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In today’s fast-changing business environment, international organisations all over the world increasingly expect global access to finance in real-time. They also expect finance to be available in a way that works for them in any currency and country, without the process being held up by the historical constraints of national boundaries. And they expect the banks and financial institutions they work with to make this a smooth, seamless process for them.
In spite of rapid progress in areas of payments processing on the consumer side, cross-border B2B payments are still very complex, touching many intermediaries often resulting in unpredictable delays. The traditional correspondent banking network operates on a predominantly bilateral relationship structure that is typically seen as clunky and unreliable, offering limited visibility into the status of every transaction.
In addition, the set-up to support clients’ business in a new corridor or currency is often cumbersome. Receiving banks can’t be certain when payments will arrive and therefore cannot give status updates to their customers/suppliers – and the amount of money involved may change as a result of exchange calculations and various fees.
As consumers, we increasingly have access to payment opportunities that are real-time with complete visibility of our transactions. But the status quo around cross border B2B payments is now becoming unacceptable, with potentially multiple steps in the payment transaction and uncertain visibility and reach. Banks and other financial institutions need to be aware that it is a logical expectation of fast-scaling companies to be able to offer their services or solutions across the world. The need for new models and technological solutions capable of making this happen in a timely way is therefore becoming increasingly urgent. Financial institutions need to adopt technology platforms that give their business customers a secure, fast and predictable way to process corporate cross-border B2B payments. This imperative is part of a real drive for change we are seeing across the B2B cross-border payments space.
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 enable banks to reduce the risk of money laundering happening in the first place.
Finding a way forward
Looking at the industry holistically, we are today witnessing a rapidly expanding number of partnerships between fintechs and financial institutions. This is key because banks and fintechs can overcome B2B cross border payments challenges by partnering to pool resources, share ideas and work together to develop new technology. We are increasingly seeing new digital technology innovations coming on stream.
Today, for example, it is possible to develop platforms that can reduce the risk and time spent on cross-border corporate transactions by facilitating transactions from the bank of origin directly to the beneficiary bank. Security is being enhanced through digital identity features that tokenise an organisation’s sensitive business information, such as banking details and account numbers, giving them a unique identifier that can be used to facilitate transactions on the network.
Technology today is really shaking up the B2B payments arena – and it is becoming increasingly critical that it does. Just a short time ago, it was just the largest multinationals that were genuinely 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 arena, no matter its size or type, every organisation needs to be able to make global payments quickly, efficiently and securely.
As businesses’ needs continue to evolve, we’re going to see a corresponding growth of digital solutions in all aspects of payments from access to enablement to initiation. We also expect that the global nature of payments across the world will continue to advance to address the need for speed, transparency and optionality. In line with all this, we expect to see banks and financial institutions generally moving over to these new and evolving payment solutions as they look to enhance the service they offer business customers.
Technology is changing all the time. Today, there is growing evidence to suggest that the future vision of all B2B cross border transactions happening simply and reliably is not just a pipe dream but will ultimately become a reality.