Many merchants have long eyed international expansion, only to be daunted by its complexity. That’s the challenge Airwallex is targeting with the launch of its in-store point-of-sale system.

The Australia-based fintech is attempting to stand out in a crowded market by offering a physical solution that allows businesses to accept in-person payments across multiple countries through a single platform—eliminating the need to partner with local vendors in each market.

These brick-and-mortar transactions integrate with online payments within Airwallex’s broader platform, which also includes reporting tools and back-office functionality.

“This is super interesting and brings me back to how I look at the merchant side of payments—processing moves data, acquiring moves money,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Many innovative fintechs have a laser focus on maximizing network performance and optimizing integrated payment workflows, while losing sight of the fact that the data represents real money that merchants need to run their businesses.”

The Operational Bottleneck

When expanding into a new market, merchants typically need to onboard a local acquirer, navigate regulatory nuances, and manage a web of domestic vendor relationships.

These operational hurdles have been often been a dealbreaker. Even among millennial and Gen Z business owners—who tend to show a greater appetite for international growth—the time and cost demands of the traditional cross-border model can make expansion feel like a bridge too far.

Infrastructure as Strategy

Airwallex is betting on its infrastructure as the differentiator. The company holds nearly 90 regulatory licenses across roughly 50 markets, maintains direct connections to local payment networks in more than 100 countries, and offers currency conversion capabilities.

This setup allows funds to be held, converted, and redeployed within local markets—where many competing systems still require immediate payouts to merchants’ accounts. If Airwallex can carve out a niche in the market, it will likely owe more to the strength of the global infrastructure than to the point-of-sale system hardware itself.

“The global POS platform that Airwallex has built is the kind of tech innovation that grabs headlines, but the real power of what they’ve built is the network of global banking licenses,” Apgar said. “Banking is regulated in every country, and while it lacks the sizzle of new tech, collecting money from customers is what merchants care about.”

The post Airwallex Takes Its Cross-Border Play In-Store appeared first on PaymentsJournal.

The real-time payments system FedNow has rapidly gained from over 1,600 financial institutions across the United States. However, these participants have so far been restricted to using only Reserve Banks as intermediaries.

This limitation has prevented banks and credit unions from leveraging the network for cross-border payments. The U.S. Federal Reserve, which operates FedNow, is now considering lifting this restriction. This change would align FedNow more closely with the Fedwire model, which has been in place for decades.

Under the proposed plan, a U.S. institution could use FedNow to send funds to a correspondent bank, which would then facilitate the international leg of the transaction. This functionality could broaden the use cases for a system that has already experienced substantial growth in both transaction volume and value over the two years since its inception.

“A move to cross-border via FedNow is the logical next step in the evolution of real-time payments in the U.S.,” said Hugh Thomas, Lead Commercial and Enterprise Analyst at Javelin Strategy & Research. “By moving to real-time, you’re synching up with the speed of domestic funds movements in big cross-border markets like the EU and the UK. With ISO 20022 standards in the mix in all three markets, you open up a lot of possibilities for cross-border payments solutions. This isn’t to say they’ve gotten there with this move, but it’s certainly a step in that direction.”

Stopped at the Border

While using FedNow for cross-border payments could streamline the domestic payments experience, the network’s real-time settlement would not extend beyond U.S. borders. Once the funds reach an overseas correspondent bank, the transaction would follow the same processes as conventional cross-border payments.

The complex correspondent banking system is likely to continue subjecting these payments to transaction fees, currency conversions, settlement delays, and limited transparency—challenges that have long plagued cross-border payments.

These issues have persisted despite ongoing efforts by industry stakeholders and world leaders. For example, leaders from the Group of 20 countries established a roadmap to improve international transactions. Yet, a recent review highlighted that legacy payments infrastructure and cross-country coordination challenges have hindered meaningful progress.

Weighing the Challenges

Such hurdles are why many experts advocate for sweeping changes to the cross-border payments landscape, potentially involving a shift toward new rails like stablecoins or global networks operated by Visa and Mastercard.

The SWIFT messaging system has also played a key role in modernizing the correspondent banking model, and it is working on a framework specifically for retail cross-border payments.

While expanding FedNow’s cross-border capabilities would likely be welcomed by many institutions, the service would still operate within an increasingly fragmented and complex global market. These are key considerations the Federal Reserve will likely weigh as it reviews public comments and decides whether to move forward with the proposal.

The post U.S. Federal Reserve Considers Taking FedNow Global appeared first on PaymentsJournal.

The U.S. dollar dominates global finance, but that dominance may face a credible challenge sooner than expected.

Harvard economist Kenneth Rogoff recently suggested that the Chinese yuan could become a global reserve currency within five years, potentially rivaling even the fast-growing digital assets industry.

That said, the dollar’s position remains deeply entrenched. According to data from the U.S. Reserve, it accounts for 58% of international transactions and has long been regarded as a safe haven currency. Beyond cross-border payments, it also maintains a strong hold over the rapidly expanding stablecoin market. Many of the world’s leading payments networks are U.S.-centric, including the global systems operated by Visa and Mastercard.

This dollar-heavy global financial ecosystem has proven difficult to displace, reinforcing the currency’s central role in global commerce—even as geopolitical tensions and trade conflicts have intensified.

China, however, has been working to change that. It has long sought to expand the role of the yuan in global payments. Although these efforts have yet to gain much traction—the Fed estimates the yuan is used in only around 2% of cross-border payments—there are signs that its role could grow.

Bucking Western Estimates

According to the South China Post, one reason Western estimates of yuan usage may be understated is that they don’t fully account for transactions conducted through China’s Cross-Border Interbank Payments System (CIPS). Developed as an alternative to the U.S.-backed SWIFT—a cornerstone of global payments—CIPS has become a crucial part of China’s strategy.

China has prioritized expanding CIPS, even easing some regulations to introduce new programs with countries such as Vietnam and Indonesia. These cross-border integrations enable QR code transfers, allowing domestic merchants to accept payments from Chinese travelers.

Cementing the Currency’s Standing

Separately, China has also focused on its central bank digital currency—the digital yuan—which has gained more ground than many other CBDCs globally.

Still, the yuan is far from challenging the U.S. dollar. Rogoff acknowledged this and laid out steps China could take to further cement the currency’s global standing, including opening its government bond markets to foreign investors and continuing to expand CIPS as a viable alternative to SWIFT.

In many ways, China’s payments strategy mirrors that of the European Union, which has also reprioritized its CBDC efforts and sought to bolster the euro’s role in cross-border payments. However, while strong government backing may drive incremental shifts, it remains to be seen whether these efforts will be enough to overcome the dollar’s entrenched position at the center of the global financial system.

The post Unseen Momentum Could Be Mounting Behind the Yuan appeared first on PaymentsJournal.

Six years after the Group of 20 (G20) introduced an ambitious roadmap to address long-standing inefficiencies in cross-border payments, global regulators say progress has been made—but many of the most persistent problems remain unsolved. In a recent keynote address, Financial Stability Board (FSB) chair Andrew Bailey assessed how far the effort has come and where it still falls short.

Speaking at the FSB Payments Summit, Bailey pointed to the increased adoption of international standards as one of the most significant developments in recent years. These advances include the implementation of the ISO 20022 messaging protocol, expanded operating hours of financial institutions to better accommodate international payments, and stronger anti-money laundering and counter-terrorism financing standards.

Despite these achievements, there has been little improvement in the end-user experience. Delays, high fees, and lack of transparency in cross-border payments are still as prevalent today as they were decades ago.

Left unchecked, Bailey warned, these persistent frictions could erode the stability of the global financial system and ultimately stymy economic growth.

Unforeseen Developments

Bailey also reiterated FSB guidance from last year indicating that G20 countries are unlikely to meet the cross-border payment efficiency targets set for 2027. While uneven implementation of standards across member nations is partly to blame, a number of unforeseen developments have also complicated progress since the roadmap was created.

Technologies such as artificial intelligence, cloud computing, and digital assets are rapidly reshaping expectations for financial services firms. At the same time, fraud has become far more sophisticated—driven in part by these same technologies—posing a growing threat across payment channels, especially in cross-border payments.

The Four-Part Plan

To combat these issues, Bailey outlined a four-part plan. First, public-sector entities should create local action plans to ensure international recommendations are effectively implemented at the domestic level. Second, they should prioritize innovation and modernize infrastructure to better support cross-border payments.

Third, Bailey called on member nations to reduce regulatory compliance costs, noting that the FSB has identified numerous cases in which regulatory hurdles have slowed cross-border payments. Finally, he emphasized that greater participation from the private sector will be key to reshaping international transactions.

Calls for a consortium-based approach have grown more common as the financial services industry confronts complex challenges, including fraud. In the context of cross-border payments, Bailey noted that deeper collaboration between public and private stakeholders will be essential to ensure regulators focus on the most pressing issues and take effective action.

The post FSB Chair Calls for a Consortium to Tackle Cross-Border Payments Woes appeared first on PaymentsJournal.

Group of 20 (G20) nations have committed to making cross-border payments more efficient, but regional complexities and outdated infrastructure have made progress slow.

The correspondent banking model adds another layer of complexity, requiring multiple banks to shuttle payments across borders. While the Swift messaging network has long served as the global hub connecting these banks, challenges remain.

This is why Swift proposed new rules for retail cross-border payments last year. Over 25 banks have signed on and will begin processing payments under this framework by June.

This marks a strategic shift for Swift, which has historically focused on intrabank and commercial payments. Rising consumer demand for cross-border payments and remittances—particularly in major markets like India, China, Pakistan, Germany, and Bangladesh—has prompted the network to broaden its focus.

Appetite for Expansion

Small businesses are also eager to expand their footprint internationally, especially younger entrepreneurs from Gen Z and millennial cohorts. Yet, delays, transaction fees, foreign exchange complexities, regional regulations, and lack of payment visibility have long been persistent pain points for cross-border payments.

Swift’s new framework aims to mitigate these challenges by providing cost transparency, traceability, and near-real-time settlement in many cases. The network expects additional payment rails to join by the end of the year.

Faster Than Benchmarks

This efficiency would be welcomed in a market that has continued to face challenges. After spotlighting the critical role of cross-border payments in the global economy five years ago, G20 nations developed a strategy to make international transactions more efficient and transparent by 2027. A recent progress report, however, indicates minimal advancement—falling short of expectations.

Already, roughly 75% of payments on Swift’s network reach the beneficiary bank in under 10 minutes, faster than the G20 benchmark. With the new rules, that percentage is expected to climb even higher.

The post Swift Moves Ahead with Retail Cross-Border Payments Network appeared first on PaymentsJournal.

As information highways have opened new avenues to the global marketplace, many business owners have been attracted to these new frontiers. However, there are unique challenges associated with cross-border operations that go far beyond currency conversions and product delivery. When businesses start moving money across borders, it introduces more gaps for cybercriminals who are increasingly adept.

At the heart of these issues is counterparty risk. In the current cross-border payments model, the recipient of the transfer is often verified through a process built on manual callbacks and spreadsheets. Given the technologies that bad actors now possess, it has become a significant challenge to effectively verify counterparties in this fragmented process.

This has created a vulnerability that criminals can exploit. Because these attacks expose organizations to financial and reputational risks, it is critical for businesses to implement solutions that can optimize the verification process.

The Unaddressed Gaps

Despite the challenges, the global market offers an enticing opportunity. Due to breakthroughs in digital payments, more small- to medium-sized businesses and financial institutions can now participate in the worldwide economy. According to the Bank for International Settlements, cross-border payment volumes are projected to reach $250 trillion by 2027, in part due to this increased participation.

However, these organizations are also exposed to the risks of a system that has been historically challenging. Many of these issues have arisen from the correspondent banking model which has dominated international payments for decades, where a chain of foreign and domestic banks work to complete a single payment.

This complex process often causes payments delays as each institution must perform their portion of the process and adhere to their policies and regulations. The intensive operation required to shuttle these payments along also leads to high transaction fees.

As these payments are routed, there is often a lack of visibility into the payment’s status within the process and any issues impacting it. What’s more, the regulatory demands and currency components of each region must be considered when processing cross-border payments.

All these issues make international transactions a lengthy, costly undertaking. Since many of these functions are still performed using manual processes, it also creates the potential for errors and misrouting along the way.

Unfortunately, bad actors are acutely aware of the issues that plague cross-border payments, and they are actively working to exploit them. According to TransUnion, global businesses lost an average of 7.7% of their annual revenue to fraud in 2025—mounting to an estimated $534 billion.

“According to that same TransUnion report, U.S. companies lost an average of almost 10% of their annual revenue to fraud,” said Jennifer Pitt, Senior Fraud Analyst at Javelin Strategy & Research. “Whether fraud losses average 7% globally or closer to 10% in the United States, the impact to a company’s bottom line is significant. While not all fraud can be prevented, unaddressed gaps in prevention and verification continue to contribute to financial loss.”

These challenges are often compounded by the ways organizations approach controls, risk, and friction in international transactions.

“In some cross-border payment environments, controls exist but have not kept pace with how organized fraud operates today,” Pitt said. “As a result, those gaps are exploited by criminal networks. This also introduces the potential for large-scale fraud operations. Consumers are generally willing to accept some level of friction, and some friction is often necessary in financial crime prevention.”

“Organizations must balance applying the right amount of friction to detect illicit activity while still meeting the demand for cross-border payments,” Pitt said. “Recognizing that consumers will tolerate necessary friction when it protects them against fraud should give organizations more confidence in addressing the lack of transparency and identity verification common in cross-border payments. When implemented correctly, these controls do not hinder payments in the way organizations once believed.”

The Tech-Enabled Threats

One of the reasons why fraud has outmatched current controls and defenses is that bad actors increasingly have access to more effective technologies.

For example, this tech has allowed hackers to perform more account takeovers, where they gain unauthorized access to a targeted account at an online financial institution. The FBI Internet Crime Complaint Center recently warned about an uptick in account takeover fraud that has already cost organizations millions of dollars this year.

Emerging technologies also allow bad actors to create and deploy malware and ransomware on a far greater scale. The initial point of entry for these attacks—and for the lion’s share of fraud attempts—are phishing messages.

The phishing messages of years past were easier to spot due to typos and grammatical errors, but this has changed. One of the reasons why today’s phishing attacks are more effective is bad actors are leveraging artificial intelligence. AI allows cybercriminals to craft better messages and send them on a wide scale.

According to a SlashNext report, there has been a 4,151% increase in phishing attacks since open-source AI was launched in late 2022. Beyond phishing, AI has also been used to create deepfake impersonations, synthetic identities, and phony documentation.

In addition to technical sophistication, fraud is increasingly perpetrated by organized fraud operations. These syndicates are well-equipped to deploy their messages and attacks on a global scale.

This environment has made fraud and increasing challenge for organizations and consumers. According to the Association for Financial Professionals, 79% of U.S organizations reported attempted or actual payments-fraud incidents in 2024.

All these fraud risks are exacerbated when sending money across borders. In addition to fraud threats, organizations must be cognizant of the threats from organized threat actors who use cross-border channels for money laundering or terrorist financing.

“Fraudsters and cybercriminals understand the limitations organizations face when identifying organized crime, including gaps in cross-border visibility,” Pitt said. “To skirt detection efforts and distance themselves from the crime, threat actors frequently use cross-border channels. And because fraud and money laundering incidents increasingly overlap, failing to detect one can mean failing to detect the other. This is also why it’s critical that teams are not completely siloed.”

“Many organizations still operate with separate AML, fraud, and KYC teams that rely on different systems and data sets,” she said. “When activity is viewed in isolation rather than across functions, it becomes significantly harder to identify risk accurately, particularly in real time. This is why the FRAML approach—a combined fraud and money laundering team—is still being heavily discussed and debated among fraud professionals.

“While the regulations may be different with fraud prevention and AML practices, the need to see the customer and activity holistically across all illicit activity often outweighs any outdated reasons for separate teams,” she said.

Moving Away from Manual Processes

The threat of cross-border payments means that organizations seeking to enter the global market must protect themselves. This means moving away from manual processes that open organizations to greater risk.

“Automation and data visualization tools are extremely helpful in quickly identifying counterparties and how they might be linked to one another,” Pitt said. “These tools can often uncover organized crime rings more easily than just relying on static data that is eventually manually analyzed by people just trying to make sense of mass amounts of seemingly unrelated information.”

Because threat actors have access to sophisticated technologies, organizations will have to adopt technology to protect themselves. Even as AI been exploited to create fraud attacks, so can it be used to identify and flag suspicious activity.

“Being able to detect reuse in identity elements (like name and date of birth, photo, and/or SSN) across multiple accounts can help identify synthetic identities as well as money mule accounts—high-risk typologies currently being used for fraud and money laundering,” Pitt said.

One of the most important challenges in international transactions is verifying that the party on the other end of the transaction is who they claim to be. In the correspondent banking model, each party conducts a series of manual checks to ensure the identity of the recipient.

However, after all these checks, banks are often left to trust that the counterparty is acting in good faith.

“There are still financial institutions that rely heavily on manual identity verification, using human review as the primary method,” Pitt said. “Advances in document fraud have made it easier for fraudsters to create convincing fake identity documents that can bypass weak verification processes, including those where in-branch professionals manually inspect IDs and documents for signs of forgery.”

“Many financial institutions are still relying on legacy KYC checks that are only done once—usually during onboarding—and annually after that,” she said. “KYC checks should not only focus on understanding each customer, but also take a risk-based view of the counterparties they transact with. Some banks only look at the customer in a vacuum and not holistically. And some don’t thoroughly explore counterparties.”

The Cornerstone of Risk Management

To address these challenges, LSEG Risk Intelligence developed its Global Account Verification (GAV) platform. GAV is an API-based and portal-accessible solution that verifies bank account ownership in real time across more than 45 countries.

The GAV platform helps organizations confirm counterparty account details before releasing funds which can significantly reduce APP fraud, failed payments, and compliance risks under PSD3, NACHA, and PSR1.

This platform is a gamechanger for organizations who are attracted by the global marketplace—but leery about the cross-border payments landscape.

“It’s just as critical to understand counterparties as it is to understand each customer,” Pitt said. “Doing what are essentially risk-based, mini-KYC processes for relevant counterparties, along with understanding how counterparties might be linked to different account holders, can help financial institutions identify organized crime and fraud rings.”

“Being able to vet who account holders are and who they do business with is often a cornerstone of basic risk management practices,” she said. “Failing to meet compliance requirements can lead to significant consequences like consent orders, lawsuits, fines, reputational risk, and customer attrition.”

The post Solving for Fraud in Cross-Border Payments Requires Better Counterparty Verification appeared first on PaymentsJournal.

While some may associate Alipay with China’s tremendously popular super app, its sister platform, Alipay+, is a merchant gateway with a rapidly expanding international reach.

As one of Ant International’s merchant platforms, Alipay+ played a crucial role in facilitating more than two billion cross-border payments last year, many of them originating in fast-growing markets like Southeast Asia, South Asia, the Middle East, and Latin America.

Altogether, Alipay+ connects to over 150 million merchants across more than 100 markets. That scale makes it is a significant development that India is considering linking its Unified Payments Interface (UPI) to the network. As the predominant real-time payments system in the world, UPI handles nearly half of global digital transactions.

Building on Dominance

Integrating with Alipay+ would make it easier for UPI’s roughly 400 million users to access instant payments while traveling abroad. This could significantly reduce the costs and settlement frictions that are commonplace in cross-border payments, while also helping keep users within the UPI ecosystem.

As UPI has become the most dominant real-time payments platform in the region, the Reserve Bank of India has aggressively looked for ways to expand the system. These efforts include raising transaction limits to enable higher-value purchases and linking the system to a credit card facilitated by Google Pay.

The Inevitable Expansion

Amid this growth, expansion beyond India’s borders seemed inevitable. Last year, UPI teamed with PayPal World, the fintech’s cross-border payments platform, in a deal that also included Alipay rival WeChat Pay.

However, one of the most intriguing developments for UPI has blossomed from the deepening relationship between India and the European Union. After a successful pilot, the European Central Bank announced plans to move forward with connecting its TARGET Instant Payment Settlement (TIPS) service to UPI.

Even more impactful is the newly established Free Trade Agreement between the EU and India. A central pillar of this landmark agreement is the creation of interoperability between the payments infrastructures of the two economies.

Taken together, these initiatives have transformed UPI from a purely domestic digital payments system into a significant cross-border payments player, with the potential to reshape what has long been a complex and inefficient process.

The post India Considers Integrating UPI with Alipay+ for Cross-Border Payments appeared first on PaymentsJournal.

After decades of discussions, India and the European Union have agreed to a landmark deal aimed at eliminating tariffs and taxes, integrating supply chains, and strengthening manufacturing capabilities across both regions.

Financial services is a key pillar of the Free Trade Agreement (FTA). As part of the deal, the two economies are working toward payments interoperability, including real-time, cross-border payments and remittances.

The overarching goal is to build a stable, long-term economic integration that benefits both sides. According to the Associated Press, trade between India and EU was relatively flat from 2024 to 2025, hovering around $136.5 billion. After the FTA, the two regions hope to boost trade to approximately $200 billion by 2030.

Calling for Stronger Infrastructure

Beyond the immediate opportunities for payments providers in both markets, the agreement allows each region to leverage the other’s strengths—most notably India’s leadership in real-time payments through its Unified Payments Interface (UPI).

The FTA builds on a prior agreement by the European Central Bank (ECB) to link its TARGET Instant Payment Settlement service with UPI. The newly inked deal also calls for broader collaboration on fintech initiatives, spanning compliance, artificial intelligence, and potentially even central bank digital currencies (CBDCs).

The digital euro has been debated for years, as EU member states weigh efficiency gains against potential privacy concerns. Recently, however, momentum has shifted, with the digital euro increasingly positioned as a cornerstone of EU payments autonomy.

ECB Executive Board Member Piero Cipollone has emphasized the need for a payments infrastructure built entirely on European technology. These calls have intensified amid the surging popularity of U.S. dollar-backed stablecoins and the expanding reach of Visa and Mastercard’s cross-border payments networks.

Responding to Entrenchment

Against this backdrop—alongside the continued entrenchment of U.S. technology and currency, and a more assertive U.S. trade stance in recent months—the FTA represents both a strategic response and opportunity. The agreement could have significant economic implications for nearly two billion people.

According to Indian Prime Minister Narendra Modi, trade between the two economies already accounts for roughly a quarter of the global gross domestic product and around a third of global trade.

The post Linking Payments Infrastructure Is a Key Component of India, EU Deal appeared first on PaymentsJournal.

Mobile payments are thriving in China, and now Visa cardholders will be able to add their cards to Apple Pay to make purchases at overseas merchants, both in-store and online.

Initially, this feature will be available only to consumers holding cards issued by some of China’s largest banks, including the Industrial and Commercial Bank of China, Bank of China, and Agricultural Bank of China. However, Visa is already planning to expand this capability to include cards issued by other institutions.

As a result, users in Mainland China will have another mobile payment option when traveling and shopping internationally. What’s more, Apple noted that Mastercard is preparing to launch similar cross-border functionality in Apple Pay.

Widespread Cultural Acceptance

Apple Pay is the leading mobile wallet in the U.S. by a substantial margin, with over 65.6 million users. This success is largely driven by the continued popularity of the iPhone in its home market.

While Apple has also led China’s smartphone market—until recently being edged out by Huawei—Apple Pay still accounts for only has a sliver of the country’s mobile wallet market, which is dominated by Ant Group’s Alipay and Tencent’s WeChat Pay.

These all-encompassing super apps each have user bases of approximately 1 billion users, driven in large part by China’s widespread cultural acceptance of mobile payments.

The Central Hub

Building on this success, both Alipay and WeChat Pay have expanded their service offerings and begun pushing beyond Mainland China. For example, Alipay+ is a merchant payment acceptance solution with reach across the Middle East and Latin America. Last year, Alipay+ supported roughly 2 billion cross-border payments for a customer base made up largely of small- to medium-sized businesses.

Ant International also noted that it is working to integrate with additional domestic payment systems—such as the mobile payments services in Thailand, Indonesia, and the Philippines—and to export the Alipay super app model to these regions.

Although mobile payments systems like Alipay, WeChat Pay, and Apple Pay are not often mentioned among the players poised to reimagine cross-border payments, they could ultimately serve as central hubs for international transactions, much as they already connect payments, identification documents, and even tickets within a single platform.

The post Visa Brings Cross-Border Apple Pay Transactions to China appeared first on PaymentsJournal.

In many of the world’s fastest-growing economies, small- to medium-sized businesses (SMBs) rely on efficient cross-border payment solutions to thrive. While numerous options exist, Ant International’s platform is seeing significant growth.

The global payments giant supported more than 2 billion cross-border transactions in 2025, many originating from rapidly expanding markets like Southeast Asia, South Asia, the Middle East, and Latin America.

Overall, Ant International serves over 50 million merchants globally—most of them SMBs—through its Alipay+ and Antom platforms. These solutions allow merchants to accept a wide range of QR, mobile, and card payments. Ant International plans to further expand its presence in regions like the Middle East and Latin America.

Expanding the Super App

In addition to supporting cross-border payments, Alipay+ operates as a unified wallet gateway, connecting global merchants to a plethora of payment types. This platform should not to be confused with the Alipay consumer app, which, along with WeChat, dominates payments in China.

These super apps have evolved far beyond payments, becoming a one-stop shop for virtually all consumer needs. One of Ant International’s goals in expanding the Alipay+ gateway is to develop similar digital wallet and super app ecosystems in other markets. Alipay+ already integrates with many leading domestic mobile systems, such as Indonesia’s DANA and Thailand’s TrueMoney.

From Domestic Systems to Global Reach

As these technologies have streamlined global communications, demand for cross-border payments has accelerated. However, international transactions have long been plagued by challenges, including high fees, low visibility, and slow settlement times.

