Access to liquidity remains a vital need for firms of all sizes, made even more pressing as we continue to work through the fallout of the COVID-19 pandemic. Extended payment terms increase liquidity needs and have an outsized impact on SME suppliers, often forcing them to settle for expensive financing options to maintain their working capital. As these trends continue in the global economy, comprehensive payment solutions are increasingly important to serving the global SME community.
In a recent Q&A with PaymentsJournal, Ron Shultz, Executive Vice President of New Payment Flows at Mastercard, and Paul Christensen, Co-Founder and CEO at Previse, discussed the current B2B payments landscape and how Mastercard is working to ease global supply chain burdens faced by SMEs. They also offered insight into the recent collaboration between Mastercard’s Cross-Border Services and Previse’s InstantPay solution.
How have B2B cross-border payments been impacted by COVID-19 and as the recovery continues over the next few years, are there any opportunities you see?
Ron: Due to the globalization of the world economy over the past several decades, cross-border trade has become essential for many firms. Although B2B cross-border payments were negatively impacted as a result of the COVID-19 pandemic, strong growth lies ahead. According to Juniper Research the projected total value of B2B cross-border payments will exceed $42 trillion in 2026, up from $34 trillion in 2021, an overall growth of 25%. Mastercard is well positioned to capture a large share of this recovery growth due to its geographic footprint and cross border network strength along with our ability to service hard to reach corridors with robust payment optionality.
Paul: As the recovery phase continues, firms will be more focused on costs, making solutions like InstantPay, which provides cost-effective working capital to SMEs, increasingly compelling. The partnership between Previse’s InstantPay solution and Mastercard’s Cross-Border Services will allow cost-conscious SME suppliers the ability to reduce their foreign exchange exposure while managing working capital by immediately being paid for their qualifying open invoices.
Supply chains have been shifting for some time and this trend has been accelerated by the COVID-19 pandemic. How can cross-border services address these changing dynamics?
Ron: Even before the COVID-19 pandemic, many multinational companies had begun moving away from single source supply chains, predominately in China, to diversified supply chains with a focus on expansion in South East Asia and Latin America. The COVID-19 pandemic has accelerated this trend and reinforced the need for supply chain resiliency. According to PWC, nearly half (47%) of CFOs across industries agreed that “developing additional, alternate sourcing options” was a pressing issue going forward as a result of the current economic climate. Mastercard’s Cross-Border Services creates opportunities for suppliers in these new markets to manage their foreign exchange exposure.
Paul: As large multinational corporations diversify their supply chains to markets in South East Asia and Latin America, our instant B2B payments solutions combined with Mastercard’s Cross-Border Services, creates new opportunities to serve suppliers in these markets. As Previse expands its reach, by leveraging Mastercard’s wide-reaching cross-border network, suppliers can be paid instantly, in the currency of their choice.
What is unique about Mastercard Cross-Border Services? What is unique about Previse’s InstantPay solution?
Ron: Mastercard Cross-Border Services allows users to send payments to over 100 counties, including hard to reach corridors and real time payment markets throughout the world, with optionality in disbursement channels through a single API connection. These channels include bank accounts, mobile wallets, and cash out locations. The solution is use-case agnostic, servicing B2B, B2C, C2B, and P2P payments with connectivity to 14 real-time payment schemes and growing. The result is a cost-effective supplement to correspondent banking that provides transparency in cost and delivery timing.
Paul: InstantPay leverages the latest advances in machine learning to analyze invoices between large corporations and their suppliers, identifying those that are likely to be rejected and enabling the rest to be paid on the day that they are received. This predominately benefits SME suppliers as they do not have to wait for their invoice to be approved by their buyer and provides cost-effective and timely working capital.
How does the combination of cross-border services and working capital solutions fit into Mastercard’s broader B2B strategy?
Ron: Mastercard Cross-Border Services is a key component of our multi-rail strategy focused on payments beyond card. We are dedicated to providing our downstream customers with choice in how they pay, and where they are paid. Delivering payments internationally with multiple end-points is central to our strategy. This service is an enabler and differentiator for banks, processors, technology firms and payment service providers, giving them a tool that supplements correspondent banking and offers a modern approach to cross-border payments. Paul has touched on the partnership between Mastercard Cross-Border Services and Previse earlier in this article, which is a recent example of how Mastercard’s broader strategy for B2B payments can be accelerated through our partnerships. Here, Previse’s InstantPay solution leverages machine learning to streamline SME’s access to working capital. Enabled with Mastercard Cross-Border Services, InstantPay can now reduce suppliers’ foreign exchange exposure and pay suppliers quickly on their open invoices. This fits seamlessly into Mastercard’s broader multi-rail strategy for payments beyond card, and the combination with Mastercard Cross-Border Services augments their current solution, providing settlement currency optionality for payment recipients. At Mastercard, we strive to provide just that to our customers: optionality.
Conclusion
In the end, the combination of working capital solutions and cross-border services is a powerful proposition as firms rethink their global supply chain strategy. We expect the impact to the global trade as a result of COVID-19 to be an opportunity for firms to find cost-effective ways to manage their cash flow as well as their foreign exchange exposure as the recovery continues. For more information on Mastercard Cross-Border Services contact [email protected]. For more information on Previse’s InstantPay contact [email protected].
