier that implementation process is made, the faster that adoption will occur.
‘Technology today is significantly disrupting the B2B payments arena – and it is becoming increasingly urgent that it does. Just a short time ago, only the largest multinationals were concerned about how to pay and get paid globally, which meant payment solutions were geared to the large multi-national corporations. In our current, progressively globalised business landscape, every business of every size needs to be able to make global payments quickly, efficiently and securely.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group