Connecting domestic mobile and real-time payments systems has been an oft-proposed solution for these issues. For example, the European Union recently unveiled plans to tie into India’s UPI real-time payments system for cross-border payments.

As a global payments ecosystem, Ant International is uniquely positioned to become a major player in the market. In addition to its mobile payments infrastructure, Ant International has developed a blockchain that could bring the efficiencies of digital assets to its platform.

Case in point: Ant International and HSBC recently partnered to pilot cross-border tokenized deposit transfers over the Swift network, leveraging Ant International’s blockchain.

The post Ant International Logged Over 2 Billion Cross-Border Payments Last Year appeared first on PaymentsJournal.

Cross-border payments are entering a new phase, where traditional rails meet digital asset innovation. In a major step forward, Ant International and HSBC have teamed up to pilot tokenized deposit transfers over the Swift network using the ISO 20022 protocol.

ISO 20022 is a messaging standard that allows organizations to exchange significantly larger payments data than current standards allow. Although ISO 20022 has existed for decades, this pilot marks the first time the protocol and the Swift network have been used together to send tokenized deposits across borders.

In the initial trial, Ant International’s blockchain was integrated with HSBC’s tokenized deposit service to complete a transfer between Singapore and Hong Kong.

Struggling to Overcome Complexity

The Swift network has connected financial institutions around the world. While it has played an integral role in making the cross-border payments model more efficient, international transactions continue to face significant issues.

Historically, cross-border payments have relied on the correspondent banking model, in which each bank establishes partnerships with foreign institutions, creating an intricate web of intermediaries. This complicated structure often leads to delays, high transaction fees, and limited transparency.

Despite coordinated efforts by various organizations to improve international payment systems, there have been less-than-stellar results. According to a recent progress report from the Financial Stability Board (FSB), key performance indicators for cross-border payments have shown only marginal improvement over the past two years.

FSB identified two major challenges: the complexity of coordinating across different regions and the persistent hurdles that arise from outdated, legacy payment infrastructures.

A Proponent of the Standard

These challenges are among the reasons why Swift, along with others, has been a strong proponent of ISO 20022 as a messaging standard. The format’s data capabilities can make cross-border payments more efficient by reducing manual interventions and their associated costs.

When a cross-border payment is delayed, financial institutions often must embark on extensive investigations to determine the root cause. Swift recently noted that delayed payments cost financial institutions more than $1.6 billion annually due to these investigations, which can take days to resolve.

Beyond reducing delays and costs in the cross-border payments system, ISO 20022 also gives financial services companies insights they can leverage to identify fraud and money laundering activities. This is why the U.S. Federal Reserve recently transitioned its Fedwire Funds Service to ISO 20022. After longtime use of the format, Swift has now officially mandated ISO 20022 as the standard for cross-border payments on its network.

Underpinning Payments

Swift has been pushing to streamline its operations through digital asset technologies.

The network said it’s creating a blockchain to underpin its transactions. In a collaborative effort with 30 global financial institutions, Swift said it would develop a shared digital ledger that is interoperable with blockchains supporting stablecoins, tokenized deposits, and central bank digital currency transactions.

The platform is designed to serve as a secure, real-time record of bank transactions, leveraging smart contract capabilities to enforce compliance. Swift’s goal is to enable real-time cross-border payments.

The Rise of Tokenized Deposits

Although this blockchain may still be in its early stages, Swift’s collaboration with Ant International and HSBC could add powerful capabilities to its already formidable network.

Stablecoins may be the digital asset du jour, but tokenized deposits have been gaining substantial traction. Stablecoins are issued by private or public entities and backed by reserves managed by those organizations.

Tokenized deposits, by contrast, are digital representations of bank deposits held by regulated institutions. Therefore, they are backed by FDIC insurance and are often better suited for use by highly regulated financial institutions.

The use cases for tokenized deposits—including cross-border payments—have attracted interest from financial services players as diverse as Citigroup and the Bank of England. BNY Mellon, the world’s largest custodian by assets, has also explored using tokenized deposits to enable institutional clients to make blockchain-based payments.

“The use cases for a company like BNY are many,” Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research told PaymentsJournal. “There’s the potential for automation on unlocking liquidity once certain obligations and conditions are met, and for 24/7 cash sweeps that reduce intraday borrowing or overdraft risk. Tokenized deposits could reduce failed-trade risk in fund redemptions due to instant settlement. They have the potential to be programmable coupon or dividend disbursements. Repo transactions and clearing are a huge part of banks operations, so this could reduce the timelines and move collateral instantly.”

The post Ant International and HSBC Pilot Cross-Border Tokenized Deposit Transfers on Swift appeared first on PaymentsJournal.

As consumers move abroad, many still need reliable ways to send money back home. To this end, an integration between Mastercard Move and Tencent’s cross-border payments solution marks a significant step for those sending remittances to China.

The partnership will enable digital remittances to Weixin Pay, the mobile payment platform within China’s Weixin ecosystem. This opens access to cross-border transfers for more than 1.4 billion users of Weixin and WeChat.

Since Mastercard Move currently connects to roughly 10 billion financial services endpoints worldwide, senders can take advantage of a vast global network. Funds can be delivered either to Weixin Pay wallet balances or to bank cards linked to the mobile wallet.

Searching for a Solution

Sending money across borders has traditionally been a convoluted process involving multiple intermediaries, often making it costly and time-consuming.

Many solutions have been proposed to address the pain points of cross-border payments. Digital assets—particularly stablecoins—are frequently highlighted because they can enable immediate, low-cost transactions that settle on secure and transparent blockchains.

However, stablecoins have faced pushback due to their heavy reliance on the U.S. dollar. This is one reason European lawmakers have shown a preference for a central bank digital currency, such as the digital euro, over privately issued stablecoins. What’s more, there are concerns that the rise of stablecoins has weakened some emerging market currencies, as users often prefer the relative stability of the U.S. dollar over their domestic currency.

The Market Remains Fragmented

All these issues mean that an overarching, global payment type is unlikely to emerge anytime soon. Instead, more solutions have taken the approach of interlinking domestic payments systems. For example, PayPal recently launched its cross-border payments arm, which connects with both WeChat Pay and India’s Unified Payment Interface (UPI).

Mastercard Move, along with Visa Direct, have also forged significant connections with many financial institutions and platforms across their ever-expanding networks. These platforms function as a supercharged version of the correspondent banking system, where banks can perform nearly real-time, secure, and transparent cross-border payments.

While connecting local digital payment systems is an important step toward improving cross-border remittances and payments, the market remains fragmented. For instance, the Mastercard Move and Tencent integration is notable, but WeChat Pay represents around half of China’s market; the other half is dominated by Ant Group’s Alipay.

The post Mastercard Links with Tencent for Cross-Border Remittances in China appeared first on PaymentsJournal.

After highlighting the ongoing challenges in cross-border payments, the European Central Bank (ECB) is taking steps to link its instant payments system with India’s Unified Payments Interface (UPI).

This integration was first proposed months ago, and after positive results from an exploratory study last month, the ECB is now moving forward with the realization phase to interconnect the Eurosystem’s TARGET Instant Payment Settlement (TIPS) service with India’s payments giant.

The ECB is also exploring the possibility of linking TIPS with Nexus Global Payments—a network born from Project Nexus, an initiative established by central bank consortium Bank for International Settlements (BIS). Nexus Global Payments connects payments systems across South and Southeast Asia, including India, Malaysia, Thailand, Singapore, and the Philippines.

These connections, along with a potential integration with Swiss National Bank’s Swiss Interbank Clearing Instant Payments (SIC IP) system, are part of an overarching strategy to simplify cross-border payments and remittances for European consumers and businesses.

Falling Short of Goals

Earlier this year, a member of the ECB’s executive board underscored the high costs of cross-border payments in the region, even as IT and telecommunications expenses have declined.

For example, a small business owner needing to send a payment to a supplier outside the EU’s Single Euro Payments Area (SEPA) often faces costs roughly 10 to 12 times higher than payments made within SEPA.

Separately, a progress report from the Financial Stability Board (FSB) found that G20 nations have fallen short of achieving the goals they set for improving cross-border payments. The FSB cited challenges including the complexity of coordinating payments across countries and the limitations of legacy payment infrastructure.

Staying at the Forefront

As more real-time payments systems have emerged, interlinking these systems could offer a powerful solution. This approach would reduce costs, increase speed and visibility, and prevent payment service providers from having to engage with multiple payment systems or a series of correspondent banks.

Other solutions for cross-border payments have also been proposed, including networks established by SWIFT, Visa, and Mastercard. Stablecoins have been suggested as another option, though there has been some pushback in the EU because these tokens are largely backed by U.S. dollars.

Conversely, integrating TIPS with a system like UPI could help maintain the euro’s prominence in international transactions. UPI handles the largest real-time payment transaction volumes globally, and India is among the top 10 recipients of euro remittances.

The post EU Plans to Link Its Real-Time Payments System with UPI appeared first on PaymentsJournal.

Much has been made of the potential efficiencies that stablecoins and other cryptocurrencies could bring to cross-border payments, but Brazil’s government also believes their use creates a tax loophole.

According to Reuters, Brazil’s ‌Finance Ministry is considering expanding the scope of its financial transaction tax to include certain cross-border payments made with digital assets. Under rules taking effect in February, Brazil classified stablecoin transfers as foreign exchange transactions. This classification also applies to international payments made with digital assets as well as  transfers to and from self-custody wallets.

Although capital gains from crypto trades above prescribed limits have been taxable in Brazil, crypto-based payments have not. Officials say this gap has opened the door for digital assets to be used in nefarious activities like money laundering. There are also concerns that some organizations may use cryptocurrencies to falsify the amounts they declare for import taxes.

“I think money laundering is a bit of an over-exaggeration here–I think it mainly pertains to businesses and B2B or B2C payments,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “I’m sure at the end of the day who the government is actually targeting is these businesses who aren’t laundering money, but they may be underreporting these numbers.”

A Demonstrable Boost

While these concerns likely have merit, taxing crypto transactions could also provide a demonstrable revenue boost for Brazil. The nation’s crypto market has surged ⁠in recent years, driven in large part by increased stablecoin usage.

Tax data shows that crypto transactions reached 227 billion reais (‍roughly $42.8 billion) in the first half of 2025, a 20% year-over-year gain. Tether’s USDT stablecoin accounts for approximately two-thirds of that volume, while bitcoin represents around 11% ​of the transactions.

“It’s a double-edged sword,” Hugentobler said. “The industry needs regulations to grow adoption and use cases, but if regulations are too strict, businesses and other users could revert back to traditional methods. I think this is a long ways away from that, but if they stifle use from too strict regulations it will negate the revenue side of the equation. If companies treat these payment options like any other payment options, they have nothing to worry about.”

Increasing Financial Inclusion

In addition to cross-border payments efficiency, stablecoins have gained ground in many regions because they markedly increase financial inclusion. In areas with currency instability, leading U.S. dollar-backed stablecoins like USDT and Circle’s USDC can offer a more reliable alternative.

This reliability has made stablecoins far more viable for payments than cryptocurrencies such as bitcoin or Ether. This sentiment was echoed by Brazil’s central bank, which found that stablecoins were largely used in the region as an inexpensive way to hold and spend USD.

Central bank officials believe that taxing these transactions would provide greater visibility into digital asset usage and help mitigate misuse. However, the proposal still requires approval from Brazil’s federal tax authority.

“Brazil is one of the world’s largest stablecoin markets by transaction volume, so this could become a live case study for stablecoins with FX-type regulations where others follow suit,” Hugentobler said. “But the fact that Brazil’s government is releasing regulations around stablecoins means it is accepting them, which is a step in the right direction overall. Whether or not growth or volumes decrease in the short term is yet to be seen, but I think as long as businesses and other users adhere to the regulation and fees aren’t too steep, it should be good for growth in the longer term.”

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For decades, typically large regional or money center banks served as correspondent banks that enabled smaller banks to offer cross-border payments. It was rare for credit unions, community banks, and other smaller financial institutions to offer cross-border payments. And if they did, it was a money-losing proposition, offered out of necessity to prevent their customers from leaving for larger banks.

It’s notable that the problem for originating institutions has become much worse. Over the past decade, the number of correspondent banks supporting originating institutions for cross-border payments has fallen by more than 25%, even as international bank transfer volumes have surged.

Small or even medium-sized financial institutions struggle to find a correspondent bank. And even if one is found—the commercial terms, product issues from the opaqueness of these payments, customer complaints about slow delivery of funds and high fees, as well as service from correspondent banks—make the experience painful for everyone involved.

But things have changed. 

New software and new paradigms address “legacy bank systems”, “legacy product thinking”, and “legacy risk” in terms of cross-border payments.

And for the first time, smaller financial institutions, credit unions, and community banks can offer their retail customers, SMEs, fintechs, and others cross-border payments that are faster, transparent, and less costly than the “big banks”.  Moreover, they’re very profitable as well as easy to implement and support with new paradigms and new tech—and no correspondent bank required.  

In a PaymentsJournal podcast, Gary Palmer, President, CEO, and Chairman of Payall, and Hugh Thomas, Lead Analyst of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed how smaller banks can compete and win in the cross-border space.

Fixing the Root Cause Issues at Correspondent Banks

What could reduce both the risk and the cost of cross-border payments? Fixing manual workflows is the first step. Digitizing and enhancing a correspondent bank’s ability to manage counterparty risk, transaction risk, and multi-jurisdictional compliance lowers the cost of processing each transaction and improves outcomes.

Alternatively, some have introduced stablecoins in an attempt to fill the gap of fewer correspondent banks. But without fixing the underlying risk and compliance issues—they’ve added new risks.

“A professor from a renowned European institution tracking various violations or issues with crypto operators in the areas of sanctions and money laundering has noted a marked increase in violations,” said Palmer. “And even though financial institutions may feel somewhat insulated from risk, this hasn’t been fully tested, and the payment system is exposed to manipulation.”

Payall has developed end-to-end infrastructure and enterprise software for banks of all sizes and all roles, which removes what Gary calls “the fear and friction” from cross-border payments—whether these payments are processed through correspondent banks, new alternatives such as Mastercard Move, or stablecoins.

Hugh Thomas observed: “Smaller banks often lack the technical resources to handle the complex demands of cross-border. What’s notable is how purpose-built solutions digitize these processes, lowering costs and opening participation in ways that weren’t possible before.”

This means that smaller and medium-sized banks can now safely, efficiently, and profitably become correspondent banks or originating institutions.

Banks Are Asking Too Much from Their Employees

Millions of times each day around the world, an originating bank employee receives a payment instruction from their core system indicating that a customer wants to transfer funds to the U.S. to make a payment for goods and services. From here, this transaction is manhandled through an overgrown jungle of paper processes across multiple departments at the originating bank and its correspondent bank.

It’s each bank’s responsibility to establish reasonable risk controls to mitigate money laundering, terrorist financing, and sanctions violations. Based on the size of the payment and other attributes, employees must decide what data to collect—contracts, invoices, bills of lading, customs declarations, tax receipts, or something else. They must then determine whether the documents are authentic or have been altered or forged. And apply judgment to decide if what’s been provided reflects an economically legitimate transaction. The bank employee also looks for sanctioned people, companies, ports, vessels, and products in this pile of documents, from an ever-changing list of sanctions. 

Now consider the time, cost, and risk of error involved—even for a few documents/pages. Multiply that by 5, 10, or 50 pages, and the problem becomes overwhelming.

And where do they record, share, and store the results—along with all the related data, documents, photos, and more? Not in core systems or digital bank platforms—because it’s impossible—but instead, in paper files, shared folders, and emails. What a mess. It’s a slow, costly, opaque, cumbersome, and risky process.

The solution? Digitizing counterparty risk, transaction risk, compliance, and a long list of other previously manual processes eliminates the slow, costly, and error-prone reliance on humans to protect each bank and the payment system.

New, Purpose-Built Software is a Game Changer

“It’s easy to understand how AI and digitization could transform cross-border compliance,” said Thomas. “Software that automates data collection, verification, and document analysis has the unique potential to reduce risk and change the economics of participation for smaller banks.”

Payall’s software digitizes all the originating institution’s rules, data collection, verification, and internal, as well as external, sharing needs. Soon, advanced AI will examine PDFs, audio files, videos, and photos, extract unstructured data—such as names of companies, ports, vessels, people, and currencies—and compare them against sanctions lists.

For the first time, an originating institution, even a small bank, can fully digitize its Know Your Transaction (KYT) process for 100% of transactions in real time. Until Payall, these processes could only be executed by a bank’s employees. It’s too much.  

Also, from the perspective of a correspondent bank working with originating institutions, nothing is more powerful than “see-through”—or 100% visibility into each rule at the originating institution, how it was executed, the supporting data and artifacts, including the results of 3^rd party verification services—orchestrated by Payall.

Additionally, correspondent banks configure their individual risk, compliance, or other rules to this incredibly data-rich payment set and take action. Instead of operating on “trust”—validated by occasional audits on as few as 0.0001% of all transactions, months after a payment—imagine the power of complete visibility into the originating institution’s application of their rules, processes, and supporting documentation on 100% of all transactions in real time.

And based on this, the correspondent bank can choose to either accept the payment or independently execute additional transaction due diligence, including a new form of Know Your Customer’s Customer (KYCC). This is only possible with new software that enables instant, on-demand multi-country KYC, KYB, as well as specialty KYT.

What was previously impossible to see is now not only transparent but can be directly and independently interrogated and decisioned by the correspondent bank—this is Know Your Customer’s Customer reimagined. 

This is particularly powerful for correspondent banks that support originating institutions from regions flagged by FATF as having material weaknesses in preventing money laundering, executing KYC, or sanctions screening.

Also, during periods of geopolitical events, bad actors can infiltrate banks. What’s the outcome? In the absence of comprehensive payment data and knowledge, U.S. correspondent banks are compelled to exit from the region or stop just about all payments. But in doing so, legitimate businesses can’t make payments or get paid, and life-saving remittances are stopped. The result? Chaos as commerce is crippled, and everyday citizens struggle to survive. While the bad actors are stopped, a country can be decimated.

“For correspondent banks, Payall enables proactive, data-driven oversight of every transaction, not just retrospective audits or occasional spot-checks. For the first time, correspondent banks can go beyond trust,” said Palmer. “We’ve completely reimagined and redefined Know Your Customer’s Customer so that correspondent banks have 100% see-through into the rules and outcomes of an originating bank partner, and they can directly engage and decision data. This changes everything: it eliminates reliance on inefficient back-office workflows, subjective trust, and guesswork. It creates confidence in the safety of cross-border payments, and gives correspondent banks the control they’ve always needed, but never had.”

Payall’s breakthrough software reduces risk to correspondent banks while ensuring legitimate trade is flowing and the most at-risk can still receive life-saving remittances. “This level of transparency and access fundamentally changes correspondent banking,” noted Thomas. “It’s no longer about faith that a partner executed its controls—it’s about verified execution, visible in real time.”

Correspondent Banks Have New Competition

While new software helps banks overcome legacy systems and legacy risk, Mastercard Move and Visa Direct are new paradigms that address legacy bank product thinking regarding international transfers. Banks and financial institutions of any size can offer cross-border capabilities that no bank has ever offered—such as transfers to mobile money, digital wallets, cash pick-up, and pay to card with Visa Direct and Mastercard Move.

In addition to providing novel software for originating institutions and correspondent banks, having pioneered specialty risk and compliance capabilities as well as end-to-end workflow digitization, Payall is certified by Mastercard Move as a technical integrator and processor. The company also supports Monex and recently announced its FedNow Service certification. Gary emphasized, “We’ll never compete with banks, whether they’re originating institutions or correspondent banks; instead, our software and global payments gateway and orchestration capabilities open more possibilities for all.” 

Mastercard Move and Visa Direct are well-positioned to capitalize on the mass exodus of correspondent banks from cross-border payments in the face of growing retail, SME, and other bank customer demand for cross-border payments. Given the modern, inclusive nature of their products, speed of funds delivery, transparency of payments, and commercial terms for banks—if they can make connecting easy and affordable, major global adoption is likely. Thomas added, “What’s interesting is that new entrants like Mastercard Move and Visa Direct expand payout options, but smaller banks can only plug into them if they have the right software partner. Otherwise, the cost and complexity of connecting make it nearly impossible.”

Palmer agreed, noting, “This is where we shine—banks struggle to find resources to connect and operate with Mastercard Move; we eliminate up to 98% of the capex and can launch a bank on Move in weeks.”

“You Can Do This”

Correspondent banks struggle with effectively and efficiently dealing with the risks associated with how foreign originating institutions, MSBs, fintechs, and other counterparties execute KYC, KYB, AML, and more. But there’s also the financial risk associated with properly maintaining nostro vostro accounts, FBO accounts, or even safeguarded accounts. The ability to perform dynamic sub-ledgering and complex account and currency reconciliation isn’t supported by legacy systems, which rely on manual control mechanisms. This is why banks need new technology to ensure financial integrity, improve outcomes, lower costs, and address the root causes of why cross-border payments have been high-risk, opaque, costly, and slow.

“A good example is a small bank we’re working with. They recognize the gap in correspondent banking and understand that our proprietary software can deliver the safety and efficiency they need to operate and win,” said Palmer. “The opportunities are material but realizing them takes the right technology and bank leadership. Banks can now do this.”

While originating banks have a different set of risk, compliance, and payment problems, new software and new paradigms address their needs, too. And with the likes of Visa Direct and Mastercard Move, there’s no reason for a credit union, community bank, or smaller financial institution to lose a customer just because they don’t offer cross-border payments.    

There’s never been a better time for a bank, even smaller financial institutions, to capture their fair share of cross-border payments—with the right software and know-how.

The post Making Cross-Border Payments Work at Smaller FIs—as Originating Institutions or Correspondent Banks appeared first on PaymentsJournal.

Leaders from the world’s largest economies developed a roadmap to improve cross-border payments four years ago, but those objectives now appear unlikely to be achieved.

A progress report from the Financial Stability Board (FSB) found that, although many milestones have been reached, the measures taken so far have yet to translate into real-world results. In fact, key performance indicators for cross-border payments have improved only marginally over the past two years.

The FSB noted that Group of 20 (G20) nations are likely to miss their target of making cross-border payments more efficient and transparent by 2027, citing the complexity of coordinating among numerous countries and the challenges involved in modernizing payment infrastructures.

A Longstanding Issue

The improvements achieved so far have been mostly related to speed. The FSB noted progress in the overall speed of wholesale payments and remittances, meaning that those who rely on financial support from family members abroad are now receiving funds more quickly. However, the initial goal set by the G20 leaders was for 75% of wholesale and retail payments to be credited within an hour of being made.

Additionally, the costs of cross-border payments—a longstanding issue—are still too high. One of the original goals set by G20 countries was to reduce the global average cost of retail payments to below 1%.

Unfortunately, not only have cross-border payment costs failed to fall below this threshold, but in some cases, they are actually rising. For example, the FSB reported that peer-to-peer payments in sub-Saharan Africa are the most expensive and the costs have increased to roughly 4% per transaction, up from 3.2% in 2023.

The Final Leg

To address these issues, the FSB called for significant overhauls to many countries’ payment infrastructures. Two of the main challenges with cross-border payments have been selecting the correct payment route at the outset and ensuring the payment reaches the recipient in the final leg of the process.

Regarding the issues in finalizing transactions, the FSB underscored the significant variations across regions. In addition to currency differences, banks often face differing regulatory frameworks, anti-money laundering laws, and Know Your Customer requirements that they must navigate.

The FSB called on regional and local leaders to take practical steps to revamp their domestic processes in alignment with international policies, noting that such reforms could not only improve the cross-border payments experience for citizens but also stimulate economic growth.

The Need for a Standard

There’s also a need for a standardized cross-border payment protocol. Such a standard could go a long way toward reducing complications arising from differing regional regulations while also helping to mitigate fraud risk.

There have been several attempts to build this network, such as the platform developed by global messaging system Swift. Swift’s infrastructure connects the financial institutions in the correspondent banking network with a standardized framework for communication.

Under the correspondent banking model, each bank establishes partnerships with foreign institutions in a complex web that can involve multiple intermediaries. This system, built on convoluted processes, often leads to the delays, high costs, and lack of visibility that have come to define cross-border payments.

Searching for a Solution

While Swift’s network has been instrumental in accelerating the current model, the emergence of new technologies has led many to call for a new paradigm. Some have pointed to digital assets—particularly stablecoins—as a potentially better solution for cross-border payments, since they can be transferred immediately over secure blockchain networks.

Several competing cross-border payment systems have also emerged in recent years. Visa and Mastercard have leveraged their global credit card networks to create networks that are effectively a more efficient version of the correspondent banking system.

Visa Direct and Mastercard Move are connected to financial institutions worldwide, and these networks have the liquidity and foreign exchange capabilities to serve as compelling alternatives for cross-border payments.

There are also networks created by fintechs like PayPal and Circle that link global payments players. For example, PayPal World connects digital payments systems like India’s UPI and China’s WeChat Pay—rather than local financial institutions—through PayPal’s network.

While it is unclear how this fragmented landscape will evolve, relief from cross-border payment inefficiencies doesn’t appear imminent. The FSB noted that, as G20 nations are unlikely to meet their 2027 targets, global leaders will soon have to decide whether to extend the deadline or develop a new strategy.

The post G20 Likely Won’t Meet Goals for Improving Cross-Border Payments appeared first on PaymentsJournal.

Global messaging hub Swift has spent decades building a global system for cross-border payments, and now it plans to launch a blockchain-based solution incorporating digital assets.

In collaboration with roughly 30 global financial institutions, Swift is developing a shared digital ledger designed to be interoperable with existing blockchains, including those supporting stablecoins, tokenized deposits, and central bank digital currency (CBDC) transactions.

