It is time to modernise cross border payments and collaborative innovation is the only way to do it.
Estimated reading time: 5 minutes
Cross-border payments innovation as a priority for everyone
When it comes to innovations in business-to-business (B2B) payments, the marketplace is, and not for the first time, taking its cue from consumers.
The advancement of consumer payments has largely been driven by demand for a better customer experience.
Additionally, the acceleration of cross-border commerce makes cross-border B2B payments even more of a focus. Banks are responding to businesses that are keenly interested in leveraging emerging technologies to improve transparency, expand optionality, and lower costs associated with cross-border payments.
Considering the difficult environment banks and businesses are experiencing globally, transparent, simple, efficient, and tailored payment solutions are now more important than ever.
Development on an international scale
As global business expands, so too does the volume of cross-border payments.
There are currently $120 trillion in global B2B payments processed annually, with at least $10 trillion supporting cross-border trade.
In the face of this growth, banks are left to deal with these highly complex transactions dependent on correspondent banking relationships, offering limited visibility into the status of payments, costs, and certainty.
The traditional payments process leaves receiving banks with little predictability of when payments will arrive, or the amount they will receive after currency exchange calculations and various fees are deducted.
Know your customer (KYC) and anti-money laundering (AML) regulations are also adding to the necessity for new approaches.
Complying with regional AML rules can result in transaction delays, which fosters greater uncertainty in an already unpredictable process and a business landscape fraught with volatility.
Partnerships can tackle rising challenges and deliver greater transparency
With accelerating global business growth comes increased opportunities for innovation across the cross-border landscape.
Banks are in an excellent position to take advantage of dynamic changes using emerging technologies, such as distributed ledger technology (DLT), artificial intelligence (AI), and cloud capabilities. The rise of cutting-edge solutions, designed to reshape B2B cross-border payments, will enable savvy banks to meet the shifting demands of clients.
Fintechs and other innovative players are bringing their digital expertise to the fore, looking to create a more transparent ecosystem.
As a result, financial institutions (FIs) have a unique opportunity to partner with these innovators, combining resources to overcome B2B cross-border payments challenges. Another benefit of such innovation is the ability to gain access to important data.
Ultimately, the importance of listening to business customers should not be overlooked.
This is especially true in challenging times, where customers need as much data as they can get. This enables them to make smart, strategic decisions which can have a huge impact on their business.
If emerging solutions hold the potential to deliver the critical data that businesses need, their implementation should be a no-brainer.
How new multilateral networks can help improve cross-border payments
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, improved transparency, increased predictability, enhanced compliance, and better access to vital data.
Cost savings remains another important benefit of adopting a multilateral cross-border payment solution, as expenditures associated with managing intermediary bank relationships are eliminated.
Look no further than 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.
A centralised, permissioned network where all participants are known, will enable payments to be processed securely and directly, thus minimising the expense of maintaining Nostro accounts.
With ongoing market-led innovation and new technologies, the future of B2B cross-border payments promises to be simpler, secure, lower cost, and more transparent.
Geographic barriers will gradually be eliminated in this rapidly evolving global payment ecosystem.
Banks can be expected to partner with fintechs and other innovative players to bring new technology to the space, tapping into their expertise as digital natives, with the goal of strengthening customer relationships.
An era of modernisation is dawning for cross-border payments, benefitting all parties involved.
Visa’s solutions for cross-border payments
Visa continues to provide leading edge cross-border services that can deliver near real-time services for FIs.
Visa B2B Connect, first launched in 2019, is a cross-border payments network focused on the challenging B2B buyer/supplier payments––which are typically high in value–– and data payload requirements.
Visa B2B Connect streamlines the entire process; it provides same-day payment services and removes the friction associated with multiple banks in the process chain to deliver direct payments from the buyer’s bank to the supplier’s bank in one step.
It provides ‘identify’ and ‘wallet’ services to ensure all participants are known to each other to reduce risks.
Visa has also acquired capabilities and integrated them to round out solution sets; the recent Currencycloud acquisition will help us continue to deliver global services, including foreign exchange (FX) and embedded finance solutions to FIs worldwide.