Alan Koenigsberg, Global Head of New Payment Flows at Visa Business Solutions, on how businesses can find a way forward.
They also expect finance to be available to them in a way that works in any country and currency, without the process being stymied by the historical constraints of national boundaries. And they expect financial institutions they work with to make this a smooth, seamless process for them.
Today, despite rapid progress in areas of payments processing on the consumer side, crossborder B2B payments remain complex, touching many intermediaries and often resulting in unpredictable delays. The traditional correspondent banking network operates on a mainly bilateral relationship structure that is often felt to be clunky and unreliable, offering limited visibility into the status of a transaction.
In addition, the setup to support clients’ businesses in a new corridor or currency is often unwieldy. 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 real-time payment opportunities with complete visibility of our transactions. The status quo around cross-border business-to-business (B2B) payments is no longer unacceptable as it is a logical expectation that fast-scaling companies should be in a position to offer their services or solutions across the world. The need for new models and technological solutions that are able to make this happen in a timely way is therefore increasingly urgent. Financial institutions are already moving to adopt technology platforms that give their business customers a secure, fast and predictable way to process corporate crossborder B2B payments. This imperative is part of a real drive for change we are seeing across the B2B crossborder payments space.
Regulation, especially around anti-money laundering (AML) and know your customer (KYC) 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. Across most of Europe, AML controls are well established. In parts of Africa, however, 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 in the first place.
We are seeing a growing number of partnerships between fintechs and financial institutions. This is key because banks and fintechs can overcome B2B crossborder payments challenges by partnering to pool resources, share ideas and working together to develop new technology. Today, for example, it is possible to develop platforms that can reduce the risk and time spent on crossborder 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 significantly disrupting the B2B payments arena. A short time ago, only the largest multinationals were concerned about how to pay and get paid globally, so payment solutions were geared to large corporations. In our current, globalised business landscape, every business of every size needs to be able to make global payments quickly and securely.
As businesses’ needs continue to grow, we’re going to see a corresponding evolution of digital solutions in all aspects of payments, from access to enablement to initiation. We also expect that the global nature of payments around the world will continue to evolve 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 payment solutions.
Technology is evolving fast. The future vision of all B2B cross-border transactions happening in a simple and reliable way will inevitably become a reality.