The platform is envisioned as a secure, real-time record of bank transactions, leveraging smart contracts to enforce compliance. Its ultimate goal is to enable real-time cross-border payments.

Checks and Balances

The costs and inefficiencies of cross-border payments have long been a challenge—one of the key reasons Swift has achieved such a strong global presence. The organization has built a network that connects over 11,000 banks across 200 countries.

By providing a critical layer of communication, Swift helps streamline a cross-border payments model that has traditionally depended on manual checks and balances. While Swift has improved the correspondent banking system, persistent challenges remain. Regulatory nuances, currency conversions, and compliance requirements continue to drive up costs, cause delays, and heighten fraud risks.

A Stronger Solution

Due to these issues, digital assets are increasingly seen as a stronger solution for international transactions. Among them, fiat-based stablecoins have emerged as the leading contender, since most cryptocurrencies are highly volatile, while CBDCs and tokenized deposits have yet to gain meaningful traction .

Blockchain-based stablecoins enable secure transactions, and their decentralized infrastructure allows payments to be sent globally in real time. Another key differentiator is that they don’t require a bank account—unlike many cross-border networks, including Swift’s.

Although Swift’s network is designed to connect with—rather than compete against—stablecoins and existing blockchains, the cross-border payments landscape is becoming increasingly crowded.

For example, PayPal and Circle now offer both stablecoins and cross-border payments networks that connect financial services firms. Additionally, Visa and Mastercard have launched substantial cross-border payments networks that leverage their global presence.

Many banks are also developing their own digital assets solutions with potential cross-border capabilities. This includes JPMorgan Chase, which has considered issuing its own stablecoin and has launched a digital assets division under its Kinexys brand.

Despite this growing competition, Swift hopes to leverage its established network to maintain a prominent role in the ecosystem. The organization is also relying on its many partner banks to drive continued innovation. For example, several banks collaborating on its new blockchain-based system include HSBC, Deutsche Bank, and JPMorgan Chase.

The post Swift Is Creating a Blockchain-Based Platform for Cross-Border Payments appeared first on PaymentsJournal.

The Swift messaging system has long been a central player in improving international transactions, and the network now has its sights set on streamlining retail payments.

This retail push marks a shift for Swift, which has traditionally been used for larger intrabank or business-to-business payments. After collaborating with roughly 30 banks across 17 countries, Swift is rolling out new rules aimed at ensuring greater transparency and efficiency in retail cross-border payments.

Under the updated guidelines, Swift said retail users will benefit from transactions that are faster than the benchmarks set by Group of 20 (G20) countries, with roughly three-quarters of payments reaching the beneficiary bank in under 10 minutes. The system is also designed to eliminate hidden fees and, where possible, use domestic real-time payments systems to facilitate instant settlement.

The Correspondent Bank Model

There has been a surge in demand for cross-border payments as global communications channels have expanded. However, the process remains largely dominated by the longstanding correspondent banking system, in which banks hash out their own partnerships with overseas counterparts.

These partnerships can involve multiple intermediaries, making transactions in this model a slow and often convoluted process. Adding to the complexity are the manual procedures that define these relationships, which create the opportunities for delays, errors, and fraud.

“There’s a concept called nostro and vostro where you’ve got banks that have pots of cash with one another,” Hugh Thomas, Lead Commercial & Enterprise Payments Analyst at Javelin Strategy & Research, told PaymentsJournal. “The nostro is mine that sits with you, and vostro is yours that sits with me. They just sort of net and pool at the end of every day and figure out, ‘OK, you’ve got this much more vostro with me and I’ve got this much more nostro with you as a consequence of us having done these transactions.’ Those are, in many cases, manual processes.”

In the end, banks in the correspondent banking system must often rely on trust, assuming that each institution in the chain is doing its part.

Getting Payments to the Finish Line

As a messaging network, Swift’s role has been to streamline communication between financial institutions. This has had a significant impact, especially on what Swift describes as the “in-flight” portion of a transaction—though this stage represents only about 20% of the total time for an average cross-border payment.

The bigger challenge lies in the final leg, after the payment exits the Swift network. This stage is far more time-consuming, with roughly 80% of transaction time spent navigating regional nuances like regulations, fees, and domestic infrastructure.

Looking for Alternatives

Although Swift’s new framework could smooth many aspects of the cross-border payments process, many of these issues are likely to persist. This is why there have been many alternatives that have been proposed as cross-border solutions.

Visa and Mastercard have already built robust global networks to support their credit cards, and they are now leveraging these systems to—in effect—create a better version of the correspondent banking system. These platforms, dubbed Visa Direct and Mastercard Move, connect to banks around the world and have the liquidity and foreign exchange capabilities to become a compelling alternative to correspondent banking.

Other contenders for cross-border payments market share are crypto and digital assets, which allow for seamless, secure, and transparent transactions across a blockchain. Due to the lack of volatility, fiat-backed stablecoins such as those offered by Circle and Tether have established a strong use case in cross-border payments.

There are also a growing number of networks that connect domestic infrastructures, such as PayPal World. Instead of connecting financial institutions, this solution connects digital payments systems like India’s UPI and China’s WeChat Pay with PayPal’s ecosystem.

Preserving Its Role

Although there are more cross-border payments systems and solutions than ever, Swift continues to play a critical, well-established role. The network is actively upgrading its platform and, later this year, will require participants to utilize the ISO 20022 protocol, which dramatically increases the amount of data that can accompany payments.

This enhancement could drastically reduce delays cause by incomplete payment instructions and potentially save organizations millions of dollars in costs associated with delayed or failed payments.

In parallel, Swift is piloting digital asset transactions on its network, aiming to bridge the gap between decentralized and traditional finance.

Together with initiatives such as its new rules for retail cross-border payments, these developments are likely to reinforce Swift’s role in the global payments landscape. Still, it remains uncertain whether one solution will emerge as the standard for international transactions—or if cross-border payments will continue to be a fragmented market.

The post Swift Develops Rules for Retail Cross-Border Payments appeared first on PaymentsJournal.

The correspondent banking model, which has dominated cross-border payments for years, is—at best—a deeply flawed system. It relies on manual processes, after-the-fact audits, and “trust” in foreign banks’ compliance, despite regulators confirming only 0.0001% of transactions are ever reviewed. And the ability to make a cross-border payment is critically dependent on correspondent banks—their foreign currency reserves and reach. Meanwhile, the rise of new and compelling systems like Mastercard Move and Visa Direct, along with emerging payment types such as stablecoins and real-time payments, while attractive to banks and their customers, have only added further complexity to an already fragmented landscape.

Traditional core banking systems, digital platforms, and supporting infrastructure were never designed to accommodate these new paradigms. As a result, banks remain largely unprepared—not only to manage the heightened risk and compliance obligations they bring, but also to efficiently orchestrate payments across these channels.

Gary Palmer, President and CEO of Payall Payment Systems, told PaymentsJournal that global payments orchestration with specialty intelligence, more than just a global gateway, has become a necessity for financial institutions looking to serve the surging cross-border payments market.

Comprehensive payments orchestration can digitize many labor-intensive processes (not just move money), such as counterparty risk management, real-time transaction monitoring, and multijurisdictional compliance. It can also function as a super switch—an intelligent hub that analyzes payment attributes such as size, commercial activity, or source of funds, B2B vs B2P, desired delivery speed, preferred recipient payment form factor—and routes the payment accordingly. The result? A new paradigm, aligned with new partners, that supports diverse mechanisms used to move funds around the world.

Legacy Bank Systems Weren’t Built for This

When a financial institution enables a transaction from a bank account, it typically delivers the payment across a domestic network. In the U.S., this could mean the ACH network, Fedwire, or even real-time payments systems like RTP or FedNow. These are the networks most core banking systems can interface with, albeit adopting new options like RTP and FedNow isn’t easy for banks or their tech partners.

However, the ways consumers move money from their bank accounts have expanded far beyond simple routing between accounts. For example, funds may now be sent from, or to, an account to a mobile wallet or a digital payments platform—transactions that often fall outside the scope of bank systems, both domestically and internationally.

“How does a bank move money around the world?” Palmer said. “Most financial institutions do this through a correspondent bank, but that introduces complications—different message formats, required data, and rules that must be followed before the payment is handed off to the correspondent bank.”

“The software that exists in core bank systems was never designed for the complexity and ever-changing nature of cross-border payments,” he said.

Another layer of complication in the correspondent banking system is that it relies on the SWIFT global messaging system, where almost all receiving participants are financial institutions.

Yet, since SWIFT delivers messages to member or participating banks for funds delivery to bank accounts, this only reaches 15–30% of the world’s population. Billions of people remain outside, unable to receive funds through banks that use the SWIFT system, they rely on mobile money, digital wallets, or cash to live from day-to-day.

However, each of these payment form factors operates under its own set of rules. Some rules are mandated by regulation, others are imposed by issuers to mitigate risk or fraud, and still others stem from the limitations of the product itself.

“For example, in some jurisdictions, mobile money wallets can’t accept a business-to-business payment; they can only accept a P2P or a retail payment or a remittance,” Palmer said. “Some have minimum payment amounts, some have maximum payment amounts, some have currency restrictions, and they all have different message formats.”

“There’s no such thing as a bank account number when you’re sending money to a mobile money or a digital wallet, so we’re talking about layered complexity and diversity that no bank system was ever built for,” he said.

And even if funds are going to a bank account, if the final leg of the payment journey is a real-time rail or domestic network in the U.S., the bank identifier is the RTN/routing transit number—not the ABA number. Yet for 50 years, every bank in the world has trained customers to ask for the SWIFT code, ABA number, or wire transfer number. But these won’t work for ACH in the U.S. Similar conditions exist elsewhere. How are billions of people retrained? Not possible—software is the key.

A Breakthrough of the Highest Order

As complex as the cross-border environment has become, there have been some recent steps forward. One of the most substantial developments affecting the market has been the emergence of Mastercard Move and Visa Direct—platforms that leverage the global payment rails of these credit card companies.

These solutions fill a gap created by the steady reduction in the number of correspondent banks in recent years. As a result, partnering with one of the remaining institutions has become increasingly costly and time-consuming.

Unfortunately, onboarding is only the first of many challenges facing banks that want to enter the cross-border payments market.

“That’s where you’re talking about issues that are affecting wire transfers, netting and pooling, and figuring out who owes what in what currency,” said Hugh Thomas, Lead Commercial and Enterprise Payments Analyst at Javelin Strategy & Research. “What time did the transaction happen? What were the two currencies doing at that time? Any number of additional layers of complexity that make moving funds back and forth not nearly as seamless as Venmo, or even cash.”

To combat these issues, Visa and Mastercard have leveraged their established infrastructure to create an alternative to correspondent banking.

They are strong competitors because they are already connected to domestic bank transfer rails through their card business. They also hold massive global liquidity across more than 100 different currencies and operate some of the most efficient foreign exchange trading systems.

More importantly, the reach of Visa Direct and Mastercard Move now extends far beyond financial institutions.

“What they have said is, ‘We need to serve everybody on the planet,’” Palmer added. “’This means we’re going to connect this infrastructure not only to the bank transfer rails, but we’re going to connect it to mobile money, digital wallets, and cash disbursement engines.’”

“They say to originating institutions anywhere in the world: ‘You don’t need a correspondent bank, you can connect to us,’” he said. “‘Here are our APIs and operating rules, connect to us and we’ll deliver funds fast to bank accounts, mobile money, digital wallets, and cash.’ This is a breakthrough of the highest order.”

The Promise of Payments Orchestration

Even though Mastercard Move and Visa Direct are game-changing systems for originating institutions, there is a caveat: the institution must be able to connect to these systems. And it’s not just one connection today, Visa and Mastercard offer multiple connection points for different types, routes or other distinctions. 

“They have their own set of APIs. They have their own set of rules that require new software and new capabilities. Before you do that, you need a payment orchestrator who has built the software to comply with the regs, who’s connected into their APIs and is perpetually maintaining that current state of connections because—just like with card issuing and card acquiring—there are periodic changes to the rules and the system, and the participants have to update their software.” 

However, connecting to Mastercard Move and Visa Direct is just one benefit of a robust payments orchestration platform. Payments orchestration consolidates multiple payment types into a single intelligent hub, reducing the need to manage disparate vendors and systems.

This means that payments can be routed intelligently across the safest, most cost-effective channels, creating a better customer experience with less friction.

Leading payments orchestration platforms also incorporate risk controls, fraud defense, and regulatory alignment. Additionally, they provide tools to support counterparty risk management, real-time monitoring, and compliance procedures.

Among all these benefits, one of the most important aspects of payments orchestration is that it brings options. This could mean enabling a new currency, a new recipient form factor, or expanding into a new country. It also gives institutions the freedom to send one-off payments of all sizes and types.

“A payment network that we’re connected to may say, ‘We handle B2B payments, not P2P,’ so it’s the type of payment that needs to be routed,” Palmer said. “Taking a step deeper, some correspondent banks won’t support certain industries. Maybe it’s gaming, maybe it’s chemicals manufacturing, or pharmaceutical manufacturing. Having software logic that allows for the interrogation of the data associated with the originator to make sure that you route it to the partner who supports the payment becomes important.”

Redundancy, Always-On Service

With the global contraction of correspondent banks, financial system instability in some regions, de-banking by correspondent banks of originating institutions, and geopolitical complications, redundancy is another key feature of payments orchestration. It’s not optional—it’s survival. The complex nature of the correspondent banking system means a bank’s relationships will likely shift over time.

“Financial institutions around the world often struggle to secure an American correspondent bank, and the process is costly,” Palmer said. “Even then, many lose those relationships within six to twelve months and must start the process over.”  

“A payment orchestrator like Payall helps address this problem. We can support an institution’s existing correspondent bank relationship while also providing access to alternatives such as Mastercard Move, Visa Direct, or other partners. This creates redundancy and ensures there is always a backup path for payments,” he added.

Such platforms can also enable intelligent switching in cases where a customer prioritizes speed over cost, routing the payment across the network that delivers it the fastest. Alternatively, the size of the payment may determine which rail it should travel on.

Given these complexities in the global payments landscape, building an effective solution from scratch has become nearly impossible. Even connecting to Mastercard Move or Visa Direct can cost a bank millions and take months to implement.

And even then, connections to correspondent banks will still need to be established in many cases. Each of these connections carries cost and time requirements—both of which can be significantly reduced by leveraging a payments orchestration platform.

 “A specialist in global payment orchestration with software built specifically for this purpose delivers significantly greater efficiency and simplicity for the originating institution,” Palmer said. “It’s a superior product that offers redundancy and reaches 90% to 95% of people worldwide.”

“It provides a financially competitive solution with low overhead for risk management and customer service investigations, and it is cost-effective to implement and operate,” he added.

The post Global Payment Orchestration = Redundancy, Options, Profits, Happier Customers appeared first on PaymentsJournal.

Amid a post-pandemic tourism slowdown, Thailand is launching an 18-month program to test whether crypto payments can help draw more foreign visitors.

Before COVID-19, Thailand welcomed about 39.9 million foreign international arrivals, generating roughly $58.86 billion in revenue. However, Southeast Asia’s second-largest economy has struggled to attract visitors in the subsequent years. Thailand’s state-planning agency recently lowered its 2025 forecast by 10%, to 33 million visitors.

To boost momentum, Thailand is preparing to launch a “TouristDigiPay” program, which will allow foreign tourists to convert cryptocurrencies into Thai baht when making purchases in the country.

The project is a joint effort between Thailand’s Finance Ministry, Anti-Money Laundering Office (AMLO), and Securities and Exchange Commission (SEC), which recently completed a study on how financial innovation and digital assets could foster both economic and tourism growth.

A Welcome Addition

Although crypto conversion will likely be a welcome addition for many tourists, using the system will require some prior planning.

Those who want to utilize TouristDigiPay must open an account with both a crypto firm and an e-money provider, each regulated by the appropriate agencies. These firms must also undergo Know Your Customer and customer due diligence checks as set forth by the AMLO.

To provide additional safeguards, TouristDigiPay will operate in a sandbox environment with monthly spending limits and no direct cash withdrawals. These guardrails are designed to prevent digital assets from being used to directly pay for goods or services. The SEC noted that merchants will receive all payments in baht.

Only foreign tourists who are staying in Thailand temporarily can use the service. Once approved, they will be able to exchange their digital assets for baht and make electronic payments, including those that use QR code scanning.

Relieving Travel Stressors

Being able to complete accurate and secure payments is one of the common stressors for travelers abroad. Offering these visitors a way to pay in the local currency can make an impact. China’s Alipay reported a tenfold increase in foreign tourists after the popular digital wallet announced integration with other wallets in the region.

Digital assets have long been a contender a potential solution to improve cross-border payments because they are decentralized and secure. However, the volatility associated with crypto has hindered it from becoming a more widespread option. Programs like TouristDigiPay address this issue by converting crypto to baht immediately, but it remains to be seen whether they will have enough impact to help turn around Thailand’s tourisms struggles.

The post Thailand Pilots Crypto-to-Baht Conversion to Drive Tourism appeared first on PaymentsJournal.

Payments company Thredd is leveraging Mastercard’s network to give its travel agency clients a more efficient way to conduct international transactions.

Online travel agencies (OTAs) such as Expedia or Airbnb face unique payments hurdles due to the nature of the industry. These companies often reserve hotel rooms or airline seats based on partial payments—transactions that carry a substantial risk of changes or cancellations.

These challenges are compounded in global travel, where cross-border payments bring their own complications: higher fees, longer payment settlements, and regulatory roadblocks have been longstanding pain points.

To solve for these issues, Thredd’s platform enables OTAs to make virtual card payments tailored by geography, payment type, or transaction volume. Using product codes facilitated by the Mastercard Wholesale Program (MWP), travel companies can streamline payments and build trust with their global partners.

Challenging Trust

Establishing trust in the travel industry can be a substantial challenge because OTAs have thousands of suppliers—every hotel, airline, cruise line, and rental car company is a potential client.

OTAs also have to build trust with their customers. Global travelers are increasingly concerned about the security of their payments. Data from Outpayce found that more than 70% of respondents prefer to book with travel companies known for secure payment processes.

Struggling to Support

These security concerns are driven by both cross-border complexities and the rising threat of fraud. However, there is another issue for travel companies: the sheer number of payment types that have emerged in recent years. In addition to the many local currencies, there are now real-time payments systems, stablecoins, CBDCs, and other digital payment methods.

This has led to a fragmented cross-border payment landscape, where many consumers have been forced to rely on multiple payment types to make global transactions.

This is also an issue for travel companies. A separate survey from Airwallex and Skift found that travel agencies struggle to support the wide range of payment methods available to their customers. Additionally, many respondents said their profit margins had been impacted by inefficient payment systems—a factor that is driving most travel companies to explore payments modernization.

The post Thredd and Mastercard Launch Custom Cross-Border Payments for Travel appeared first on PaymentsJournal.

The correspondent banking model that has enabled cross-border payments for the past 50 years is built on trust; trust that each party in a complex chain will act in good faith and fulfill its obligations.

However, the absence of purpose-built technology and the dependence on manual processes at originating institutions and correspondent banks have prevented effective and efficient counterparty engagement and risk management. 

Want proof? The United Nations Office on Drugs and Crime estimates that between 2% and 5% of the global GDP, or up to $2 trillion, is laundered through banks each year. Also, according to Accuity Research, de-risking has driven a 25% reduction in global correspondent banking relationships. Ask any central banker and the message is the same: cross-border payments through financial institutions are high risk, slow, expensive, opaque, and not inclusive. Fear and friction define this business. 

The demand for cross-border payments has surged in recent years, highlighting the urgent need for new solutions that can address counterparty risk within the correspondent banking system.  Otherwise, digital innovators and fintechs will continue to marginalize banks for essential services (deposit taking), but disintermediate them on the originating side, taking their customers and profits. And the “real risk” at banks and payment systems from these players doesn’t go away.

Where It Breaks Down

In the current model, a respondent bank—typically a smaller or regional financial institution—approaches a larger correspondent bank and requests access to its global network to facilitate international payments on behalf of its customers.

“The bigger bank says, ‘Great, let us see your policies and procedures regarding KYC, AML, pick the abbreviation,” said Gary Palmer, President and CEO of Payall. “’OK, we’ve approved you,  here are commercial terms, funding policies and our message format. Every six months up to two years, we’re going to audit your records to see if you’ve followed your own policies.’ And it’s off to the races.”

Typically, the correspondent bank submits its policies and procedures for clearing payments and managing counterparty risk to its regulator, and they periodically audit these to ensure compliance.

Additionally, the central bank or relevant regulator requires a business plan from the originating bank as well and examines their adherence to procedures.

“Here’s where it breaks down,” Palmer said. “Those policies and procedures have been layered on top of each other—layer after layer—for 50 years. I learned this in 2017, when I met with dozens of originating institutions, correspondent banks, central banks, and regulators, and discovered there had never been software built as a part for any of the parties to digitize this business.”

“No core system, no digital bank platform and no risk or compliance engine has ever been built to address the problem set that each one of those institutions faces for cross-border payments,” he said. “They built core bank systems to do deposit accounts, car loans, maybe savings accounts or checking accounts, but never cross-border payments. So, the only way for a bank—whether it’s an originating bank, a correspondent bank, or an intermediate bank—to operate is by manual workflows.”

Nostro and Vostro

This model poses substantial risks and costs for financial institutions as well as frustrations and high costs to users. For example, a bank in Brazil may have customers who collectively make $4 billion in payments to recipients in the United States every year, with an average transaction size of $252,000. This process is facilitated by a U.S. correspondent bank.

In this scenario, the Brazilian bank might advertise on their website that it can make bank transfers to the U.S.

“There’s a concept called nostro and vostro where you’ve got banks that have pots of cash with one another,” said Hugh Thomas, Lead Commercial & Enterprise Payments Analyst at Javelin Strategy & Research. “The nostro is mine that sits with you, and vostro is yours that sits with me. They just sort of net and pool at the end of every day and figure out, ‘OK, you’ve got this much more vostro with me and I’ve got this much more nostro with you as a consequence of us having done these transactions.’ Those are, in many cases, manual processes.”

The nostro account created by the Brazilian bank may hold significant amounts of USD. These dollars sit on the bank’s balance sheet and are subject to market volatility until a customer decides to send their $252,000 payment to a U.S. recipient.

“Guess what happens next?” Palmer said. “A payment instruction goes to the backroom of the Brazilian bank where their customer made the international transfer. A human being looks at it and says, ‘Does my customer have enough money in their account? Do I have enough money in my nostro account? Does my correspondent support this type of payment? Oh, and the customer is in pharmaceutical or they’re in gaming or they’re in furniture construction—will my correspondent bank support the commercial activity or the source of funds?”

Adding to the complexity, Brazil, like many countries, has specific requirements set by its central bank for these payments. For example, if a transaction exceeds a certain threshold, then workers at originating institutions must collect additional data, such as a bill of lading or an invoice, which must then be reported to the regulator.

These country-specific nuances introduce additional manual checks to an already intensive process.

“Based on the size of the payment, what does my regulator say I need in terms of data documents and artefacts to substantiate the payment?” Palmer said. “Did my correspondent bank mandate any particular rules based on the size of the payment? What are my internal risk and compliance rules? This results in millions of manual touchpoints at originating institutions and correspondent banks every day.”

The Essence of Moving Trillions

While the answer to most of these questions may be affirmative, this time-consuming process must be repeated with each transaction. Moreover, these lengthy manual interactions increase the risk of errors or manipulation.

For example, a bank employee must not only review whether all the required documentation has been submitted but also ensure the documents haven’t been altered or forged. They may then verify whether the payment involves a sanctioned vessel, port, company, product, or currency.

As a result, a single payment could require reviewing hundreds of pages.

“Now the bank says, ‘What do we do with all this stuff? There’s no way to tie all this human-collected data, rule execution and decision-making with a payment and store it at the bank’s core.” Palmer said. “So, they file all this stuff away in paper folders, and it sits until either the Brazilian regulator comes in to ask for it, or the American correspondent bank or their regulator, as part of an audit or examination, asks for it.  And how effective is it to manually audit 0.000001% of all transactions?”

“You’re trusting the foreign bank – in the case of the correspondent bank – to execute these things because you can only audit a tiny number of transactions and you’re auditing them two months, six months, two years after the fact,” he said. “This has been the essence of moving $160 trillion last year through the banks around the world.”

Digitizing the Process

Though this model has dominated for decades, several forces are driving a shift to a new paradigm. First, the consumer experience with digital payment solutions has raised expectations across the board. When users can send peer-to-peer domestic payments in seconds, they expect the same speed and transparency in cross-border payments.

Along with these heightened expectations, cross-border payments demand has surged in recent years.

However, with no global standardization of payments regulations likely anytime soon, institutions must implement systems that enable counterparty verification without intensive manual checks. These platforms can digitize the due diligence process and radically improve the efficiency of onboarding counterparties.

“Imagine a series of AI agents surveilling that counterparty over time,” Palmer said. “Have there been changes in the ultimate beneficial owner? Have there been any citations, letters, or interventions from a regulator of the counterparty? Have there been any issues from a financial reporting perspective, or irregularities, or terms of profitability?”

“New software digitizes just about everything: originating bank applications, including document collection and diligence, the boarding process, the examination and evaluation of everything from the Wolfsberg questionnaire all the way to their critical infrastructure,” he said. “It digitizes the relationship—the CRM of the counterparty as well as enables 100% real-time see-through to how an originating institution executed their risk and compliance rules, replacing slow, costly, and human-centric periodic audits of a small percentage of transactions with perpetual visibility and digital decisioning of every transaction. This capability has never existed before and replaces trust with data, removing fear and friction at correspondent banks.”

The post From Trust to Truth—New Purpose-Built Infrastructure to the Rescue appeared first on PaymentsJournal.

