Finances

Getting it right for the customer is how to win in cross-border payments

Despite the steady march of globalisation and the deepening interconnectedness of global financial markets, moving money across borders has long been seen as one of the last great challenges for the payments industry.

Correspondent banking is dead; long-live correspondent banking!

Limited operating hours cause delays in updating balances, delaying clearing and settlement. Long transaction chains create the potential for data corruption, ambiguity around financial risk. Corridors with large time-zone differences “trap” cash to cover FX risks – requiring banks to provide funding in advance, often across multiple currencies, or to have access to foreign currency markets, driving up costs. Transactions are rarely fully digitised and instead often involve shifting digitalised copies of paper, requiring more manual checks – gumming things up all the more.

Fintechs and incumbents march on – with the customer firmly in focus

Small wonder that cross-border payments continue to be targeted by new market entrants – a wide range of new fintechs are emerging to address speed constraints, opaque fee structures, and clunky user interfaces. Some are also bringing artificial intelligence and data analytics to bear on transaction data, providing insight into income and spending trends.

Incumbents, galvanised by increased competition in retail and small business segments, are also pushing forward in this space. Large network operators like MasterCard Vocalink and Visa are modernising their infrastructure to process a wider range of payments. SWIFT, the world’s preeminent financial messaging system operator, is quickly transforming itself into a comprehensive transaction management service. For their part, financial institutions like NatWest are partnering with SWIFT on platforms like SWIFT gpi and SWIFT Go to help offer customers a smoother, faster, more transparent payments experience.

Fintechs still haven’t quite gained traction among large companies, where treasurers still seem to prefer traditional banking partners. But they have influenced banks and other financial institutions to borrow from the underlying principles powering fintech’s competitiveness in retail and small business segments: relentless customer centricity. Companies that can bring the kinds of seamless user journeys fintechs are known for providing, along with the scale, stability, and sophistication needed to navigate a complex regulatory environment, will ultimately win out in the cross-border payments space.

Collaboration is key

But no one company can go it alone. Indeed, many of the most potent examples of value creation in the cross-border payments space are found in emerging partnerships and networks: some notable initiatives include the European Payments Initiative, which aims to bring true pan-European interoperability to real-time payments, and P27, which aims to deliver similar capabilities in the Nordics.

If anything, these initiatives highlight the importance of collaboration in the cross-border payments space. And as financial institutions continue working with technology firms to deliver initiatives that open up new trade corridors and link geographies, the landscape looks set to evolve further – to the benefit of customers and the economy.

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