Amid a wave of solutions aiming to close the gaps in cross-border payments, PayPal is launching a platform that integrates with several leading global payments systems.

At launch, PayPal World will partner with India’s Unified Payment Interface (UPI) and China’s WeChat Pay, with plans underway to integrate with Latin American payments platform Mercado Pago.

Through PayPal World, users of PayPal and Venmo can send payments to users of these other systems—even if the recipient doesn’t have a PayPal account. For example, a U.S. traveler in India could pay a local merchant using UPI, or an e-commerce customer with a WeChat Pay wallet could complete a purchase using PayPal.

A Global Payments Powerhouse

The UPI integration alone is significant news, as the instant payments system recently surpassed Visa to become the world’s largest real-time payment system in both transaction volume and the total number of transactions. In less than a decade, UPI has emerged as the dominant payments platform in the world’s most populous country.

While WeChat Pay competes with Alipay for mobile payments dominance in China, it currently serves approximately 1.3 billion users. Mercado Pago, though smaller with an estimated 64 million users, could play a strategic role. An integration involving PayPal, Venmo, UPI, WeChat Pay, and potentially Mercado Pago would create a truly global payments powerhouse.

A Fragmented Landscape

This system could be a gamechanger for cross-border payments, which have long faced challenges like country-specific regulations, high transaction fees, and processing delays. These issues have persisted for decades, even as demand for international payments continues to heat up.

In recent years, a range of solutions—from cryptocurrencies to credit card networks—have emerged, each aiming to address these challenges.

However, rather than solving the problem, these innovations have contributed to  a fragmented landscape. Users often find themselves juggling multiple platforms for different cross-border payment needs. In reality, most would prefer a single, unified solution. If PayPal can successfully integrate these systems—and others—into PayPal World, it could be a significant step toward a one-stop cross-border payments shop.

The post PayPal Cross-Border Payments Platform to Integrate UPI and WeChat Pay appeared first on PaymentsJournal.

The EuroPA alliance is partnering with the European Payments Initiative (EPI) to explore opportunities for connecting European consumers and merchants across 15 countries. The initiative aims to support all payment types—from peer-to-peer (P2P) payments to enterprise-level transactions.

Under this model, users will be able to use their preferred digital payment solutions both locally and across Europe. Provisions will also be made for countries that don’t yet have established systems of their own.

An Alliance and a Consortium

The EuroPA alliance includes mobile payment players across Europe, such as Bancomat, Bizum, Blik, MB WAY (SIBS), and Vipps MobilePay. Its goal is to create an interoperable mobile platform built on the Single Euro Payments Area (SEPA) real-time payments protocol. Support for SEPA was mandated in the region at the beginning of this year.

EPI, for its part, is a consortium of 16 European financial services companies whose initial focus has been the Wero digital wallet—a product designed to serve as a unified mobile payment solution for retail transactions.

Wero launched last year in Germany before expanding to Belgium and France. One of its initial use cases was to allow users to complete P2P transactions in seconds using a QR code, email address, or phone number.

Functionality for cross-border and merchant payments is in development for Wero, and EPI plans to evolve the wallet into an all-encompassing platform—supporting everything from recurring payments to buy now, pay later.

A Eurocentric Solution

Combining EPI’s digital wallet with the mobile platforms of EuroPA’s members is a logical step, given the organizations’ agenda—to enhance Europe’s sovereignty in payments by building a better cross-border solution.

Concerns have been growing in Europe over the dominance of Visa and Mastercard, especially  as USD-backed stablecoins gain traction in the region.

This reliance on both U.S. companies and the dollar has drawn criticism in Europe, prompting calls for a more Eurocentric solution. Both the European Commission and the Eurosystem have stated that one of the fastest ways to strengthen the payments system is by interconnecting existing payment solutions.

The post EuroPA, EPI Aim to Strengthen European Cross-Border Real-Time Payments appeared first on PaymentsJournal.

Circle recently launched a network designed to harness the potential of stablecoins in cross-border payments, and the network has now added another integration.

The Circle Payment Network (CPN) was first announced in April, with the company’s ambitious goal of creating a global rail to rival those operated by Visa and Mastercard. As the issuer of the world’s second-leading stablecoin, USDC, it was clear that stablecoins would play a key role in CPN.

The network aims to bring digital assets transfers—previously the domain of crypto exchanges—directly to financial institutions. To this end, Circle is integrating with RedotPay to allow users in Brazil to send payment using leading stablecoins, such as USDT and USDC, with funds automatically converted to Brazilian Real in the recipient’s account.

Circle had previously unveiled a similar solution with Tazapay in Hong Kong. CPN also has integrations with Conduit and Alfred Pay, with the latter planning to use the network to enable stablecoin-to-fiat transfers through Brazil’s PIX instant payment system and Mexico’s similar SPEI system.

Changing the Game

These solutions could be a gamechanger in cross-border payments, which have frequently faced issues like payment delays, regulatory barriers, and high fees. Many consider cryptocurrencies uniquely suited to solve to address these challenges because they are decentralized, and their blockchain underpinning enables transactions that are efficient, transparent, and cost-effective.

This is a use case where digital assets are beginning to gain traction—the Bank for International Settlements (BIS) recently reported that bitcoin, Ether, and the leading stablecoins facilitated roughly $600 billion in cross-border payments in Q2 2024.

BIS also noted that Circle’s USDC and Tether’s USDT stablecoins—along with low-value bitcoin payments—are seeing increasing adoption in everyday cross-border transactions.

Gaining Global Traction

The proliferation of stablecoins is accelerating, and this is not driven solely by crypto players. PayPal’s stablecoin has been on the market for over a year, and Stripe has its own option in the works.

More financial institutions—both in the U.S. and abroad—are also considering their own options to keep up with the demand for digital assets. If Circle Payment Network continues to gain traction, it could become an additional driver in the global stablecoin push.

The post Circle’s Cross-Border Payments Network Gains Traction appeared first on PaymentsJournal.

As digital connections have fostered a global community, the demand for cross-border payments has surged. And yet, the cross-border payments paradigm—where correspondent and intermediary banks work with originating banks to process payments—has remained largely unchanged for the past 50 years.

In a recent PaymentsJournal podcast, Gary Palmer, President and CEO of Payall Payment Systems, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the limitations of global payments systems, the emerging solutions to cross-border payment challenges, and the potential impacts on the global payment landscape.

Coining a Phrase

The current model for cross-border payments relies on a patchwork of banks. One of the main issues is that many of the core banking systems these institutions depend on have been in place for decades.

Another issue is that many banks operating in the cross-border space have a limited scope. They tend to focus solely on the specific products they are licensed to offer in a given area—such as bank accounts, car loans, or mortgages.

The combination of outdated technology and narrow focus has made an already complex process even more daunting, leading many institutions to hesitate before entering the market.

“I have coined a phrase—that cross-border payments and correspondent banking for cross-border payments are governed by fear and friction,” Palmer said. “When you introduce the concept of cross-border payments, now you’re dealing with multi-jurisdictional issues, you’re dealing with multiple currencies, you’re dealing with Know Your Transaction complexities that change all the time. You’re dealing with sanctions checks that extend beyond your border.”

“It’s a whole area of subject matter expertise that the core banking systems and the usual players in this technology have never addressed,” he said. “It’s the elephant in the room of why there’s fear and friction.”

An Opaque and Mysterious World

Adding to the friction, over the last decade there has been a 25% reduction in the number of correspondent banks. Even as cross-border trade has grown—and is likely to continue growing—the entities that facilitate it have declined.

This puts even more pressure on the existing correspondent banks, which are already struggling under the weight of manual processes. For example, a correspondent bank looking to onboard an originating bank must verify that it is a legitimate entity—a process includes a 100- to 300-question due diligence Excel worksheet and extensive document requests.

“They make sure they have good AML policies, they complete the Wolfsberg Questionnaire, they go through critical infrastructure,” Palmer said. “Then they say, ‘OK, Mr. Bank, we trust that you’re not going to do bad things or lie or that your customers do bad things when you send money around the world.”

“That’s generally how the system works, it’s manual” he said. “The whole relationship is built on an inefficient relationship of manual documents, manual checks, and manual revisits of that relationship. The counterparty risk of a manual system like that is the foundation of why there’s fear and friction.”

In addition to inefficiencies, there is a lack of transparency. For instance, an originating institution might make a payment through a correspondent bank to an intermediate bank, ultimately reaching a final financial institution.

The bank at the last leg of the process has limited visibility into how effectively the originating institution executed their Know Your Customer, Anti-Money Laundering, and other compliance checks.

“It is amazing to me how little people understand correspondent banking,” Wester said. “When they need to send a payment overseas or over a border into another country, how little they get what’s going on in the background. The fact that it has been so resistant to change, given how much everything else has changed around the world in technology and in financial services specifically, means cross-border remains this sort of opaque and mysterious world.”

A Big Bug in the System

Even though many institutions want to dispel the opacity around cross-border payments, there are three conditions that prevent banks from having the capital and the resources to innovate.

“One, it’s protecting their systems and their data from the bad actors all around the world,” Palmer said. “Two, some banks have hundreds, others have thousands of third-party and home-grown systems, and these systems have to be fed and maintained with updates and patches and reboots, and that sucks a lot of resources away. The third thing is the bank’s existing core products are constantly facing regulatory changes.”

Many financial institutions are also resistant to change. As a result, cross-border payments under the current framework tend to be expensive, the service is often inadequate, delivery times are slow, and there is a pervasive lack of transparency.

However, not all of these aspects are necessarily seen as disadvantages—especially in the case of delayed settlement, which can sometimes be beneficial.

“People coming into the space might look at that and say, “Oh, that seems to be a big bug in the system,’” Wester said. “But when you’re coming at things from ‘my job as a financial institution is to mitigate all the risk on my side’, what you’ll find is that a lot of the folks don’t look at all of that as a bug. That’s a feature that’s protecting them.”

“They aren’t looking at it from the perspective of ‘Gary needs to send money overseas, let’s make it easy on Gary,’” he said. “They look at it from a money and a risk mitigation standpoint. It’s ‘I’m not really worried about Gary. He can’t go anywhere else, so he’s going to have to deal with the system the way it is.’”

The Most Powerful Correspondent Bank

While payment delays may give an institution the time it needs to conduct manual compliance and risk mitigation checks, they can cause substantial frustration for the sender. This frustration is only exacerbated by the efficiency of consumer payment systems where transactions are increasingly moving toward real-time, transparent settlement.

These heightened expectations, coupled with surging cross-border payments demand, are driving a shift in the paradigm.

“The topic that we’ve called opaque and filled with friction in the last 50 years has become a topic that every financial institution, every fintech, every financial technology vendor, everybody wants to talk about,” Wester said. “I think it’s just the sheer weight of everyone realizing that things have been broken, or at least weren’t delivered as well as they could have been.”

“Everybody’s now beginning to realize that cross-border transactions are the low-hanging fruit,” he said. “They are an opportunity.”

Two of the main organizations taking advantage of this opportunity are Mastercard and Visa. These credit card companies have built global cross-border payments empires based on three main assets.

First, in nearly every country where they operate, they are connected to local bank transfer systems. This allows them to pull money from a card issuer and send it to a card acquirer located elsewhere in the world.

Second, Mastercard and Visa maintain substantial global liquidity in every currency they trade. This enables them to pull money in the card issuer’s currency, convert it, and deliver it in the local currency of the country where the card was used—whether at an ATM or point of sale.

The third asset is their role as credit card companies managing roughly $2 trillion of foreign currency trade, which allows them to set foreign exchange rates.

“If we forget for a second that Visa and Mastercard have a card business and just think about those three assets—bank transfer connectivity, massive FX trading efficiency, volume and foreign liquidity capacity—these three assets are extraordinary,” Palmer said. “When you combine that together, it looks like the coolest, biggest, most powerful correspondent bank on the planet.”

Taking the Market by Storm

These cross-border networks have advanced to the point where credit card companies have given them their own brands: Visa Direct and Mastercard Move. For banks and credit unions, these systems can represent a significant upgrade from the traditional correspondent banking model.

This means a bank could contact Mastercard Move and specify the sender’s and recipient’s currencies and locations. The platform can then deliver the payment to a bank account, a mobile money account, a digital wallet, or even as cash. This functionality is available in roughly 60 countries, and most transactions are processed in real time.

Additionally, all parties will receive an email or text message confirming delivery. The platform can also specify the exact amount the recipient will receive, without FX volatility or foreign transaction fees charged by the receiving bank.

“Mastercard has developed a cross-border product and Payall makes it easy for financial institutions to get live with Mastercard whilst providing a host of other risk and compliance capabilities,” Palmer said. “Think of us as the cross-border processor into Mastercard Move to allow a bank to deliver a payment to 90% of the world’s population, whether they’re banked or unbanked. It’s nearly real-time and super-efficient, with great FX rates and confirmed delivery.”

“It’s all the things that a bank customer wants and needs, and it’s priced in a way that the smallest credit union to the strongest regional bank can still make good money on it,” he said. “This is a breakthrough. This is a new paradigm, a new alternative to correspondent banks, and it’s taking the market by storm.”

The post Fear and Friction in Cross-Border Payments: The Alternative to Correspondent Banking appeared first on PaymentsJournal.

Amid a flurry of initiatives, PayPal has received an in-principle nod to become a cross-border payments aggregator in one of the world’s largest markets.

In recent years, the Reserve Bank of India (RBI) has brought cross-border payments under a tighter regulatory framework, requiring all companies to obtain a payment aggregator cross-border (PA-CB) license.

Due to the stringent guidelines, only a handful of organizations were permitted to operate as cross-border payments providers a year after the proposal was introduced: Adyen, Amazon Pay, BillDesk, and Cashfree Payments. Earlier this year, India’s Skydo was added to that list.

According to the Times of India, PayPal will now enter a market that processed $73.8 billion in outbound shipments in April alone, spanning roughly 200 international markets.

A Surging Market

Although India is a hotbed for cross-border payments, the market has surged worldwide. As a result, numerous solutions have cropped up to process these transactions.

A recent report from Visa found that 77% of consumers still rely on multiple payment methods for international transactions. The study also revealed that the average consumer uses four different payment methods for cross-border payments, and most respondents are actively seeking a single provider to meet their needs.

Significant Launches and Promotions

This has been a tall order, as cross-border transactions continue to face challenges like regulatory barriers, high transaction fees, slow processing times, and a lack of transparency. Although PayPal is not yet a unified cross-border payments solution, the company has introduced a series of initiatives that may enhance its global reach.

For example, PayPal recently inked a deal with Coinbase to remove fees for purchases of its PYUSD stablecoin, aiming to encourage broader adoption. The company also announced that customers will be able to earn 3.7% interest when holding the stablecoin in their PayPal or Venmo accounts.

Additionally, PayPal launched its first mobile wallet, positioned to compete with Apple Pay and Google Pay for in-store payments. The company also entered the agentic commerce space through a new deal that integrates PayPal payments into Perplexity’s AI chat.

Should all these efforts gain traction, PayPal could strengthen its standing in an increasingly dynamic market.

The post PayPal Gets Approval to Facilitate Cross-Border Payments in India appeared first on PaymentsJournal.

The Bank for International Settlements (BIS) found that bitcoin, Ether, and the leading stablecoins facilitated roughly $600 billion in cross-border payments in Q2 2024.

The report highlighted that speculation and broader global financing  trends are the main forces driving the use of digital assets. BIS also noted that Circle’s USDC and Tether’s USDT stablecoins—along with low-value bitcoin payments—have gained traction in everyday cross-border transactions.

Additionally, the study underscored the duality of crypto, which can operate as both an investment vehicle and a transaction mechanism. BIS noted that the data points to a growing overlap between crypto assets as speculative assets and traditional financial systems.

An Ideal Candidate

There has long been speculation that cryptocurrencies could be an ideal solution for cross-border payments. These transactions often face challenges ranging from payment delays and high fees to regulatory restrictions.

As a result, many potential solutions have cropped up, including offerings from Visa and Mastercard, global messaging network SWIFT, and even a project organized by BIS—a consortium of central banks focused on exploring international payments systems.

Digital assets present a compelling alternative for cross-border payments due to their decentralized nature and blockchain foundations, which enable transactions that are immediate, transparent, and cost-effective. However, the volatility of cryptocurrencies like bitcoin and Ether, coupled with concerns around fraud and security, has kept many financial institutions from adopting digital assets in earnest.

Moving Beyond Borders

This sentiment has changed over the past few years, as more institutions have invested in technologies like stablecoins and tokenization. Stablecoins have been the focus of many initiatives by leading financial services companies like PayPal and Stripe. Even Meta announced its plans to launch a stablecoin to facilitate its worldwide operations.

Although more companies are adding digital assets to their product offerings and crypto is more mainstream than ever, there are still risks to consider.

“Our assessment highlights a continuing need for future research to understand the dynamics of global crypto flows,” the BIS noted. “Our analysis indicates that policy measures designed to dampen traditional financial flows may have limited impact on constraining cross-border crypto activity.”

“Yet, as cryptoassets become more integrated with mainstream finance, understanding the systemic risks and potential contagion effects between these markets will be essential for policymakers and market participants alike.”

The post Crypto Is Playing an Increasing Role in Cross-Border Payments appeared first on PaymentsJournal.

The pace of innovation in cross-border payments is relentless, with regular announcements of new technologies and partnerships. Yet even as the ecosystem evolves, adoption of these solutions by commercial users remains slow and uneven. As shifting tariffs force global businesses to reconfigure supply chains, financial institutions have an opportunity to step in with guidance and solutions tailored to meet rapidly changing cross-border payment needs.

In the Tech Meets Tariffs: Cross Border Payments in 2025 report, Hugh Thomas, Lead Commercial Payments Analyst at Javelin Strategy & Research, examines the impact of tariffs across multiple industries, explores how financial institutions can offset a potential decline in cross-border revenue, and highlights the opportunity for a new way forward.

Weathering the Tariff Storm

Many cross-border payments providers likely serve customers who are considering re-shoring their supplier base to domestic partners to avoid tariffs. For example, a U.S. company with an established Canadian partner may now be weighing whether it is worth absorbing a 10% cost increase to continue this relationship or switch to a stateside supplier.

Since tariffs affect each industry differently, these decisions can quickly become complex.

“In the U.S. oil and gas industry, probably 30% of oil and gas inputs come from Canada,” Thomas said. “The supply chain for refining is designed to take Canadian oil sands, and where else can you get that from? Argentina is the only place that produces that sort of crude, and they’re not online right now to send that stuff up, so the chance to change the supply chain for that industry is very low.”

Conversely, the grocery industry sources much of its produce from Mexico. In this case, companies face fewer barriers when switching to a U.S. supplier, offering different fruit products, or pivoting to entirely new ones.

Another aspect that comes into play is which industries maintain higher days of inventory. For example, the top 10% of the construction industry’s inputs come from cross-border sources. However, many builders carry roughly 130 days worth of inventory on their books.

“They can weather the storm on these tariffs if they wind up being something temporary, which Trump tries to negotiate away on an industry-by-industry or even a company-by-company basis,” Thomas said. “Providers should be thinking about the industries that they bank, and how they’re going to support them to weather the storm.”

Making the Donuts

If tariffs linger and cause more U.S. companies to switch to domestic suppliers, financial institutions could potentially lose revenue from cross-border payments. However, there are several ways that these institutions can adapt.

“One way is if the business needs to bring on new suppliers, maybe there’s an escrow play in there where your first six months of payments are contingent on delivery of goods, particularly for big strategic buys,” Thomas said. “There is also the opportunity to move some customers to commercial cards because that’s a quick way to avoid Know Your Supplier (KYS) expenses, and maybe get a little bit of rebate revenue from your card provider. “

Another approach is to make cross-border payments more efficient. For years, these transactions have been plagued by issues such as high transaction fees, slow settlement times, fraud, currency conversions, and regulatory barriers.

Recently, there has been a flood of systems and solutions designed to make cross-border payments easier, cheaper, more automated, and more transparent. These range from programs managed by credit card networks to projects driven by a consortium of central banks.

Some speculate that connecting real-time payments systems globally could offer the most effective cross-border solution.

Digital assets like crypto and stablecoins have also been presented as the ideal solution for cross-border payments, due to their decentralized nature and blockchain-based security.

While each solution offers unique benefits—and some have gained more traction than others—widespread cross-border payments implementation continues to lag.

“Adopting these technologies is moving at about the same pace as getting rid of checks is moving—glacial is the best way to describe it,” Thomas said. “That’s because the people who are in the business of managing business payments, be they domestic or cross-border, have most of their days spent making the donuts, they don’t have a lot of time to tweak the recipe.”

Two Forces Driving a Reckoning

Because operations take precedence for many enterprises, financial services providers must offer products that deliver impact from day one, without requiring significant build-out or customization on the customer’s end. Additionally, the business use case for any cross-border solution must be both vital and practical.

Once financial institutions identify the use case and the right solution, they will be well positioned to support their commercial customers at a time where many could face a seismic shift in their supply chains.

“These crisis moments have the potential to drive things forward if they make everybody have a reckoning, in terms of how they’re doing things today from a process perspective,” Thomas said. “You have this unprecedented situation of a potential supply chain reevaluation—which is a huge force at work right now—and you’ve got a broader move to go more global, which is still persistent despite the fact that people are putting their tariffs up.”

“There are those two forces at work and then there are all these technologies waiting for someone to look at them more seriously,” he said. “Maybe all this disruption can get people to the point of saying, how we did business yesterday is not how we will do business tomorrow.”

The post As Businesses Reevaluate Cross-Border Relationships, Financial Institutions Can Help appeared first on PaymentsJournal.

More digital assets companies are expanding into traditional financial services territory, as evidenced by two recent moves by Circle.

The firm, best known for its USDC stablecoin, revealed plans to explore applying for a bank charter. Gaining a bank charter would allow the crypto company to offer traditional lending products and take deposits.

Circle also recently shared that its most imminent product launch would be the introduction of a cross-border payments network. A source told Cointelegraph that the new network is “initially targeting remittances but is ultimately aiming to rival Mastercard and Visa.”

Unifying a Fractured Landcape

Cross-border payments have been a pain point for years, facing issues like payment delays and high fees due to the lack of a standardized transaction format. Several solutions have been proposed to unify the fractured landscape, including everything from the SWIFT network to Visa and Mastercard’s worldwide rails.

Interestingly, stablecoins like USDC have been considered one of the leading contenders for cross-border payments because their blockchain foundation makes transactions instant and inexpensive.

However, there has been some recent pushback against stablecoins, as all the leading options are based on the U.S. dollar, which detractors argue only serves to further increase the dollar’s dominance.

Circle has yet to share details on its cross-border solution, so it’s unclear if the network is intended to serve as an alternative to its stablecoin and how it will be positioned in an already crowded landscape.

Taking on Financial Services

Despite concerns about the prevalence of stablecoins, their dominance appears to be holding strong. The success of Circle’s stablecoin, now the second-leading option in a trillion-dollar market, has been the catalyst behind both the company’s moves into financial services.

The promise of digital asset technologies like stablecoins, tokenization, and blockchain is a major reason why so many leading financial institutions are heavily investing in what was once considered crypto-related tech.

However, even as mainstream institutions adopt digital assets, crypto companies have begun to take on aspects of conventional financial services. According to the Wall Street Journal, Circle is not alone in its ambitions to expand beyond crypto. Coinbase, BitGo, and Paxos are also considering applying for a banking license.  

The post Circle Mulls Bank Charter, Unveils Cross-Border Payments Network appeared first on PaymentsJournal.

A member of the European Central Bank’s executive board voiced frustrations over the persistently high costs of cross-border payments, despite declines in IT and telecommunications expenses.

Speaking at the Regional Governors’ Meeting, Piero Cipollone highlighted the issue with a specific example: a small business owner in Croatia sending a €5,000 transfer to a supplier in a Western Balkans country outside of the EU’s Single Euro Payments Area (SEPA) could face costs up to 12 times higher than when sending to a supplier within SEPA.

Since its launch in 2018, SEPA’s reach and capabilities have expanded greatly, with Montenegro, Albania, and North Macedonia set to join this year. Still, Cipollone noted that fragmentation within the EU remains a barrier to growth.

Interlinking Instant Payments

Because cross-border payments are a challenge on a much wider scale, a better system can be built by linking the existing real-time payment systems across countries.

This approach would reduce costs, increase speed and transparency, and prevent payment service providers from having to engage with multiple payment systems or a chain of correspondent banks.

Targeting Cross-Border Payments

At the heart of Cipollone’s proposal is the EU’s TARGET Instant Payment Settlement (TIPS) service, a multi-currency instant payments platform that already operates within SEPA.

Cipollone proposed implementing a currency exchange service within TIPS so real-time payments can originate in one TIPS currency and settle in another. Initially, this service would operate within the euro area, Sweden, and Denmark.

The system could then be expanded to include other networks globally. One such framework could be Project Nexus, which was established by a central bank consortium, the Bank for International Settlements (BIS). Set to take effect next year, the project is designed to connect payments systems in South and Southeast Asia, such as India, Malaysia, Thailand, Singapore, and the Philippines.

The next step in the proposed plan would be to establish a direct link between TIPS and India’s UPI, which has quickly become one of the leading instant payments systems in the world.

After these steps, the ECB can then work to further achieve its goal, which—according to Cipollone—is to “develop safer, more accessible alternatives that make global payments cheaper, faster, and more transparent, without compromising on integrity, stability and sovereignty.”

The post ECB Official Says Real-Time Payments Systems Could Solve Cross-Border Payments Struggles appeared first on PaymentsJournal.

JPMorgan’s recently rebranded digital assets unit, Kinexys, will enable commercial clients of India’s Axis Bank to send and receive USD transfers in real-time both domestically and cross-border.

According to Reuters, this will be the first time organizations in India will have access this functionality. Two key benefits of this feature include greater flexibility and increased liquidity due to instant settlement.

In a statement, Naveen Mallela, Global Co-Head at Kinexys, gave an example of how this capability could be advantageous—allowing companies in India to make dollar payments to Middle Eastern organizations on Sundays, which are workdays in the region.

Solving for Forex Issues

Kinexys began as Onyx, one of the world’s first bank-operated blockchains. JPMorgan rebranded the platform last year, announcing its objective was to drive on-chain foreign exchange conversions. The program initially focused on facilitating real-time dollar-to-euro conversions.

There is a demonstrable need for this type of solution, as demand for cross-border payments has increased, and the cost and efficiency of currency conversions remain pain points.

“The forex market is one of the largest and most liquid markets in the world, and 24/7 instant settlement has been much needed,” Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research told PaymentsJournal. “This will help reduce counterparty risk in multi-bank transactions and should provide greater transparency to the participants involved.”

A Blockchain-Based Financial Ecosystem

The unique demands of cross-border payments have led to much speculation about which payment rail will eventually become the platform of choice.

Cryptocurrencies are attractive for cross-border transactions due to their decentralized nature, but their volatility often makes them impractical for many use cases. For this reason, stablecoins—designed to track fiat currencies—have emerged as a leading contender.

However, global networks operated by credit card companies like Visa and Mastercard could also serve this purpose. Additionally, global messaging network SWIFT and Europe’s SEPA have also emerged as potential solutions.

With so many offerings, it becomes more likely that multiple platforms will coexist in the global payments landscape.

As Mallela noted in his statement: “Our work with Axis Bank marks the next step in creating a growing industry-wide blockchain-based financial ecosystem with interoperability among central bank digital currencies, stablecoins and other digital currency solutions.”

The post JPMorgan to Facilitate Real-Time USD Payments in India appeared first on PaymentsJournal.

The rise of digital payments has made the world more connected than ever, driving demand for cross-border transactions. However, a report from Visa found that 77% of consumers still rely on multiple payment methods for international transactions.

In fact, Visa revealed that the average consumer uses four different payment methods for cross-border payments, and two-thirds of respondents said they are actively seeking a single provider to meet all their needs.

Consumers want a reliable payment method as they spend more on cross-border transactions than ever before. Visa expects the cross-border payments market to reach $250 trillion in just the next two years. Consumers are also making transactions more frequently, with roughly a third saying they make weekly cross-border e-commerce purchases, while 45% send or receive payments monthly.

Fraught With Challenges

Cross-border transactions have long faced challenges, including regulatory barriers, high transaction fees, slow processing times, and a lack of transparency. While all these factors impact international transactions, Visa found that security was the top priority for consumers across all regions. The next three most important factors were trust, reliability, and fees, in that order.

Roughly 90% of respondents expect their cross-border payments provider to have robust fraud and security measures in place, and around two-thirds said fraud concerns have deterred them from using a cross-border option. In addition, many consumers reported stopping a transaction after suspecting fraudulent activity.

Achieving Ubiquity

The issues associated with cross-border transactions have led to several initiatives aimed at creating a more uniform global standard. For example, the Bank for International Settlements (BIS) is a global consortium of financial institutions that has launched several projects to address structural inefficiencies in the global payments system.

In addition, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) operates a global messaging network that it has used to develop an international payments system. Both SWIFT and BIS have explored ways to use emerging technologies like blockchain and tokenization to address security and efficiency challenges in cross-border transactions.

Crypto and stablecoins have long been considered strong candidates for cross-border payments. Additionally, the massive global networks operated by credit card companies like Visa and Mastercard suggest these organizations could play an important role in the future cross-border landscape. While it remains unclear which payment mechanism will achieve cross-border ubiquity, the demand is evident—and growing.

The post In a Fragmented Cross-Border Payments Landscape, Consumers Seek Stability appeared first on PaymentsJournal.

Amid the surging demand for cross-border payments, India’s BRISKPE has launched a platform designed to provide global reach for even the smallest businesses.

The platform is geared to address the needs of marketplace sellers, gig economy workers, exporters, and other micro, small, and medium-sized enterprises (MSMEs). Payment issues have long been a persistent concern for small business owners, with high fees, complex currency conversions, delays, and fraud risks often acting as barriers to entry into global markets.

Another issue has been the dearth of payment types available to merchants. To remedy this, BRISKPE’s platform will support both pay-by-bank payments and card transactions facilitated by PayPal and PayU, a Netherlands-based firm that has gained significant traction in India. PayU has been a strong supporter of BRISKPE’s cross-border efforts, contributing millions in seed funding to help launch  the platform.

Currency Capability

For pay-by-bank transfers, BRISKPE said that funds will be credited within one day. Initially, the platform will support transactions in six currencies—USD, GBP, EUR, CAD, AUD, and SGD. And it also support transfers in over 30 currencies using the Society for Worldwide Interbank Financial Telecommunication (SWIFT) protocol.

SWIFT operates a global messaging network that has widely been considered a contender to handle cross-border operations. The organization has been actively working to support new payment types, including crypto and digital assets.

Unlocking Potential

Although SWIFT’s solution has gained greater traction, it doesn’t specifically address the cross-border payment issues faced by small businesses. To that end, the BRISKPE platform will charge business owners a flat 1% fee on all pay-by-bank transactions.

BRISKPE aims to streamline the onboarding process for merchants by offering instant Know Your Customer (KYC) approvals and providing tools to track and manage payments. To mitigate fraud, the platform will leverage the existing fraud detection capabilities that PayU and PayPal have in place for wallet and card transactions.   

“Our goal is to empower MSMEs by breaking down the financial and operational barriers that have held them back for too long,” said Sanjay Tripath, CEO and Co-Founder of BRISKPE in a statement. “By simplifying cross-border payments and offering a variety of payment options, including A2A, card-based and wallet-based collections, we’re not just helping businesses save costs—we’re enabling them to address diverse client needs and focus on growth, innovation, and unlocking their full potential.”

The post BRISKPE Launches Cross-Border Payments Platform for Small Businesses appeared first on PaymentsJournal.

The correspondent banking system that has been the framework for cross-border payments for decades has become inadequate to meet the demand for global remittances. However, with so many technology solutions available, many financial institutions might be unsure how they can participate in the growing cross-border payments segment.

In a recent PaymentsJournal webinar, Gary Palmer, CEO and Founder at Payall Payment Systems, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the obstacles facing global payments systems, the potential solutions, and the emerging paradigm for cross-border payments.

Purpose Built

One of the main reasons why there have been issues when sending cross-border payments is that there was never the purpose-built infrastructure to support it, whether that be through a core bank system, a digital banking platform, or a back-end system.

Sending a payment across borders requires processes that can account for aspects like risk, compliance, process automation, data sharing, and payment orchestration. So far, there has not been a widescale solution that allows the entire ecosystem to enjoy transparent, efficient, and safe cross-border payments.

One reason this infrastructure hasn’t existed is because financial institutions simply haven’t had the time or the budget to build it.

“I had lunch recently with the CTO of a major U.S. financial institution, and we were chatting about his massive technology budget for innovation,” Palmer said. “We found out that it wasn’t so massive, because 90% of his budget is spent doing three things. One, protecting the institution’s data and their systems from hackers. Two, trying to keep thousands of disparate applications and systems current, and three, trying to keep products up to snuff with regulatory changes.”

By the time a financial institution fulfills these essential obligations, there is little left over for innovation. As a result, originating institutions who want to offer customers cross-border payments, or correspondent banks that are under pressure to improve how they support payments from foreign financial institutions to the U.S., might be unsure how to proceed.

The Human Angle

Though it is challenging to facilitate cross-border payments, the demand is stronger than ever. That creates an opportunity for financial institutions to provide a solution that can touch almost every person on the planet.

“When you think about how global our world is, it means you can own a retail shop in Dubuque, Iowa, and you’re importing goods from India or China,” Palmer said. “You might have a software designer in Eastern Europe and a leather supplier in Argentina. Small retailers are now engaged in global trade and selling products worldwide on Etsy and Amazon. They need to be paid.”

In less-developed areas of the world, a marketplace seller on eBay or Etsy is not just concerned with the speed of getting paid and the costs associated with the transaction. These payments are extremely significant to these individuals because they could be the difference in obtaining medical care for their family or putting food on the table.

“There’s a human angle here,” Palmer said. “There are businesses that have struggled or failed because they were waiting to get paid from a cross-border transaction. A better cross-border system helps financial institutions to not only help their local community, but there is also a trickle effect to other parts of the world. It starts with giving customers the ability to pay suppliers and vendors efficiently.”

Speed and Safety

Though cross-border solutions can make an enormous impact, they can also be difficult to safeguard. As payments systems have gotten faster, and in many cases real-time, there has been some concern that this speed could be exploited by criminals.

“Some have said that real-time payments systems undermine an institution’s ability to protect the safety and soundness of its payment systems, to prevent money laundering, and to make sure that nefarious activities aren’t happening,” Palmer said. “I’m passionate about this and I can prove it, that speed and safety are not mutually exclusive with the right software solution.”

If cross-border payments become slower and more regulations are tacked on, they won’t be a functional solution. Consumers could turn to alternative channels that would be unregulated and unsafe. Instead, cross-border payments should be front-and-center in financial institutions that use software to facilitate them.

A Modern Alternative

Most of the new cross-border payment technology solutions are geared toward disintermediating financial institutions. However, there are solutions that are designed to work with banks.

Both Visa and Mastercard have created frameworks for cross-border payments that financial institutions can utilize. For example, Mastercard Move is a product that is a modern alternative to the classic correspondent bank structure.

Mastercard Move gives banks the ability to make transfers in more than 100 countries, and in most of those countries the transfers are in near real-time. In addition to faster settlement, when a bank is connected to the framework through a platform like Payall, they will receive confirmation of delivery for both sender and recipient. There also aren’t the typical fees associated with foreign transfers.

That functionality can have a dramatic effect on smaller businesses.

“I like to speak in terms of cash flow and liquidity, but I don’t say that in terms of only Fortune 500 organizations,” Bodine said. “Cash flow and liquidity are very important to the unbanked and the underbanked, and to small business owners. With the proper tools, the inefficiency that has plagued cross-border payments can be mitigated, and cash flow and liquidity for those individuals can be improved.”

The Next Few Years

Because financial institutions are still in the earliest stages of adopting cross-border payments technology, one of two things will happen. Either classic correspondent banking systems will adopt software that allows them to be competitive, or alternative paradigms will begin to gain traction.

“My prediction is that we’ll see more financial institutions all around the world offering these types of products to their customers,” Palmer said. “In five years, we’ll see more pay by bank payments using infrastructure like ours. But I want to be clear, we’re literally just getting started. There’s a long way to go before that happens.”

There may also be new constructs like domestic networks that connect to other domestic networks. In a few years, banks will have more options than ever for how they can enable funds to move around the world. Regardless of the framework, there is a clear need for change.

“I can’t overemphasize the importance of efficiency, speed, cost, and transparency,” Bodine said. “I had the great displeasure of paying for a wedding overseas, and I spent large amounts of money in the correspondent banking system just to get the funds there, and then I had to wait long periods for confirmation. The whole time I’m wondering whether my money was actually safe.”

The post How Financial Institutions Can Change the Paradigm for Cross-Border Payments appeared first on PaymentsJournal.

A senior U.S. Treasury official expressed concerns that establishing a cross-border payments system outside a transparent regulatory framework could pose risks to economic stability, potentially leading to international ramifications.

According to Bloomberg, Brent Neiman, Assistant Secretary for International Finance at the U.S. Treasury, was particularly concerned about the potential for misuse of improperly regulated systems for money laundering and fraud. At a conference at the New York Federal Reserve, Neiman noted that “the United States must lead when it comes to cross-border payments to maximize the chances that any new systems with significant international usage reach the quality and standards we prefer.

Challenging Dominance

Although Neiman did not reference any particular system, Bloomberg highlighted that the remarks came shortly after the BRICS coalition’s proposal to create a cross-border payments system independent of any Western platform.

The BRICS Cross-Border Payments Initiative (BCBPI) was introduced by Russia, which founded the BRICS organization, in collaboration with China, India, Brazil, and South Africa. Its goal is to establish an alternative to the SWIFT cross-border network, which currently operates under U.S. oversight.

In addition to creating a multi-currency system that facilitates trade among BRICS participants, the BCBPI has also been touted as a means to challenge the global dominance of the U.S. dollar.

The Central Dollar

While BCBPI is still at the proposal stage, Neiman stressed that the U.S. should play an active role in shaping any international standards. He also underscored the importance of achieving  regulatory clarity stateside, particularly by establishing a framework for stablecoins, which are frequently promoted for cross-border payments.

However, stablecoins represent just one solution within a worldwide payments network that is experiencing growing demand for cross-border transactions. Neiman emphasized that U.S. regulators should remain neutral toward specific payment methods, focusing instead on ensuring that the U.S. dollar is central to the global economy.

“Making the dollar-oriented system faster and more efficient would strengthen our hand in upholding US values like privacy and in bolstering both our national security and that of our allies,” Neiman said during his remarks at the conference. “If a poorly designed payments system were widely adopted (for cross-border payments) it could do significant harm to international financial stability and economic security.”

The post U.S. Treasury Official Underscores Risks in Emerging Cross-Border Payments Systems appeared first on PaymentsJournal.

As cross-border payments fuel an increasingly globalized economy, concerns about fraud in these transactions have also grown.

Although cross-border payments make up just 11% of total card payment transactions, they account for 63% of card-related fraud. This issue is particularly acute in the UK, where losses due to authorized push payment (APP) scams reached £239 million in the first half of 2023, according to UK Finance. One in three UK cross-border payment users reported falling victim to APP fraud, in which individuals are tricked into sending money to criminals.

With international payments, the physical distance between the fraudsters and their victims significantly reduces the chances of criminals being caught, leaving victims with limited options for recourse after being defrauded. In response to these risks, the UK’s Payments Association released a white paper exploring how governments and financial institutions can work to deter fraud in the cross-border payments space.

Tony Craddock, Director General of The Payments Association, said that the lack of cohesive international standards for Know Your Customer and anti-money laundering protocols allows criminals to exploit regulatory inconsistencies. The research highlights Australia’s approach as a model: a collaborative framework among banks, law enforcement, and technology providers has led to improved fraud detection.

Taking Protective Steps

Many financial institutions are not fully prepared to handle the complexity and speed of cross-border payments, particularly when it comes to information sharing.

“Financial institutions that share risk signals and historical data across the payments ecosystem are in a much better position to identify and block criminal activity,” said Suzanne Sando, Senior Analyst of Fraud and Security at Javelin Strategy & Research. “Instead of solely relying on in-house data, access to a consortium offers a rich historical data pool to better detect and handle risky transactions, providing visibility into critical datapoints that may have otherwise not been available.”

Another promising solution recommended by the Payments Association is tokenization. Tokenization involves creating digital tokens, often on a blockchain, to represent financial assets. This approach is gaining traction as a way to increase the speed and security of cross-border payments, which is crucial when it comes to reducing fraud and ensuring transaction integrity on a global scale. Several organizations are exploring tokenization for these benefits, with private banks including, UBS, JPMorgan Chase, and Citi making significant dents in this arena.

There’s also the global communications standard ISO 20022, which establishes a common language for sending and exchanging payment data. Its enriched data allows for more precise fraud controls for cross-border payments, which are expected to strengthen further as ISO 20022 adoption grows, enhancing security and trust in global transactions.

The post New Tools in the Fight Against Cross-Border APP Fraud appeared first on PaymentsJournal.

Cross-border transactions have become a cornerstone of the global economy, enabling businesses and individuals to seamlessly exchange goods, services, and payments across international boundaries. As technology advances and digital payment systems evolve, the process of moving money across borders is becoming faster, more secure, and increasingly accessible. However, this growth also brings challenges such as regulatory compliance, currency fluctuations, and the need for transparency in payment processing. Understanding the dynamics of cross-border transactions is essential for businesses looking to expand internationally and for financial institutions aiming to support global commerce effectively.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Commercial Cross Border: This is Getting Good.

Cross-Border Transaction Market Size, in Trillions of U.S. Dollars

• 2022 – $1.27 trillion
• 2023 – $1.41 trillion
• 2024-est – $1.56 trillion
• 2025-est – $1.72 trillion
• 2026-est – $1.91 trillion

About Report

Commercial cross-border transactions are a driving force in the global economy, poised to grow at nearly 11% CAGR through 2030. Yet, these transactions remain complex, often hampered by the inefficiencies of the traditional correspondent banking model, which is costly, slow, and lacking transparency. Emerging technologies such as instant payments and blockchain are disrupting this legacy framework, offering faster and more cost-effective solutions for business payments.

This report by Javelin Strategy & Research explores the evolution of cross-border payments, comparing traditional methods with innovative tools reshaping the landscape. It also examines the critical risks associated with international business, including foreign exchange volatility, regulatory challenges, fraud, and geopolitical uncertainties, while providing strategies to address these hurdles effectively.

The post Will Cross-Border Transactions Continue to Be Lucrative? appeared first on PaymentsJournal.

Swiss financial giant UBS is the latest bank to launch a blockchain-based solution designed to facilitate cross-border payments. With the persistent delays and other challenges associated with international transactions, the financial landscape is evolving to one where individuals can easily move money worldwide.

Blockchain’s potential to reduce fraud, lower transaction costs, and increase transparency is particularly beneficial for cross-border payments. Its transactions address many longstanding challenges in payments and help democratize access, making international transactions more accessible to the underbanked.

By speeding up transactions, blockchain also has the potential to greatly reduce the impact of currency fluctuations, providing stability for businesses and individuals engaging in cross-border transactions.

“If you have a 24-hour window to complete a transaction, that’s when you can really see the negative effects of currency fluctuation,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “But instant payments can clear and settle within 20 seconds. At the point when you hit the button, you can almost pinpoint with that exact currency what the exchange rate is going to be.”

Blockchain is often seen as a way to deliver these services on a widespread scale. Approximately 63% of consumers have already used instant payments systems to send funds across borders to friends and family, according to a report by GlobalData. Merchants can receive blockchain payments from around the world—without the need for bank intervention.

“Let’s take the example of a necklace maker in Bali that doesn’t have a bank account but probably has a phone,” Bodine said. “That smart device could receive a payment made through blockchain technology. It enables small businesses to act like Fortune 500 companies and extend their supply chain throughout the world.”

The UBS Structure

UBS Digital Cash operates on a private blockchain network accessible only to permissioned clients. Settlements are executed through smart contracts, which automatically process payments once predefined conditions are met. Client transfers on UBS’ platform are recorded and processed in a digital ledger—independent of currency, in near real-time, 24/7. UBS reports that it has already completed international transactions in dollars, Swiss francs, euros, and Chinese renminbi.

Other multinational banks have made ventured into this territory. In 2020, JP Morgan launched JPM Coin, which was rebranded as Kinexys Digital Payments earlier this week. Citi Token Services and DBS Token Services both went live earlier this year.

The post Cross-Border Payments Take Another Step Forward on the Blockchain appeared first on PaymentsJournal.

The Bank for International Settlements has said that Project Mandala, an initiative to create an automated regulatory compliance system for cross-border payments, has reached the proof-of-concept stage.

Cross-border payments are in high demand, but issues like slow settlement and currency conversions have hindered widespread adoption. It is also difficult for financial institutions to navigate the country-by-country regulatory hurdles.

For that reason, Project Mandala is one of the key initiatives for the BIS this year. The first steps in the proof-of-concept phase will be for all the participating institutions, which include commercial banks, central banks, and other financial technology companies, to operate a Mandala node within their systems.

Compliance by Design

Through the nodes, the institutions can interact through a peer-to-peer messaging system that provides payment policies in the target country. Project Mandala stores cross-border regulations in a repository that can be accessed by all the participants.

The system uses zero-knowledge proofs, cryptographic protocols that enable one individual, called the prover, to convince another, known as the verifier, that a claim is true. The verification process is conducted without either party disclosing any details about the claim itself.

A BIS official in Singapore, Maha El Dimachki, said the organization is encouraged by the early results of Project Mandala and believes the new system can make an impact on cross-border payments. Dimachki also said the BIS is “pioneering the compliance-by-design approach to improve cross-border payments without compromising privacy or the integrity of regulatory checks.”

An Active Organization

The BIS is a consortium of seven central banks, including the Bank of France, Swiss National Bank, Bank of Japan, Bank of Korea, Bank of Mexico, Bank of England, and the Federal Reserve Bank of New York. The organization’s goal is to fuel innovation in global financial systems.

The BIS has been active of late. Earlier this year, the organization announced that Project Agora is in the design stage. That initiative, which has received buy-in from 41 financial firms, will explore how tokenized commercial bank deposits can be integrated with central bank digital currencies on a centralized platform.

The post BIS Pilots Automated Compliance Process for Cross-Border Payments appeared first on PaymentsJournal.

More than half of global consumers have made instant cross-border payments for goods and services, and that market is projected to grow.

Approximately 63% of consumers have used instant payments systems to send funds across borders to friends and family, according to a recent report by GlobalData. The study also estimated that European cross-border payments alone would experience nearly the same level of growth in the next few years.

“We’re seeing the dramatic use of instant payments in India, Brazil, and Asia, and it’s picking up steam in the European Union,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, in an earlier conversation with PaymentsJournal. “The real tipping point is going to be when we see the cross-continent and cross-ocean payments influx, and I don’t think we’re too far away from that happening.”

Prime Candidates

Instant payments are considered the future because they are fast, accurate, and less expensive. They are also a prime candidate for cross-border payments, which often face issues with slow settlement times, regulatory hurdles, and fraud.

There have already been cross-border expansion efforts by some of the largest instant payments players. After India’s success with UPI, the National Payments Corporation of India’s international branch entered talks to explore expanding the UPI model to countries in South America and Africa.

UPI is also set to connect with instant payments services from Malaysia, Thailand, Singapore, and the Philippines over the next few years in a venture called Project Nexus. UPI had already linked with Singapore’s PayNow last year.

Cross-Border Powerhouse

Project Nexus is facilitated by the Bank of International Settlements, a consortium of seven major central banks. BIS has also initiated Project Agora, a collaboration with public and private financial organizations to explore how tokenized commercial bank deposits can be integrated with central bank digital currencies on a single platform.

One participant in Project Agora is the Society for Worldwide Interbank Financial Telecommunication (SWIFT) which has the potential to be a cross-border powerhouse in its own right. SWIFT operates a global messaging network that it has already used to transfer tokenized assets. The organization is moving forward with digital asset transaction trials next year.

Although there are many cross-border payment solutions in development, it’s still unclear which one will scale to become the standard for instant cross-border payments. Last year’s failure of the P27 project in Europe proved that a common standard isn’t the only issue hindering cross-border payments—banks and regulators also have to buy in.

The post Instant Cross-Border Payments Gain Traction Amid Scaling Challenges appeared first on PaymentsJournal.

Tapping into the global economy requires successfully navigating the challenges associated with cross-border payments. Even relatively simple tasks, like processing payments in foreign currencies, can become major headaches if you fail to account for the volatility of exchange rates.

Proactively addressing common challenges like fraud, regulatory compliance, and processing times can help protect a company’s profitability. These measures support efforts to expand into new markets and ensure the necessary tools are in place to process payments in a wide range of currencies, from dinars to Australian dollars.

Understanding Key Challenges

Cross-border payments in the era of e-commerce can quickly become complicated. Without a proactive approach to addressing these hurdles, organizations risk running afoul of international laws, tax agreements, or fraud. If they’re processing international payments, organizations should work with software that accounts for:

• Regulations designed to combat money laundering and improve income visibility
• Fraud and cyber security threats ranging from Phishing to identity theft
• Slow transaction times that may take days to clear
• Currency rates that fluctuate between payments

Navigating these challenges is key for succeeding in the global economy. Even small changes, like adopting a reliable payment portal, can help protect organizations from legal fees and excessive taxes.

Combating Fraud in E-Commerce

Fraud is a serious issue for the global economic economy, with an estimated 2% to 5% of global GDP laundered each year—amounting to between EUR 715 billion and 1.87 trillion. Fraud can significantly impact businesses as well, and falling victim to criminal activity is often easier than expected.

AI plays many roles in e-commerce today, enhancing inventory management, personalizing product recommendations, and offering predictive analytics. AI is also combating fraud by:

• Tracking consumer interactions
• Identifying suspicious behavior
• Keeping up to date with trends in criminal activity
• Providing data to help reclaim stolen revenue/products

Taking a data-driven approach to fraud can also serve as a powerful deterrent. Utilizing well-established payment processing software helps deter increasingly emboldened criminals and reduces the risk of falling victim to fraud in cross-border transactions.

When evaluating payment providers, consider Swift and Wise, which have recently partnered to offer API services, payment pre-validation, and cloud connectivity. These innovations can support bank’s efforts to streamline global remittances and modernize legacy software that is not equipped to handle cross-border payments.

Analyzing Transaction Data

Leveraging consumer data not only protects against fraud but also empowers organizations to make smarter financial decisions when expanding into the global economy. Successful use of big data can help:

• Identify market opportunities in the global economy
• Manage risk during expansion and mitigate investor losses
• Improve your forecasting efforts for greater stock management
• Enhance customer services regarding payment transactions when selling to consumers from overseas

Utilizing an AI-driven big-data analytics program can help organizations overcome challenges associated with data adoption. Most analytics programs have built-in functions that clean data sets and transform complex information into actionable customer and market insights. These tools can also assist in raising capital from investors, ensuring that organizations can navigate challenges related to cross-border payments without falling into financial difficulties.

Leveraging AI to track transaction data can help organizations better understand the fees they are likely to incur when conducting business internationally. International bank payments are often frustratingly opaque, with fees commonly hidden within currency conversion rates. This lack of transparency can erode a company’s profitability and hinder its ability to manage international payments effectively.

As the global economy expands, more banks are investing in fintech solutions, like blockchain, to minimize these fees and offer more competitive payment options to companies. AI can be used to monitor transactions via blockchain, reducing the risk of hidden costs like investigation charges.

Conclusion

Navigating the complex web of cross-border payments can be daunting for organizations new to the global economy. Without a proactive approach to cybersecurity, companies may unknowingly expose themselves to fraud. Additionally, failing to work with a well-established payment portal can lead to compliance issues with international tax laws. By adopting a proactive strategy for processing cross-border payments, companies can hedge against currency risks, enhance security measures, and improve payment processing times.

The post Navigating the Challenges of Cross-Border Payments in a Global Economy appeared first on PaymentsJournal.

Project Agora, the cross-border payments project proposed by the Bank for International Settlements (BIS), has received the backing of 41 private financial institutions.

Announced earlier this year, the project has now reached the design stage. The objective of Project Agora is to examine how tokenized commercial bank deposits can be integrated with central bank digital currencies (CBDCs) on a centralized platform.

In the current system, cross-border payments involve two separate actions: messages are sent to banks detailing how clients should be credited, followed by the transfer of funds. Tokenization technology has the potential to unify these processes, making payments more secure and efficient, and allowing banks to update their ledgers in real time.

“Unified ledger is all about disrupting the legacy model of correspondent banking and making cross-border less expensive, less risky and more efficient,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “It also opens up payments to previously unbanked demographics. What isn’t being spoken about much is the potential for this to be the infrastructure that ties together instant payments from around the globe, which does not yet exist. The players involved in Project Agora are the obvious candidates to make this happen.”

Structural Inefficiencies

The unified ledger concept behind Project Agora addresses structural inefficiencies in the existing international payments system. Due to the increase in fraud and the vulnerabilities of cross-border payments, the project emphasizes establishing a standard where Know Your Customer verification and anti-money laundering checks are central.

In addition to tackling fraud, a cross-border payments standard will have to account for various country-specific regulatory and technical environments, as well as different time zones.

Because of those variabilities, the unified ledger in Project Agora is designed with an open architecture that can be programmed and modified. In addition, tokenized deposits and CBDC will be housed in separate sections of the unified ledger, with their interactions governed by smart contracts.

Driving Innovation

BIS is a consortium of seven central banks, including the Bank of France, Swiss National Bank, Bank of Japan, Bank of Korea, Bank of Mexico, Bank of England, and the Federal Reserve Bank of New York. The umbrella organization’s goal is to drive innovation in global financial systems.

The consortium also includes private sector participants, with some of the 41 members being Visa, Mastercard, JPMorgan Chase, Swift, and Monex. Participants in Project Agora are expected to take part in the project until the end of 2025, when the consortium will release its findings.

The post Financial Firms Join Project Agora to Develop Cross-Border Payments Standard appeared first on PaymentsJournal.

An executive at an EU fintech said that improving the financial relationship between the UK and the European Union would be a boon for payments platforms and merchants that have struggled with additional fees and regulatory requirements since Brexit.

Former PayPal and American Express executive Dave Smallwood has been appointed as the Managing Director of Dutch-based Mollie’s UK business, and he lamented the difficulties the fintech faced in obtaining a Payment Institution license in the country.

“I do think that a better Euro/UK relationship would be better for merchants, full stop,” Smallwood told Tech.eu. “The extra bureaucracy that Brexit caused the merchants selling something from the UK into Europe, or Europe into the UK…it makes things harder, reduces the opportunity for our customers. Anything that can lift that and make it better for them would be greatly received by us and many others.”

Closer Ties

Smallwood’s comments came in response to recent statements by UK Prime Minister Keir Starmer, who expressed a desire to reset the country’s relationships with the EU.

Starmer has been working with Germany’s chancellor to create an agreement that would spur economic growth in both countries. However, the UK’s prime minister made it clear that there are no plans to reverse Brexit anytime soon.

Many Clashes

Since the UK withdrew from the European Union over a decade ago, there have been many clashes between UK and EU financial services providers. Recently, two EU trade associations raised concerns about the UK’s proposed cap on interchange fees for payments originating from cards issued by European financial institutions.

The UK’s goal was to reduce the fees incurred by UK businesses, but the trade organizations argued that capping interchange fees on EU cards would cause European financial institutions to lose money on every transaction.

These concerns have posed challenges for payments companies like Mollie, which operate in both regions. Still, Mollie has rapidly grown into a multibillion-dollar company with offices in the Netherlands, Portugal, Italy, Germany, and France.

However, the UK remains the largest e-commerce market in Europe, and Mollie has ambitious plans for the country. The fintech has stated that its objective is to become the UK’s leading financial services provider for small to medium-sized businesses.

The post Improving EU/UK Relationship Could Give Payments Platforms and Merchants a Boost appeared first on PaymentsJournal.

The next major cross-border payments system might emerge from Poland, where the mobile payment platform BLIK continues to pursue aggressive growth strategies.

After securing placement in Google Play earlier this year, BLIK has now announced its expansion into Slovakia, with plans to enter Romania soon. Last year, BLIK merged with the Slovakian mobile payment system VIAMO, enabling the service to become available in that country. This week, BLIK further expanded its reach by partnering with Tatra, one of Slovakia’s largest banks, which will now offer payments through BLIK.

Growing Markets

The upcoming expansion into Romania is expected to enable BLIK to handle transactions in both Romanian leu and euros, as well as establish a connection with the SWIFT payment system.

“We chose Romania because it is among the countries with the fastest economic growth in Europe,” BLIK CEO Dariusz Mazurkiewicz said in a statement. “Using our own expertise and the right business model, we are ready to develop in Romania a modern and unique mobile payment system as well.”

BLIK says the number of e-commerce users in Romania will reach 11 million by 2025.

A Success Story

BLIK launched in Poland in 2015 and has been highly successful, with more than 16 million active users in the country. In the first half of 2024, BLIK completed more than 1.1 billion transactions, a 40% increase compared to the same period last year.

Formed through a partnership of Poland’s six largest banks and Mastercard, BLIK allows users to authorize transactions using a six-digit code. Online payments have generally accounted for the largest share of the service’s transactions, representing nearly half of all BLIK payments. However, payments can also be made through a physical network of retail shops, post offices, and various other service providers. Many ATMs in Poland allow cash withdrawals using BLIK codes, eliminating the need for a physical card.

While expanding into other Eastern European countries, BLIK also worked with Boku, a global network for localized payment solutions, to become available through the Google Play Store. As of this past June, BLIK became Boku’s first account-to-account connection with Google.

BLIK has shown remarkable growth in the physical realm. In the first half of this year, BLIK saw its highest growth in transactions within the point-of-sale segment. Users made 258 million transactions in this channel in just six months. Overall, BLIK payments at the POS increased by 58% compared to the first half of 2023.

The post BLIK, Poland’s Payment System, Takes Steps to Grow appeared first on PaymentsJournal.

Visa and Revolut are launching Instant Card Transfers, a platform designed to mitigate the challenges of cross-border business payments.

Organizations that transfer funds internationally have long contended with high transaction fees and prolonged processing times. In addition, each country has its own set of regulations for cross-border payments. Instead of searching for IBAN numbers and Bank Identifier Codes, Revolut’s business clients will only need a card number to send money internationally.

Instant Card Transfers is expected to reduce the multi-day delays often associated with cross-border payments, with many transactions reaching their destination in less than 30 minutes.

Significant Strides

The new offering will be available in over 78 countries and support 50 currencies. This platform gives small- to medium-sized businesses an opportunity to expand their global footprint, although it will initially be open only to UK and EU members.

Since its inception in 2015, UK-based fintech Revolut has made significant strides, including securing its long-awaited UK banking license. The fintech has also announced plans for U.S. expansion, although it has not yet filed for a U.S. banking charter.

A Global Framework

Commercial payments have become so complex that even many seasoned financial professionals may not grasp all their nuances. With cross-border business payments, substantial sums change hands through various methods, and companies have to account for currency conversions.

The demand for cross-border solutions is unlikely to decline given the ever-growing globalization of business. Progress toward establishing a global framework for cross-border payments has been slow, but platforms like Swift and BIS’s Project Agora are designed to address this gap.

However, the most effective candidates for facilitating global cross-border payments already have a framework in place.

“There are several options that could fill that gap and deliver the infrastructure for cross-border payments, but it’s still not clear which one will emerge,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, in a previous conversation with PaymentsJournal. “Visa and Mastercard would be perfect candidates for cross-border payments because they already have an established global highway. It could be a great addition to their business, especially if there’s a reduction in credit card interchange fees.”

The post Visa and Revolut Collaborate on Cross-Border Business Payments Platform appeared first on PaymentsJournal.

Two European trade associations have issued a letter raising objections to the UK’s proposed interchange fee cap for payments originating from European issuers, saying that the proposal could harm the EU’s financial systems.

UK legislators proposed the new rules after a review found that UK businesses paid an additional £150 million to £200 million in interchange fees to EU credit card companies in 2022. These fees are incurred when consumers use an EU-issued debit or credit card to make online purchases from UK businesses.

In response, UK regulators proposed a temporary credit interchange cap of 0.3% and a debit cap of 0.2% on EU cards, and lawmakers will determine permanent caps after further analysis.

“While we appreciate the rationale for taking action to boost competition and innovation in payments domestically, and cross-border, we see the proposed measure as potentially discriminatory, a risk to the integrity of national payments and retail banking markets in the EU and counterproductive,” the European Banking Association and Payments Europe wrote in a letter.

Points of Contention

The two groups also noted that EU financial institutions “will lose money on each transaction.” Fintechs and digital-first banks could be particularly affected, as they don’t offer widespread lending and are much more reliant on payment fees.  

Another point of contention was that the proposed UK regulation did not address the other side of the coin—where UK consumers use their cards for transactions in the EU.

Heated Debates

According to the Financial Times, UK regulators were spurred into action after Visa and Mastercard raised their fees in 2022, given that roughly 99% of UK debit and credit card payments are processed by these two companies.

U.S. merchants have echoed similar concerns, having agreed to a $30 billion settlement with Visa and Mastercard over high interchange fees. However, this settlement was ultimately rejected because merchant groups, like the National Retail Federation (NRF), argued that the deal was far less than merchants were owed, and a NY judge agreed.

While debates over credit card interchange fees are likely to continue, many overlook the role credit card companies play in worldwide payments infrastructure. Dramatic changes in interchange fees could have immediate implications for consumers.

“The NRF’s position is card payments should be free to the retailer,” Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, told PaymentsJournal in June. “The challenge is card issuers have two income streams: fees from merchants and fees and interest from cardholders.”

“If merchant fees are removed, every card could have a $199 annual fee, no rewards, and a 29.99% APR,” he said. “Granted, there’s room to improve card pricing and structure, but rarely does progress happen when one side pushes relentlessly in court to get everything for free.”
 

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Banks in rural Mexican communities may soon be able to receive cross-border payments from the U.S., thanks to a new initiative from the Interledger Foundation and the People’s Clearinghouse. The organizations have announced a plan to streamline cross-border payment capabilities to the 140 community banks that are members of the Mexican Association of Social Sector Credit Unions.

The People’s Clearinghouse, a tech platform serving community banks and credit unions in Mexico, aims to connect rural financial institutions to the national payments system and hopes this initiative will serve as a blueprint for global deployment, benefiting other underbanked populations. The Interledger Foundation, a global nonprofit advocating for open, interoperable payment solutions, will facilitate the money transfers using its Interledger Protocol. It partners with Mojaloop, a coalition of nonprofits building a real-time digital payments system for developing countries that’s backed by the Bill and Melinda Gates Foundation. Mojaloop’s instant payments infrastructure translates from the ILP language to whatever language each community bank is using.

The project is expected to go live in the first half of 2025. It will initially serve more than half a million Mexican banking customers—210,000 at community banks and 300,000 at savings co-ops.

U.S.-based Mexicans have long been forced to use private money transfer services to send cash back to Mexico. These services often entail high fees, high minimums, and long wait times to receive funds. Additionally, many of Mexico’s community banks don’t have the clearing and transfer systems necessary to deposit funds directly into recipients’ accounts. The new service aims to provide an alternative to this process.

Trailing Other Latin Nations

Other Latin American nations have had success with cross-border payments. Brazil’s Pix recently announced that it would allow Brazilians traveling abroad to use Pix at participating stores and let foreign nationals within Brazil make Pix transactions.

However, Mexico has faced a tepid reception for CoDi, its instant payment system based on QR codes, partly because the Mexican government has done little to promote it. As a result, financial institutions have been looking for ad hoc ways to facilitate payments, especially cross-border transactions. One example is an initiative from Mexico’s Nubank, announced last year, to send money across the border through WhatsApp.

The post Cross-Border Payments Are Heading for Rural Mexico appeared first on PaymentsJournal.

Travel companies continue to struggle with the proliferation of payment options available to their customers, recognizing the need to upgrade their systems. Many report that their profit margins have been affected by outdated or complicated payment systems.

They are taking action, however, with nine out of 10 expecting to modernize their financial operations this year, according to a survey from Airwallex and Skift. While cross-border payments have become a profit center for many travel companies, they have also made their financial dealings much more complex. Many of the executives surveyed expressed interest in an all-in-one payment and financial operations platform.

Credit cards, debit cards, and digital wallets remain the most common customer payment methods for travel, but local payment methods and peer-to-peer systems are rapidly gaining popularity, especially in Asia. As a result, 70% of travel companies report that handling a variety of payment types across different markets has become increasingly complex.

On the other hand, cross-border payments have been a boon to many players in the industry. Nearly 40% of travel executives report that half of their revenues result from international customer payments. Two-thirds of respondents also said that cross-border payments have become more complicated due to the volatility of FX rates.

Progress in Asia

The survey covered companies in Asian countries such as Hong Kong and Singapore, where many systems have focused on simplifying cross-border payments for travelers.

Several initiatives have been launched recently to support this trend. Last year, China’s UnionPay International enabled merchants to accept 170 international wallets. Alipay + and Malaysia’s PayNet also announced that travelers to Malaysia can now make digital payments through major e-wallets, and Ant Group teamed up with the Korea Easy Payment Foundation in South Korea to offer cross-border payments to tourists from China and Southeast Asia.

Despite these advancements, travel companies still face concerns about spending. Nearly all the companies surveyed by Airwallex and Skift said they frequently make payments to suppliers or vendors in foreign currencies. Most noted that managing multiple supplier and vendor payments in different countries under the traditional payment and financial infrastructure is a key challenge.

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A delayed or misdirected payout can have drastic effects on the recipient. A recent report from Mastercard found that 76% of consumers would have trouble supporting themselves in the event of a late or failed cross-border payment.

Despite powerful modern payments technology, around a third of cross-border payments users have reported payment issues.

To meet the demand for secure and swift payouts, Verituity partnered with Mastercard Move to introduce a new approach to the process. The cloud-based platform streamlines verification tasks, ensuring timely payouts on the first attempt. It will be available for both domestic and cross-border transactions.

Pay By Anything

Mastercard Move is a collection of global payments solutions that focus on both domestic and cross-border payments. The portfolio is backed by Mastercard and delivers trackable payments, transparent fees, and prompt payment. The partnership will expand Verituity’s reach, while saving Mastercard Move partners costly verification and payment failure expenses.

Beyond security, the platform offers a flexible pay-by-anything approach that allows payers greater control over the disbursement experience—and it’s now accessible in 140 countries. By and large, recipients can receive their payouts in the manner that works for them.

“In today’s global economy, the ability to make and receive payments quickly and easily is crucial,” said Sherri Haymond, executive vice president of Global Digital Partnerships at Mastercard in a prepared statement. “Mastercard Move enables secure, near real-time payment transfers to and from billions of card, bank and digital accounts globally.”

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When PayPal recently announced that its cross-border money transfer platform, Xoom, would now support the PayPal USD (PYUSD) stablecoin, reactions were largely muted. While PayPal’s history with crypto has been somewhat shaky, it’s clear that the company is taking deliberate steps to fuel cryptocurrency adoption.

PYUSD is a stablecoin that is based on the U.S. dollar, and the cryptocurrency was just launched in the latter half of 2023. The stablecoin can be redeemed on a one-to-one basis with U.S. dollars, and the initial focus for the crypto was for use in P2P payments. The company hoped the stablecoin would attract users who have been deterred by crypto’s perceived volatility.

While its release raised eyebrows, the decision to enable the stablecoin for cross-border payments is monumental. Xoom, which was acquired by PayPal in 2015, now supports PYUSD transfers to 160 countries.

According to James Wester, Director of Cryptocurrency at Javelin Strategy and Research, “it’s a pretty big deal for a company like PayPal—a well-regulated, locked-down, risk-averse financial services provider—to use their own stablecoin for cross-border payments.”

New Vistas

The demand for cross-border remittances has increasingly garnered the attention of financial services and payments companies. It has also drawn the focus of crypto and blockchain companies. The fact that PayPal has used its notable resources to create a solution in the space is an intriguing development.

The new model immediately delivers cost-savings for cross-border transfers, which has been a long-time pain point. PayPal cited a report from late 2023 that noted the average cost to send $200 cross-border was around 6%. Xoom won’t charge any fees for transfers to its supported countries.

Another selling point is the absence of crypto sales fees. When users select PYUSD as the sending format, their currency will be converted to crypto at no cost. The sender can also select the fiat currency in which the recipient will receive their funds. Transactions that aren’t conducted in USD, however, will still be affected by exchange rates.

“We had two objectives to achieve,” said PayPal’s Senior Vice President of the Blockchain, Cryptocurrency, and Digital Currency Group, Jose Fernandez da Ponte in a prepared statement, “create something that had a stable value to maximize user confidence and ensure it had utility for commerce and payments.”

Ponte went on to say that the new effort “builds on our goal of driving mainstream adoption of cryptocurrencies while also offering an easy way to securely send money to friends and family at a lower cost.”

Obstacles to Entry

While there is a robust market for cross-border transfers, it also presents significant challenges. It’s estimated that 70% of financial institutions are unsatisfied with the number of cross-border remittances that fail. Those failures have cost companies upwards of $89 billion through the first three quarters of 2023.

One of the main reasons payments fail is problems with verifying the recipient’s personal data. In many cases, humans are still verifying recipient information, and language barriers can play a part in derailing transactions. Cross-border payments are also vulnerable to currency-conversion complexities.

In addition to payment failure issues, there are regulatory issues to combat. Even though stablecoins are touted to be more reliable than crypto at large, the regulatory framework around them has been called into question.  

The Financial Stability Institute said that stablecoin rules aren’t enforced equally across the world, and that regulations are “diverse and fragmented.” There are also concerns about how the loosely-governed coins could be susceptible to data breaches, fraud, or money-laundering.

Reach and Scale

Any apprehensions about stablecoin stability haven’t stalled PayPal’s plans as of yet. Crypto has been at the forefront of the company’s initiatives for some time, as proven by the resumption of its UK crypto activities in November.

“PayPal’s efforts with crypto have been interesting so far especially issuing its own stablecoin,” Wester said. “But bundling its crypto efforts with Xoom to go after the remittances market and offer a lower-cost alternative for cross-border payments, it’s important.”

Cross-border transfers have been a target use case for digital currencies for some time. PayPal entering the market signals a significant shift in how money will be sent across borders.

“Given their reach and scale, this could be a very big deal, especially in areas where low-cost remittance alternatives don’t exist,” Wester said.

The post Why PayPal’s Cross-Border Stablecoin Solution Should Be Bigger News appeared first on PaymentsJournal.

The Federal Reserve Bank of New York, along with six other central banks, will team up with the Bank for International Settlements (BIS) to test using tokenization as a way of increasing the speed and integrity of cross-border payments.

Under the name Project Agora, the goal is to ease international payments in the face of different legal, regulatory, and technical requirements, as well as different operating hours and time zones. According to the BIS, This initiative holds the potential to bolster the monetary system’s functionality while introducing innovative solutions through smart contracts and programmability, all while upholding its two-tier structure. 

Tokenization is the process of creating digital tokens, such as cryptocurrencies, on a blockchain to represent assets, including financial instruments. The technology offers several benefits, including greater simplicity within the financial system, faster settlement, and a potential reduction in fraud. It’s essentially a more efficient and transparent way of approaching value movement than banks do now.

A Continuing Process

BIS, the central bank for central banks, has been exploring tokenizing deposits through its Innovation Hub. Over the past few years, it has been focused on creating a wholesale stablecoin for central and international banks to settle with each other. Through Project Agora, the BIS will also be partnering with a group of private financial companies to explore combining tokenized central bank money with commercial bank deposits on a unified, programmable platform.

Project Agora follows on the heels of an initiative called “Tokenise Europe 2025,” which the European Commission and the German Banking Association launched in February 2023. Its objective is to leverage the potential of asset tokenization and distributed ledger technology to increase competitiveness and build economic resilience in Europe. More than 20 banking trade groups and fintechs throughout Europe joined to support the initiative.

“Project Agora is a continuation of testing and experimentation the BIS has been doing for quite some time regarding tokenization,” said James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research. “It’s a further indication that the tokenization of assets, and the efficiencies that tokenization encourages, are evolving quickly.”

Long-term, the BIS’ tokenization efforts for cross-border payments show that central banks are eager to take advantage of the benefits of digital currencies. “In effect, it’s a continuing validation of the idea of ‘digital assets,’ meaning digital tokens attached to currencies, equities, and contracts,” Wester said.

The post Next Step for Cross-Border Payments: Tokenization appeared first on PaymentsJournal.

Imagining a world less economically interconnected than our current one is challenging. Yet three decades ago, global interactions were markedly different—companies engaged in significantly fewer cross-border payments and were predominantly focused on domestic endeavors.

Fast forward to today’s borderless global economy reliant on international supply chains, remote workforces and API-first tech stacks, and the siloed business models of yesteryear have nearly completed their relegation to obsolescence.

With a persistent desire to increase the speed of processes across organizations and government agendas worldwide, there is a modern imperative to streamline cross-border payments to improve efficacy. However, fraud is the primary challenge contributing friction to the objective at hand.

Two Aspects to Improve: Speed & Security

The surge in cross-border payments, driven by trade, capital, and migration flows, is only expected to climb—with a reported $190 trillion in 2023 projected to reach $290 trillion by 2030. 

With such expected growth comes a need to improve the efficiency and speed of cross-border payments, as evidenced by conversations led by the European Union in recent times.

In October 2022, the European Commission introduced a legislative proposal aimed at enabling citizens with bank accounts in the European Economic Area to execute instant euro payments. Earlier this month, the legislation was officially passed, with banks and payment service providers now mandated to allow EU citizens and businesses to conduct nearly instantaneous credit transfers.

Despite significant growth, cross-border payments remain expensive and sluggish with fees averaging 1.5% for corporations, 6.3% for remittances, and a timeframe that can take up to several days for payments to complete. Reducing the cost, speeding up the process and enhancing the accessibility of cross-border payments would yield significant advantages, particularly in emerging and developing economies.

The critical challenge for companies engaged in this field is to devise strategies that effectively balance the two aspects of speed and security; to serve customers’ ideal desires of near-instantaneous payments that are completely secure.

The Cross-Border Payments Fraud Problem

Unfortunately, this is easier said than done. While only representing 11% of total card payment transactions, cross-border payments accounted for 63% of card fraud. Fraudsters are particularly drawn to cross-border payments because they can easily steal funds, often as a result of weak security measures.

Most notably, the physical distance between the fraudsters and their victims significantly lowers the chances of the perpetrators being caught. Since victims have limited options for recourse after being defrauded, cross-border payments are frequently seen as the easiest opportunity for fraudsters to execute scams.

How Fraud Undermines Trust

Increasing fraud rates have the potential to erode trust in the security of cross-border payments, and a loss of faith in the security of these payments could lead to an eventual decline, diminishing the future viability of businesses dependent on an international marketplace.

Victims of cross-border payment fraud are ensnared by an array of sophisticated tactics. In Account Takeover (ATO) fraud, perpetrators gain unauthorized access to victims’ banking or digital wallet accounts, manipulating them for illicit transactions. Even within the broader fraud threat landscape, account takeovers are a growing problem, with an estimated 22% of adults in the US falling victim to this type of fraud in 2022.

Another popular method is chargeback fraud, which involves deceitful transaction reversals, while stolen card fraud sees the unauthorized use of credit or debit card details for fraudulent purchases or withdrawals. While sometimes referred to as ‘friendly fraud,’ chargeback fraud can be far from pleasant and is growing at a rate of around 41% a year.

Cross-border payments are also susceptible to fraudsters looking to commit money laundering. Money laundering intricately disguises the origins of illicit funds, complicating efforts to trace them back to criminal activities. Once again, this is a huge fraud problem generally. In fact, anti-money laundering fines were up 50% last year alone.

Other forms of fraud affecting the cross-border payment process include BIN attacks, triangulation fraud, and Authorized Push Payment (APP). Together, these tactics not only inflict financial losses but can also severely damage victims’ credit history and erode trust in digital financial transactions across the board.

New Ways to Address Old Problems

The answer in addressing fraud in cross-border payments is to get proactive and stop the issue before it occurs. Unfortunately, traditional risk technologies have been expensive to develop, slow to implement, complex and ultimately, unable to keep pace with evolving fraud trends. 

Thankfully, new solutions are now coming to the fore that offer significant improvements.

Artificial intelligence (AI) advancements have opened new avenues to address these challenges. 

Through advanced digital footprinting and the power of machine learning, modern fraud prevention solutions that leverage AI can find the tell-tale signs of fraud that humans tend to miss and help to stop it in its tracks.

For companies, the ability to enrich data is key to this effort. Without always realizing it, users regularly leave behind digital footprints on the sites they visit. By analyzing this information, solutions like ours can unlock the likelihood of an individual being fraudulent while simultaneously making other critical determinations around online accounts.

Fraud prevention solutions that leverage AI have the potential to impart considerable new trust across the cross-border payment space. Whether it’s leveraging behavioral analysis techniques to spot anomalies in user behaviors that indicate account takeovers or utilizing transaction monitoring to spot any unusual transfers of funds, the technology could be transformative.

Maintaining Trust

In the context of cross-border money transfers, trust is paramount. Without maintaining this trust, the entire system risks being compromised. Embracing and integrating advanced technologies is not just about safeguarding funds; it is a crucial step in ensuring the integrity and reliability of the global financial system. Thus, adopting solutions utilizing AI, machine learning, and other state-of-the-art tools, represents more than technological progress. More than ever, it’s increasingly vital for companies and individuals undertaking this essential process to recognize their role in combating the growing threat of fraud.

The post It’s Time to Take Control of Cross-Border Payment Fraud appeared first on PaymentsJournal.

Mastercard’s recent collaboration with Alipay to facilitate swift and secure global money transfers marks a significant development in response to growing consumer demand for faster online cross-border payments.

In a prepared statement, Alan, Marquard, Head of Transfer Solutions at Mastercard, highlighted the significance of this partnership. By connecting with Alipay—a super app that reaches over a billion users in China—Mastercard is able to enhance its international payment offerings. The integration allows Mastercard’s bank, fintech, and corporate customers worldwide to provide consumers with real-time access to the popular e-wallet.

And with a focus on making payments faster and safer, Mastercard is aiming to capitalize on the growing demand for disbursements and remittances.

Global Partnership

Through the Mastercard Move initiative, participating financial institutions gain access to international payments to more than 180 markets. They’re also leveraging a global payout network that covers more than 150 currencies and reaches 95% of the world’s banked population. 

Overall, this partnership is helping Mastercard expand its collaboration with Alipay to streamline international fund transfers to China in real-time, benefitting both senders and receivers by making the transaction process easier.

The State of Cross-Border Payments

There’s been an increase in cross-border payments over the years, and as evidenced by this partnership, we expect this trend will only continue to grow. That said, it still relies on inefficient legacy processes and methods, and as a result, is an area ripe for innovation.

A whitepaper from Wells Fargo touched upon how cross-border payments can be unpredictable and costly—and financial institutions looking to make a name for themselves in the space will need to have a strategy in place to tackle the complexity that comes with cross-border payments.

The post Mastercard Expands Cross-Border Payment Efforts with Alipay appeared first on PaymentsJournal.

Pix, Brazil’s instant payments system, which garnered more than 160 million users since its launch in 2020, is going global.

At the Group of 20 Nations meeting in Sao Paulo this week, Brazil’s central bank has been pushing ideas to make cross-border payments faster and cheaper, with Pix at the forefront. The central bank is reportedly seeking opportunities for Pix to interact with foreign platforms, with Italy being one example of a nation showing interest in developing a bilateral agreement.

An Immediate Success

Pix has experienced rapid and dramatic growth, crossing four million monthly transactions as of October 2023. It now surpasses credit and debit cards as Brazil’s preferred payment method, handling more than $400 billion monthly, according to Ebanx, a Brazilian fintech company. The system is expected to account for 40% of online payments made in Brazil by 2026. Last year, Roberto Campos Neto, head of Brazil’s central bank, predicted that the country’s open finance system would soon lead to the elimination of credit cards.

Pix has revolutionized payment methods in Latin America. Instant payments have been rising by 55% annually, according to 2023 data compiled by Ebanx. Several countries, including Argentina, Bolivia, Mexico, El Salvador, Peru, and Costa Rica, have introduced some form of instant payment, hoping to replicate Brazil’s success.

One model for extending Pix is Nexus, developed by the Bank of International Settlements. This platform intends to facilitate instant cross-border transactions and is currently being tested in five Asian countries. Brazil’s central bank describes Nexus as a “promising path” for Pix to gain global scale beyond bilateral agreements.

A Model of Simplicity

Pix allows customers to transfer money instantly to a bank account or digital wallet, 24/7, and without incurring fees. Maxnaun Gutierrez, Head of Individuals and Products at Brazil’s CB Bank, explained to PaymentsJournal how the process works. 

“Imagine that a friend has paid for dinner, and you need to pay him back,” Gutierrez wrote. “Instead of asking for all his bank details (account number, branch number, full name etc.), all you need to ask is: what is your Pix code? All your friend will need to do is give you one of the following pieces of information: his cell phone number, his individual tax identification number (known as a CPF in Brazil), his e-mail, or a random number generated by the system.

“When it comes time to pay for a product, a consumer can open their cell phone, scan a QR Code, and make payment in a few seconds, since all the information about the purchase will appear automatically on the screen of their phone.”

The post Brazil’s Pix Moves to Take Instant Payments Around the World appeared first on PaymentsJournal.

The European Union Council has adopted new rules that require instant payments in euros to be fully available in the EU. Customers will be able to transfer euro-denominated money within 10 seconds at any time, even outside business hours, to any other EU member state. The move is widely expected to help European payments companies compete on a more equal footing with Visa and Mastercard, according to Reuters.

The law is expected to go into effect in April. Banks located in the eurozone are required to begin allowing instant payments within 18 months of that date. Banks in the non-eurozone area have until 2027 to comply and until 2028 to allow instant payments made from an account in a local currency.

Payment service providers that offer standard credit transfers in euro will also be required to both send and receive instant payments in euro. If banks apply any charges for these services, they must be no higher than for standard credit transfers.

A Needed Change

The landscape for instant payments in the EU has been fairly desolate prior to this new initiative. Several EU countries allow free transfers that take a day or two, but true instant payments are offered at a higher rate and cannot be used for cross-border transactions. SEPA (Single Euro Payments Area), the existing EU network, allows for cross-border transactions between EU countries, but countries can transact only in euros, and uptake has been slow.

The instant payment rules were first proposed in October 2022. At the time, Mairead McGuinness, the Financial Services Chief at The European Union, described the move as “seismic and comparable to the move from mail to e-mail.”

Analysts have expressed a great deal of enthusiasm for the new instant payments protocol.

“Mandating a requirement and having it go into action are two vastly different things, but I am very optimistic about this announcement,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “ASEAN [the Association of Southeast Asian Nations] already has a regional play, and the EU is the next logical one. We can add to the list the announcement of India’s UPI and Google Pay. Regional cross-border is the first step in achieving global, cross-continent, cross-ocean transfers. Global instant payments are imminent.”

The post EU Takes a Giant Step to Promote Instant Payments appeared first on PaymentsJournal.

What have been the most important factors furthering cross-border payments over the past decade? That’s one question answered by the U.S. Faster Payments Council‘s (FPC) latest report, The Practicalities of Cross-Border Payments in a Faster Payments World.

Over the last ten years, the volume and value of cross-border payments has increased by 61% and 37%, respectively, according to the Bank for International Settlements Committee on Payments and Market Infrastructures. In that same time frame, the number of correspondent banking relationships has fallen by 29%.

What caused those dramatic changes? The FPC identified five key developments that facilitated the growth of cross-border payments:

1. In 2017, Swift introduced its Global Payments Initiative (GPI), allowing financial institutions to send and receive funds quickly and securely anywhere in the world. GPI also allowed for full transparency in the status of a payment at any given moment. By working together to strengthen the SWIFT network, banks can help ensure that clients receive a consistent and value-added global payments service. They can also pave the way for fast, traceable cross-border payments.

• ISO 20022 became a reality for SWIFT member banks in March 2023. This global standard uses a common language to both send and exchange payment data, enhancing the current interface within companies, payment schemes, and financial institutions worldwide. ISO 20022 offers enriched payment data, enabling more robust fraud controls, behavioral predictions, and building better resilience.
  
  
• Distributed ledger technologies (DLT) facilitate payments by providing a secure and transparent platform for the transfer of funds. DLT is also the technology that blockchains are made from. Blockchain is particularly well suited to cross-border payments, where numerous intermediaries are involved in processing transactions.
  
  
• Application programming interfaces (APIs) allow applications to communicate with each other. The harmonization of APIs has become a priority due to its ability to offer more accessible, transparent, affordable, and faster cross-border payments. APIs facilitate faster and more efficient cross-border payments by reducing manual intervention and supporting more timely data exchanges across the payment chain.  
  
  
• Central bank digital currencies (CBDCs), digital versions of a country’s fiat currency, allow for faster, cheaper, and more secure payments than traditional methods. In July 2023, a BIS survey showed that 93% of central banks were working on digital currencies. The FPC sees digital currencies and tokenized assets as having immense potential to alter the global financial and cross-border payments landscape by making it faster, cheaper, and more secure.

The report also addresses topics like how correspondent banking relates to cross-border payments, and fintech in the cross-border space.

The post The Factors Driving Cross-Border Payments appeared first on PaymentsJournal.

HSBC’s announcement of Zing, a cross-border transfer app that will launch shortly in the UK, shows one of the world’s largest banks wielding its muscles once again. HSBC becomes the first major legacy bank to compete in the steep-trajectory consumer cross-border space.  

Zing will be available to UK consumers through Apple’s App Store and Alphabet’s Google Play, and is eventually expected to roll out to other countries. It is specifically designed for users who do not have an HSBC account.

Zing is licensed as an e-money institution by the UK’s Financial Conduct Authority. Therefore, Zing funds are not considered bank deposits and are not insured by the Financial Services Compensation Scheme, the UK’s version of the Federal Deposit Insurance Corp.

Making Payments Global

For users of the service, the primary question around Zing is how it might make their lives easier. “For consumers, Zing would offer an additional cross-border payment option for remittances and retail purchases,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “Although P2P mobile payment apps are common in many global markets, most only support domestic payments. Super apps, such as AliPay+ and other mobile wallets, are also making it easier for tourists and local businesses to transact in foreign currencies.” 

There’s also the larger issue of what this means—not just for HSBC, but for all banks considering entry into this space. Zing puts HSBC in competition with fintechs like Revolut and Wise, in a market that banks have heretofore conceded to so-called super apps. Zing follows on the heels of the HSBC Global Wallet, which was announced in May 2021. HSBC’s Global Money, introduced in 2020, offers existing customers a fee-free currency service.

“This poses another interesting twist in the race for market leadership in cross-border services,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “Correspondent banking is protecting its turf, but fintechs are nipping at their heels. Banks are sprouting up their own fintech divisions to remain relevant—and the card schemes are claiming that they already do this, they’ve done it for a long time, and they do it better than anyone.”

The post HSBC Muscles Into Cross-Border Payments With Zing appeared first on PaymentsJournal.

Understanding that the current cross-border landscape remains fragmented, the International Monetary Fund (IMF) is exploring the use of a trusted ledger which would facilitate interoperability, safety, and efficiency for cross-border payments.

During the Atlantic Council conference held earlier this week, Tobias Adrian, Director of the Monetary and Capital Markets Department at the IMF, spoke about the potential of the unified ledger, which he referred to as XC. This was a continuation from a speech he gave in June, where he discussed XC’s main advantages:

• Settlement with central bank reserves offers safety
• Interoperability with national currencies and legacy systems
• Assists in managing information flows to resolve economic friction
• It relies on transparency and rule-based governance, in accordance with the international monetary system

The aim, Adrian noted, is to ensure payments get to their destination and to ensure compliance with anti-money laundering, counter terrorist financing, and Know Your Customer regulations.

Efforts Towards a More Unified Infrastructure

Despite the growing adoption of cross-border payments worldwide, the landscape is still lacking in faster, more affordable payments, messaging and trust between countries, and regulatory checks. But headways are gradually being made.

In response to these and other challenges, the Bank for International Settlements (BIS), along with central banks, and ASEAN countries launched Project Mandala to facilitate compliance processes in cross-border payments. Compliance procedures are automated, and the initiative offers real-time transaction monitoring, which helps boost transparency when it comes to policies specific to a country.

In 2021, Project mBridge was also launched by the BIS to use CBDCs to facilitate real-time cross-border transactions. It enables digital currencies from various jurisdictions to be connected within a unified infrastructure.

These efforts are the right step forward, but as previously mentioned, there’s still much work that needs to be done in the world of cross-border payments. At the Atlantic Council conference, Adrian noted while key strides will be made because of the XC platform, the 190 countries that make up IMF’s global membership will need work and take initiative to continue this momentum.  

The post IMF Proposes Trusted Ledger to Enhance Cross-Border Payments appeared first on PaymentsJournal.

As cross-border payments become a crucial part of global business operations, compliance measures are in focus for companies and governments alike. However, as compliance frameworks vary greatly across countries, it’s highly difficult for financial institutions to navigate multiple sets of rules.

Central banks and regulators worldwide acknowledge the necessity of addressing this challenge and increasingly turn to blockchain technology in search of answers. The Bank for International Settlements (BIS), in particular, has recently launched Project Mandala in collaboration with central banks and regulators of ASEAN countries. The project is meant to streamline and automate compliance processes to turn cross-border payments into a smoother experience.

This is not the first initiative that BIS has introduced to address existing issues with international settlements. But here’s the big question: can projects like these really make a tangible difference for businesses? Let’s take a look.

Using CBDCs to Cross the Gap Between Economies: Project mBridge

Project mBridge is the initiative by BIS that received arguably the biggest amount of attention. Launched in 2021, the project seeks to use central bank digital currencies (CBDC) to support cross-border transactions in real time. The arrangement is meant to directly connect digital currencies of different jurisdictions within a unified technical infrastructure to allow international payments to be immediate, low-cost, safer and universally accessible.

This idea does offer several advantages in cross-border payments for the B2B sector compared to centralized payment systems. If central banks across different countries can successfully establish a jointly operated payment system, it would allow different CBDCs to be freely traded between banks and financial institutions. In other words, cross-border payments could be settled while bypassing the bureaucracy involved in moving funds across multiple banking systems.

It’s understandable why the promise can seem alluring to many, but, personally, I can’t help but feel like the progress made by BIS in this matter is on the slow side. The greatest tangible measure of success that mBridge has demonstrated to back itself up so far is a trial run that was conducted a year ago. In August through September 2022, $22 million worth of transactions were conducted between participating banks via the mBridge blockchain.

Since then, the project has once again become relatively silent on its progress, only occasionally making statements about onboarding new participants. It is still up in the air when full-scale deployment can take place.

Streamlining Regulatory Compliance: Project Mandala

Project Mandala is the most recent Proof-of-Concept launched by BIS to ease the process of regulatory compliance. The goal is to create a common protocol to streamline cross-border use cases, automate compliance procedures, as well as provide real-time transaction monitoring and greater transparency between different jurisdictions.

Considering that it only just launched, there’s not much known for certain about how Mandala is going to operate or what kind of impact it’s going to have on fintech companies specializing in cross-border payments. In the long run, developing and adopting standardized compliance protocols could foster collaboration and interoperability between fintech companies and traditional financial institutions.

In the nearest perspective, however, it will not change much for how businesses conduct their cross-border payments.

Alternative Solution: Employing Services of Fintech Companies to Facilitate Global Money Movement

To reiterate, the inconsistency in compliance methodologies across jurisdictions results in a complex patchwork of rules that increases the cost, time, and effort it takes for businesses to open accounts and conduct cross-border payments. And while the BIS and other parties across the world are working towards the development of better infrastructure and tools that can be used to address this challenge, it will be some time yet before any significant progress on this front can take place.

Meanwhile, the cross-border payments market continues to be dominated by correspondent banks connected via SWIFT, a system that often comes with high fees and sluggish settlement times of at least 5-10 days. Businesses across the world are in sore need of payment solutions that can improve B2B liquidity management and enable them to keep pace with the increasing transactional demands.

The way I see it, right now, they are better off relying on other options, such as fintech companies that can facilitate cross-border transactions on their behalf while employing alternative interfaces and rails. A more direct interaction between companies that sidesteps the involvement of third parties would allow for reduced transfer times and immediate availability of funds.

And if the chosen payment provider company has a robust KYC/KYB and compliance framework, conducting transactions through it would also serve the additional purpose of enhancing trust, which is a fundamental factor in international trade. Companies would no longer have to worry so much about inadvertently becoming part of illicit activities, such as fraud or money laundering schemes.

Following this path ensures that B2B operations can take place quickly as companies do not have to directly engage in lengthy and confusing bureaucratic processes centered around banks and crossing different jurisdictions. The fintech company is the one that shoulders handling these aspects in this case, which allows businesses to focus on conducting their operations in a seamless manner and without taking on greater risks.

The post Central Banks and Fintechs Compete to Shape Cross-Border Payments Mobility appeared first on PaymentsJournal.

Mastercard announced this week a new strategic partnership with Dubai Islamic Bank (DIB) to launch cross-border payment services for both peer-to-peer (P2P) and business-to-business (B2B) fund transfers. The collaboration highlights the United Arab Emirates’ determination to transform its payments ecosystems, both domestically and internationally.

The new collaboration with DIB leverages Mastercard Cross-Border Services to enable the bank to provide real-time remittances through its digital channels across more than 40 countries worldwide. All told, Mastercard Cross-Border Services facilitate the movement of funds to any end point across over 140 countries.

The announcement comes when the UAE has been more focused lately on domestic payment ecosystems. The UAE Central Bank has put forth a National Payments Systems Strategy that would enhance the existing payments architecture in the country, and ensure infrastructure is future-proof as the payments evolution continues. 

But the growing fintech environment in Dubai has led to many international payment service providers elbowing their way into this market as well. In addition, there has been an increased focus from the UAE government around regulations for cross-border payments.

A Growing Presence in the UAE

It is within this landscape that Mastercard has also been growing its presence in the UAE. Just last week, First Abu Dhabi Bank announced it was working with Mastercard to launch its SlicePay card, powered by Mastercard’s Installments Program.

And in August, Mastercard established a global center for advanced AI and cyber technology in Dubai. Mastercard signed a memorandum of understanding with the UAE’s Artificial Intelligence, Digital Economy & Remote Work Applications Office to work together on increasing AI capabilities and readiness in the region. Mastercard described the focus of the effort as battling financial crime, securing the digital ecosystem, and driving inclusive growth in the UAE and beyond.

The memorandum of understanding also looked to establish a co-branded innovation hub in Dubai along with the Dubai Chamber of Digital Economy, intended to serve as a platform for cooperation in digital innovation and artificial intelligence technologies. The goal is to attract international technology companies, startups, and digital talent to Dubai, in partnership with government entities like the Dubai Digital Authority, Dubai Future Foundation, and Dubai Chamber of Commerce. Today’s announcement signals that we should expect Mastercard’s connections to such entities to continue to grow.

The post Mastercard Collaborates with Dubai Bank on Cross-Border Payments appeared first on PaymentsJournal.

The global remittance market is expected to top $800 billion for the first time ever in 2023, according to Mastercard’s newly released Borderless Payments Report 2023.

The study projects global remittances to reach $810 billion by the end of the year, up from $794 billion in 2022, with the cash inflows accounting for more than 15% of the GDP in 25 low- and middle-income countries. The growth is primarily the result of an increasingly mobile world population, although some serious concerns remain for users of cross-border payments.

Half of the consumers surveyed said they are likely to consider working and living abroad in the next three years, with the percentage highest for those living in India, South Africa, Colombia, and the Philippines. Two in five consumers are now sending more money to another country in order to support their financially struggling families. Mastercard expects this trend to grow, as 41% of senders and 48% of receivers expect the frequency of their cross-border transactions to increase over the next 12 months. Nearly half also plan to increase the value of their transactions.

The research confirms that consumers have become more comfortable with digital cross-border payments, as opposed to in-person transactions. Consumers cited their desire for quick and secure remittance capabilities and built-in confirmation that the funds were received as prime reasons for using digital payments.

Concerns Around Speed and Fraud

Although there’s been an acceleration over the years, serious concerns around cross-border payments remain. Consumers still see them as slower and harder to use than domestic payment methods. Specifically, 52% of consumers said their cross-border payments tend to be slower as compared to a domestic payment, and 43% were less confident making a cross-border payment.

Fraud is also a concern. Although consumers are more likely to say they have been victims of domestic payment fraud, four in ten of those surveyed consider cross-border payment fraud to be the bigger risk.

The most important considerations for these consumers when choosing an online payment provider include:

• Delivers funds in 24 hours or less (cited by 43% of respondents)
• Keeps the transaction, and my personal and financial information, secure (40%)
• Provides confirmation that funds were received (39%)
• Enables me to send funds via mobile app (35%)
• Enables me to track the status of the transfer and when it will arrive (33%)

The Mastercard survey also included small and medium-sized enterprises (SMEs) who pay suppliers or service providers in other countries. Of the SMEs surveyed, 61% said they are relying on more international suppliers than they were 12 months ago. But one-third report having to deal with failed or late cross-border payments, damaging their relationships with critical suppliers.

The post Despite Concerns, Cross-Border Payments to Top $800 Billion in 2023 appeared first on PaymentsJournal.

Alipay+ is continuing to expand its cross-border efforts, this time teaming up with LankaPay to improve cross-border digital payments for travelers.

Starting next year, digital wallet users in select Asian countries—including the Philippines, Singapore, South Korea, Thailand, and Hong Kong SAR—will be able to use cashless payments when traveling to Sri Lanka. Consumers will have the ability to make payments at more than 400,000 LankaQR merchants throughout the region.

Similarly, Sri Lankan travelers will be able to use their LankaQR-enabled apps to scan and purchase goods at Alipay+ merchants worldwide.

“Alipay+ continues to accelerate the shift towards digital travel in more regions through our integrations with national standardized QR codes, this time in Sri Lanka with LankaPay,” Dr. Cherry Huang, General Manager of Alipay+ Offline Merchant Services, Ant Group, said in a prepared statement.

She added: “As global travel recovers, we’ve noticed a shift in travel preferences, including travelers’ heightened expectations of how digital solutions should enhance their travel experience and greater interest in visiting previously less-explored destinations. That’s why we’re really excited at how our partnership with LankaPay will allow tourists to explore the wonders of Sri Lanka more easily, while also helping them discover and pay more conveniently at local merchants, which drives growth opportunities for local businesses.”

“The partnership between AliPay+ and LankaPay will help drive digital payment adoption among consumers and businesses in Sri Lanka and other Asian markets,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “National standardized QR codes like LankaQR, help facilitate interoperability, especially with cross-border digital payments. These types of collaboration make it easier for consumers to use the same mobile wallet apps at home and abroad, and for retailers to accept digital payments for local and visiting customers.”   

Alipay Continues to Leverage Uptick in Travel

Alipay has been on a mission to expand its global presence, taking advantage of the surge in travel. Today, travelers want the same seamless payment experience they enjoy at home—and because digital wallet adoption is higher than ever—more fintech solution providers have been working to meet consumer needs and ensure they’re able to transact regardless of where they are.

Last month, Alipay partnered with PayNet to boost cross-border payment acceptance throughout Malaysia’s 1.8 million merchants. By 2024, all Malaysian e-wallets under PayNet will be accepted by Alipay+ merchants’ global network.

And similar to its partnership with LankaPay, Alipay+ joined forces with South Korea’s ZeroPay in September, to facilitate cross-border payments for tourists from China and Southeast Asia.

The post Alipay+ and LankaPay Enable Cross-Border Payments in Sri Lanka appeared first on PaymentsJournal.

Oversea-Chinese Banking Corporation (OCBC) is letting consumers in Singapore conduct cross-border transactions through an Alipay+ integration.

An Influx in Cross-Border Transactions

Via the OCBC app, consumers in Singapore are now able to scan and pay at Alipay+ merchants in Malaysia and South Korea. And as of Sept. 22, the service will be available to consumers in Mainland China.

According to OCBC, the timing of its expansion “coincides with the start of the 19th Asian Games in Hangzhou, and when travel to and from Mainland China is expected to ramp up, especially given the recent resumption of the 15-day visa-free entry for Singaporeans and the Chinese government’s elimination of the need for a pre-departure Covid-19 antigen test.”

As more consumers travel the globe, the ability to pay for goods and services via their preferred method is becoming ever more important. OCBC is seeing this shift and acting accordingly.

One notable feature of its integration with Alipay+ is that payments are made directly from the customer’s OCBC Singapore bank account versus having to deal with any third-party apps.

Rapid Payment Transformation

AsiaPac continues to lead the way in instant payments, and while these networks represent regional schemes, they offer an excellent model for how other regions of the world should look to expand, says Albert Bodine, Head of Commercial and Enterprise Payments at Javelin Strategy & Research. 

“These regional schemes also are establishing a framework to follow for what will eventually become a global instant payments rail,” he said.

In the last year alone, OCBC has established cross-border payment linkages with Malaysia’s DuitNow QR and Thailand’s PromptPay QR, facilitating peer-to-merchant transactions. This demonstrates OCBC’s commitment to embracing fintech innovations and extending its reach across Asia. Future markets include Japan, Hong Kong, and Macao.

OCBC’s partnership with Alipay+ underscores the evolving landscape of fintech and cryptocurrency adoption in the region, where traditional banks are collaborating with digital innovators to offer customers a more efficient and convenient way to transact globally.

The post OCBC’s Unlocks Seamless Cross-Border Payments Via Alipay+ appeared first on PaymentsJournal.

China’s UnionPay International (UPI) is ramping up its cross-border efforts by enabling merchants in the country to now accept 170 international wallets.

UPI’s recent announcement is in line with its goal to facilitate network interconnection and interoperability. This move aims to provide more convenience to consumers traveling to China by allowing them to use the payment options they’re familiar with. For example, residents of Hong Kong and Macao SAR can use wallets including BoC Pay, Octopus card, and the UnionPay App.

Meanwhile, users of Thailand’s K PLUS and South Korea’s NaverPay can pay for goods by scanning the UnionPay QR codes at the point-of-sale.

Global Partnerships Are Driving Rapid Transformation

Cross-border payments are gaining traction worldwide. There have been several partnerships this year where organizations have expanded their cross-border initiatives, particularly targeting travelers.

Earlier this month, Alipay + and Payment Networks Malaysia (PayNet) announced that travelers to Malaysia can now make digital payments through major e-wallets, including TrueMoney, Kakao Pay, and AlipayHK. The partnership will have a significant impact across the region, with cross-border payment acceptance expanding to Malaysia’s 1.8 million merchants.

Similarly, Ant Group recently teamed up with an electronic wallet provider, Korea Easy Payment Foundation, in South Korea to offer cross-border payments to tourists from China and Southeast Asia. Visitors just need to use any of the six digital payment apps within the Alipay+ network to pay at shops and restaurants and scan the ZeroPay QR codes when they’re at check out.

By and large, these ongoing endeavors are addressing pain points that many travelers face when entering a new country—not being able to pay for goods via their preferred payment. Previously in China, it was impossible for tourists to make payments without a Chinese bank account. And it was only until this summer that foreign travelers were able to link their foreign credit cards to WeChat or AliPay.

The post UPI Facilitates Cross-Border Payments for Travelers appeared first on PaymentsJournal.

Swift and Wise are teaming up to offer financial institutions and their customers more cross-border payment options.

Via the partnership, financial institutions can transmit Swift payment messages to the Wise Platform via its new Correspondent Services solution.

According to Swift, banks and other major enterprises that leverage its platform won’t need to worry about dealing with a new interface, but rather, will see the existing infrastructure that they’re familiar with.

The Wise Platform will also leverage several of Swift’s tools, including cloud and API connectivity, as well as Payment Pre-Validation.

“This is a very interesting play amidst the major card schemes starting to offer cross-border options that circumvent traditional wire rails and correspondent banking,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “2024 is going to be a year to watch as new payments rails have entered the market and traditional ones are having to adapt and evolve to stay relevant.”

Banks Must Not Drop the Ball with Cross-Border Payments

When it comes to modernizing their legacy systems, many banks are still lagging behind. With emerging technologies entering the market at a rapid pace—and more customers demanding instant, secure, and low-cost payments—banks are feeling the pressure to innovate. Cross-border payments can help them do so. Last year, global remittances were projected to reach $974 billion, and we expect growth to continue to rise.

It’s important to note, however, the movement of funds internationally is not so straightforward. Organizations must contend with both regulatory and compliance requirements when it comes to sending and receiving money, depending on the region.

When it comes to getting ahead of the innovation curve, partnerships with industry specialists will be a game changer. That’s why the collaboration between Swift and Wise is a beneficial one, as this solution brings faster, seamless, and secure payments, without having to build a major technological solution from scratch.

The post Swift and Wise Partner on Global Cross-Border Payment Efforts appeared first on PaymentsJournal.

Ant Group, the Chinese fintech giant behind Alipay, has teamed up with an electronic wallet operator in South Korea to offer cross-border payments to tourists from China and Southeast Asia, according to the South China Morning Post. The move is part of Ant Group’s strategy to grow its overseas presence and tap into the recovery of travel and tourism amid the pandemic.

From Friday, visitors using any of the six digital payments apps in the Alipay+ network, which includes the mainland and Hong Kong versions of Alipay, can pay at shops and restaurants in South Korea by scanning ZeroPay QR codes at the checkout. ZeroPay is a QR-code-based payments service launched by the Seoul city government to help small businesses avoid settlement fees.

Alipay+, a suite of global cross-border digital payment and marketing services, is intended to work like a middleman, enabling local businesses to process a wide range of digital wallets from other countries. It is also a way for Ant Group to expand its footprint in Asia without obtaining local licenses or setting up joint ventures.

The Alipay-ZeroPay partnership comes as travel and tourism rebound globally, with China among the popular travel destinations that are likely to benefit from this trend.

China has become dominated by digital payments, and as was reported in PaymentsJournal, this made it challenging for tourists who did not have Chinese bank accounts. That’s because, until this summer, it was impossible to link foreign credit cards to WeChat or Alipay. Travel to China by foreigners was scant during the COVID-19 pandemic, so this was not a huge problem. But as China opens up to more tourists, it wants to make it easier for people to pay for things. This recent cross-border initiative fits neatly into that approach.

The cross-border payments market is becoming increasingly competitive, as fintech players and traditional financial institutions vie for shares of the growing demand for seamless and secure transactions across borders. Ant Group’s Alipay+ network is one of the leading players in this space, leveraging its huge user base and extensive merchant network in China and Southeast Asia.

The post Alipay+ Expands in South Korea to Tap Into Tourism Rebound appeared first on PaymentsJournal.

The signing of a connected regional payment system memorandum of understanding has enabled Vietnam to join a cross-border payment system service. It will join the Philippines, Singapore, Thailand, Malaysia, and Indonesia. The purpose of the initiative is to facilitate fast, affordable, and transparent cross-border payments for consumers and businesses across the ASEAN region.

The countries not only will work to connect their payment systems to boost trade and remittances but also will also develop a QR code system to perform retail transactions.

“I believe this cooperation provides equal benefits for all involved countries,” Deputy Governor of the State Bank of Vietnam Thanh Ha Pham said in a prepared statement.  “It creates an easy, affordable, and reliable payment system that can drive economic growth.”

ASEAN: The Path to a More Integrated Economy

The fostering of a more comprehensive financial ecosystem within Southeast Asia has been in the works for some time now.

A cross-border payment system was launched last month, allowing residents from Singapore, Thailand, Malaysia, and Indonesia to make payments for goods and services in each other’s countries by using this system.

This regional connectivity will also reduce the dependence on the U.S. dollar for all cross-border transactions, specifically between businesses. The strength of the U.S. dollar has contributed to the weakening of ASEAN currencies, adversely affecting the economies.

Earlier this year also saw the development of a cross-border QR payment linkage between Indonesia and Malaysia. This is in line with the Bank of Indonesia’s plan to develop open banking and a financial market infrastructure.

Another QR payment linkage was established, this time between Singapore and Malaysia, increasing cross-border commerce as well as helping small businesses widen their customer base.

By the end of 2023, and as part of the next phase, regulators in Singapore and Malaysia hope to facilitate real-time fund transfers through the recipient’s mobile phone number.

With so many still underbanked and unbanked in the region, these efforts will move the needle forward in establishing further financial inclusivity.

The post Vietnam Joins ASEAN Cross-Border Regional Payment Cooperation appeared first on PaymentsJournal.

Paysend is rolling out an ad campaign to solidify itself as a leading money transfer service among the Hispanic community.  

The campaign will include a mix of traditional and digital advertising, including commercials, radio advertising, as well as podcast opportunities—all in Spanish, according to Paysend’s press release.

In an effort to stand out among competitors, Paysend is not charging a transfer fee—at least not during the initial launch—which typically runs between $3 and $10. But as the press release pointed out, Paysend is hoping to capture a considerable slice of the remittance market.

Targeting the Hispanic market is a strategic move for the company. According to the Pew Research Center, the U.S. Hispanic population surpassed 60 million in 2021, making it a powerful demographic force with a strong commitment to sending money to family and loved ones.

“Paysend’s marketing campaign portrays sending remittances and cross-border payments as an easy, convenient, and positive experience,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “With ads in their native language, a Hispanic cast, and more Spanish speaking customer service staff, Hispanic customers can relate better and feel more comfortable sending money to their loved ones back home. I recently had to make an international P2P payment and realized it’s not as simple and inexpensive as sending money to a friend within the U.S.”

Remittances Are on the Rise

Cross-border payments are increasing worldwide and the need for solutions to make these payments faster and less costly is becoming more important. The first focus for cross-border payment providers was to improve the user experience for P2P (Person to Person) transactions, but over time, this has now expanded to cross-border payments for B2B (Business to Business) solutions.

This was the focal point of discussion in a Javelin report released last year, which explored the latest developments around cross-border B2B payments and delved into how various players— including central banks, fintechs, banks, processors, and networks—are working together to continuously improve on cross-border payment solutions, especially within the B2B market.

On that note, Singapore and India recently established a link between their respective real-time payment schemes which facilitate instant mobile phone transfers between the two countries. This was not Singapore’s first foray into cross-border transactions as the country previously developed a similar solution with Thailand and Malaysia.

The Monetary Authority of Singapore and Bank Negara of Malaysia also developed a cross-border QR code payment link which facilitates in-person payments by scanning the QR code on display by merchants.

The post Paysend Launches Advertising Campaign to Reach Hispanic Market appeared first on PaymentsJournal.

In preparation for the 2023 Asian Games, Ant Group is increasing cross-border payment options for international travelers.

With the support of the People’s Bank of China, and in collaboration with NetsUnion Clearing Corporation, consumers traveling to see the Asian Games will have the ability to use their own e-wallets by leveraging Alipay+. The first group of e-wallets will be accepted from Thailand, Malaysia, Macao, and Hong Kong, with additional overseas e-wallet acceptance to come soon.

International travelers will have the option to attach their international credit cards from major issuers into the Alipay app in order to make their purchases.

Alipay will also work closely with the Asian Games to facilitate travel and ticketing services, sustainability efforts, and digital payments.

“The Ant Group-Asian Games partnership makes it easier and more convenient for international sports fans and visitors to pay for purchases with the same mobile wallets and digital payments that they’re used to using back home,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “It’s exciting to see new cross-border payment options like Alipay+ and ASEAN’s digital payment system that allows residents in Indonesia, Malaysia, Singapore, and Thailand to pay for goods and services in local currencies using a QR code. These cross-border payment solutions are beneficial for tourism, international trade settlement, investment, and remittances.”

Cross-Border Transactions Are Gaining Ground

Cross-border payments are taking the financial ecosystem by storm, providing both businesses and consumers a way to send payments quickly, safely, and efficiently. With the rise of e-commerce, consumers and businesses are transacting internationally as well.

A new cross-border payment system was recently formed between members of the Association of Southeast Asian Nations (ASEAN), which includes the Philippines, Singapore, Indonesia, Thailand, and Malaysia. This initiative was formed to establish a more complete financial ecosystem in the Southeast Asian region. Businesses within these regions are hoping to rely less on the U.S. dollar for cross-border payments, particularly as it has affected them negatively due to its strength.

Facilitating and streamlining cross-border payments has been in the works for some time now. Singapore and Malaysia also developed a cross-border QR code payment linkage. Financial institutions will now be able to make payments by scanning NETS QR and Duit Now QR codes, enabling in-person payments. This can be done by scanning these QR codes displayed by merchants and for cross-border e-commerce transactions online.

The post Ant Group Expands Cross-Border Payments Efforts via Asian Games Collaboration appeared first on PaymentsJournal.

More businesses worldwide are looking to expand their international efforts as the surge in cross-border services grows. Recent findings from Stripe revealed that two-thirds of businesses plan to expand their operations in untapped markets within the next two years, in an effort to diversify their earnings against economic uncertainties.  

Roughly half of businesses surveyed also indicated that it’s much easier to operate an international business today than it was five years prior. 

According to Stripe, businesses are revving up to sell internationally for a variety of reasons. In addition to benefiting from digital trade in untapped markets, there’s also high interest among consumers. In fact, 68% of consumers surveyed said they were willing to purchase physical goods from a company that’s based elsewhere. And slightly fewer (59%) said the same about purchasing cross-border digital services. 

Technology has helped businesses streamline their cross-border operations, in addition to help them drive up sales.  

“There has been a proliferation of digital rails and messaging schemes for making payments, receiving payments, clearing and settling on a global basis,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research.  

“A small business that previously might have been limited to selling in her local geography is now a smartphone away from selling all over the world. It’s also important to note the potential for fiat-backed cryptocurrency, how those instruments extend even further the reach of global trade and how they provide reach to non-banked businesses. That is an enormous untapped market that digitization is going to allow us to target,” he said. 

Looking Ahead 

Digital has played a substantial role in enabling goods and services to be traded globally. It has also given birth to new business models such as subscription services, online marketplaces, and digital creators who sell their content online.  

The key to scaling these business models is to ensure that the online payment platforms are convenient and secure, as this solidifies trust and can build long-lasting customer relationships.  

The post A Rise in Digital Trade Prompts More Businesses to Expand Abroad  appeared first on PaymentsJournal.

Residents in Indonesia, Singapore, Thailand, and Malaysia can now make payments for goods and services in each other’s countries via a new cross-border payments system. According to CNBC, the recent launch comes months after a memorandum of understanding was signed by members from the ASEAN (Association of Southeast Asian Nations—which includes five Southeast Asian central banks: Malaysia, Thailand, Indonesia, Singapore, and the Philippines. 

The goal is to facilitate and support cross-border trade settlements, remittance, investment, and other economic processes, fostering a more comprehensive financial ecosystem with the Southeast Asian region. 

By establishing regional connectivity, ASEAN is working to reduce reliance on outside currencies—such as the U.S. dollar—to conduct cross-border transactions, especially between businesses. The U.S. dollar’s strength in the last few years has debilitated ASEAN currencies, which negatively impacts these economies, as most of these member countries are food and net energy importers.  

“The system will forgo the U.S. dollar or the Chinese renminbi as intermediary,” Nico Han, a Southeast Asia analyst at Diplomat Risk Intelligence, the consulting and analysis division of current affairs magazine The Diplomat told CNBC. 

At the Forefront of Cross-Border Payments 

The move to streamline cross-border payments between regions in Southeast Asian has been in the works for a while. In April, we covered how the Monetary Authority of Singapore and Bank Negara of Malaysia partnered to develop a new cross-border QR code payment linkage. This signaled a significant step forward to facilitating smoother payments between the countries.  

And this recent push by ASEAN is another clear step forward to a more financially inclusive environment.  

“While a regional play, ASEAN is arguably leading the way for modern-day cross border payments,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, who covered ASEAN in his upcoming impact note, Commercial Strategies and the Need for Speed.   

“Singapore, Indonesia, Malaysia and Thailand are tying together a very sophisticated, high velocity platform allowing individuals and businesses in those countries to pay and be paid by the same in any of those four countries,” he said. “Interestingly, the card schemes have fired one over the bow suggesting that their existing payments rail is already there and exceeds the capabilities of the ASEAN solution.” 

The post ASEAN Is an Emerging Leader in Cross-Border Payments  appeared first on PaymentsJournal.

In an increasingly interconnected world, the demand for low-value cross-border payments has reached unprecedented levels. Swift, a global provider of secure financial messaging services, conducted a comprehensive study to shed light on the key factors influencing the market. The study, which polled 7,000 consumers and small businesses, shed light on the significance of security, transparency, and the impact of hidden fees.

According to Swift, security and transparency are of utmost importance to both consumers and small businesses when selecting a payment provider. Security emerged as the primary driver for customers, followed by trust (for consumers) and transparency of fees (for SMEs).

Customers dislike hidden fees even more than payments not arriving at all. In fact, roughly 70% of respondents said they would not use a payment provider again if they encountered hidden fees—likely because hidden fees make people feel like they have been cheated. To thrive in this market, payment providers should prioritize transparent pricing structures and upfront disclosure of fees.

The research also highlighted the dominance of traditional banks in the cross-border payments landscape, with 87% of SMEs and 81% of consumers turning to banks as their primary choice for international payments. However, the survey also revealed that customers are open to exploring alternative providers if they can match the offerings of banks or other fintech players.

While speed is valued by customers, the study found that it should not come at the expense of security and transparency. Many consumers and SMEs expect international payments to be completed within one hour or less. Although only a minority currently expects instant payments, Swift suggests that these expectations are likely to rise as more domestic market infrastructures adopt instant payment systems. The survey also uncovered notable variations in customer preferences across different countries. Customers in Saudi Arabia and Australia express heightened concern about the impact of foreign exchange conversion, while German SMEs place particular importance on the integration of payment processes into existing tools, such as accounting software.

The post Swift Study Unveils Key Factors SMEs and Consumers Value in Cross-Border Payments appeared first on PaymentsJournal.

Banks have long been the main facilitators of international fund transfers. For decades, their wire transfer systems and correspondent banking relationships were the primary mode of transit for cross-border remittances. However, recent technological advances and regulatory changes have enabled financial challengers to rise through the ranks quickly and become the primary source for consumers to send money abroad promptly. As global remittances are projected to surge to $974 billion in 2022, it is no surprise that more organizations are looking at remittance as a substantial revenue stream. 

But why have traditional financial institutions seemingly relinquished leadership within the field, leaving the door open for non-traditional financial intermediaries to meet consumers’ needs? Similarly, will banks risk losing additional revenue opportunities with cross-border payments due to outdated infrastructure?

A recent webinar discussion between Hal Ramakers, SVP of Global Solutions at Brightwell, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, examined:

• The explosive rise in demand for cross-border payments
• The complexity of moving funds across borders
• Solutions that support banks’ expansion into the global payments industry

The rising demand for digital cross-border remittances

The demand for digital cross-border remittances is increasing in tandem with globalism. Migrant workers need to send money back to their home countries to support their families, while businesses are outsourcing and expanding internationally, necessitating the need to pay contractors and supply chain vendors across borders. Additionally, many industries, such as the maritime industry, rely on foreign workers. In the cruise industry, for example, more than 95% of workers reside outside the U.S., requiring cruise lines to pay employees through multiple payment rails.

“As we look at the data, the peer-to-peer payments market makes up 2% of the volume of money moved globally, followed by 5% for consumer-to-business, and 7.9% for business-to-consumer,” Ramakers said. “But the biggest opportunity for cross-border payments sits within the business-to-business market, where checks and wire transfers are still widely used.”

Simultaneously, we’ve hit an inflection point where consumers expect to access services digitally. Banking customers want to conduct transactions within the same mobile apps they receive their paycheck.

“Providing an embedded solution to consumers where they are already conducting their business has intrinsic value,” said Ramakers. “An embedded solution reduces complexity and makes the payment process more seamless by eliminating the need to provide payment details elsewhere. Customers may even be willing to pay extra for a seamless experience.”

Complexity remains around cross-border transactions

Many U.S. consumers who’ve adopted popular apps like Zelle and Venmo may be left wondering why similar solutions don’t exist for cross-border transactions. After all, despite the fact that there are over 4,500 commercial banks in the U.S., the back-end infrastructure supports real-time domestic transfers.

But things get hairy quickly when crossing borders and currencies. A myriad of varying regulatory and compliance requirements from sending and receiving regions contribute to often insurmountable challenges.

“Crossing borders and jurisdictions requires specialized expertise to ensure the secure and efficient movement of funds,” Riley said. According to a report by JP Morgan, the pandemic era saw a 600% increase in cybercrime, making money transfers a genuine risk.

Improve profit margins by implementing an embedded global payments solution

Despite the significant challenges, implementing a cross-border payment solution can yield material dividends.  In contrast to commoditized payment transactions, the intentional nature of the average cross-border transaction carries positive price sensitivity. It’s also worth noting that 75% of businesses surveyed in a recent Javelin study were dissatisfied with their current cross-border payment options.

By partnering with an experienced provider, financial institutions can side-step the complexity challenges and get a highly sought after cross-border solution in market quickly.

“Brightwell is unique because we have cross-border payments expertise built into our core. We saw the opportunity to build a platform that allows other organizations to integrate real-time payments with ReadyRemit,” said Ramakers.

ReadyRemit by Brightwell is a comprehensive remittance solution which simplifies implementing and managing a global payments program. Its full-scale, full-service, fully compliant remittance engine enables banks to enter or expand into the global payments industry — without the high costs associated with forming partnerships, building infrastructure, and navigating complex compliance and regulatory requirements.

The post How Banks Can Reclaim Their Leadership in Cross-Border Transactions appeared first on PaymentsJournal.

The International Monetary Fund (IMF) recently released a note exploring how new platforms for central bank digital currencies (CBDCs) can improve cross-border payments. While some cross-border payments are efficient, many options are expensive, slow, and opaque. The authors, Tobias Adrian and Tommaso Mancini-Griffoli, introduce cross-border payment and contracting (XC) platforms as a potential solution.

According to IMF, these platforms would act as trusted digital town squares, where both consumers and businesses can transact under local rules and laws—and would use a single ledger to exchange tokenized assets. The platforms would be designed to be compatible with existing payment systems, and would not require countries to adopt a central bank digital currency.

Streamlining cross-border transactions has the potential to boost global trade, economic growth, and financial inclusion. Small and medium-sized enterprises, in particular, stand to benefit from reduced costs and increased access to global markets. IMF’s blueprint aligns with the ongoing digitalization of the financial sector, providing a framework for countries to leverage the advantages of digital currencies in a regulated environment.

The rapid growth of fintech companies, coupled with the increasing popularity of cryptocurrencies, has prompted central banks and financial institutions to explore the potential of CBDCs. These digital currencies, backed by central banks, offer the benefits of cryptocurrencies, such as faster transactions and increased transparency, while retaining the stability and regulatory oversight associated with traditional fiat currencies.

While the IMF’s proposal aligns with the digitization trend, it represents a departure from the decentralized nature of cryptocurrencies. The envisioned global CBDC platform, while efficient and cost-effective, does not fulfill the aspirations of crypto enthusiasts seeking a decentralized financial system. But it may provide many benefits, without much of the risk, that has plagued cryptocurrency exchanges.

“Cross-border payments remains a challenge for both consumers and businesses. It remains costly and slow,” said James Wester, Co-Head of Payments at Javelin Strategy & Research. “Distributed ledgers, stablecoins, and crypto are all being applied to solving the problem, but there are still issues of anti-money laundering and anti-terrorist funding requirements.”

“The idea of building a ledger that is AML/ATF compliant, effectively co-opting the benefits of distributed ledgers is an interesting approach, but the issue then becomes whether or not it actually solves the current cost and settlement problems,” he added.

The post IMF Reveals Plan for Cross-Border CBDCs appeared first on PaymentsJournal.

Cross-border payments continue to face challenges such as low speed, high costs, limited access, and a lack of transparency. The G20 has called on the Financial Stability Board (FSB) to create a roadmap to improve them.  

In response to this program, The Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) has requested that key players in the market join a panel to harmonize API protocols to enhance these international payments.  

G20’s Goal For Improving Cross-Border Payments

Improving cross-border payments has been an important issue for many years. The G20 cross-border payments roadmap features a high-level plan that allows for flexibility, regardless of where countries stand and which starting points they are in their payment system arrangements. Also, based on how the goals are met, these milestones can be adapted year over year.  

The roadmap also includes a commitment to a joint public and private sector vision in order to enhance these international payments. It features steps to organize oversight, supervisory, and regulatory frameworks. Furthermore, to support the requirements of the cross-border payment market, it aims for improvements in current payment infrastructures.  

APIs Are a Priority 

CPMI has invited important industry associations, financial infrastructures, and central banks to appoint API experts for this new panel. To qualify for a nomination, candidates must have strong technical knowledge and experience in developing APIs, open banking, and cross-border payments. They must also be familiar with API standardization initiatives at the jurisdictional or multilateral level.  

APIs are equipped to facilitate faster and more efficient cross-border payments as they reduce manual intervention and support a more timely data exchange across the payment chain. Currently, APIs are being used for investigations, message repairs, compliance screening, and account validation.  

The harmonization of APIs has become a priority due to its ability to offer more accessible, transparent, affordable, and faster cross-border payments.  

The panel will have 20 members and will meet virtually on a quarterly basis.  

The post Using APIs to Enhance Cross-Border Payments  appeared first on PaymentsJournal.

Filipino workers who are living in Canada and Vietnam have a new way of passing remittances, one that leverages bitcoin’s Lightning Network.

Neutronpay, a Canada-based digital payments platform, has announced a partnership with Pouch.ph to provide fast, cost-effective cross-border payments from Filipinos living abroad to family members back home.

“This is a long overdue partnership between Neutronpay and Pouch, and I am very excited and pleased to share we now have the ability for the Filipino community in Canada and Vietnam to remit home faster, better, and cheaper than traditional banking rails,” Albert Buu, Neutronpay’s founder and CEO, said in a prepared statement. “With the Lightning Network, families can now send more of their hard-earned money home instantly to the Philippines rather than losing a large portion to high fees with regular banking methods today.”p

How the Arrangement Works

Through the Neutronpay-Pouch partnership, originating funds—either the Canadian dollar or the Vietnamese dong, depending on where the Filipino expat is located—are converted into bitcoin through the Lightning Network, then output to the recipient in the Philippines in the form of the Filipino peso.

Javelin Strategy & Research

Remittances are a major force in the Filipino economy. The country’s central bank reported in February that cash remittances hit $36.14 billion in 2022, a rise of 3.6%. The total was 8.9% of the country’s gross domestic product.

Overseas foreign workers—OFWs—from the Philippines numbered 1.8 million in 2020, according to research by Statista.

“For the longest time, overseas Filipinos had limited options when it came to sending money back home, relying mainly on traditional banks and money transfer agents that could be both inconvenient and costly,” Ethan Rose, CEO of Pouch, said in the Neutronpay release. “Working with Neutronpay is consistent with our endeavor to empower OFWs to easily send money to their families and loved ones.”

Expanding the Role of Cryptocurrencies

Joel Hugentobler, an analyst in the Javelin Strategy & Research Cryptocurrency practice, noted that the technology used in the Neutronpay-Pouch partnership represents yet another way cryptocurrencies have expanded the field of payments for consumers.

“The continuing increase in interest for people to use the Lightning Network to transfer fiat currencies further strengthens bitcoin as it becomes a more liquid asset that trades in an increased number of currencies,” he said. “This method of payments using the Lightning Network separates the payment attribute from bitcoin the volatile asset.”

Hugentobler also drew a contrast between such advancements in the rest of the world and the current regulatory stance of the United States.

“Countries that remain open and neutral to cryptocurrencies have seen and will continue to see the benefits, such as cheaper payments that are near-instantaneous, and remittances,” he said. “The United States benefited greatly from the internet boom and the following decades because the government introduced a neutral regulatory framework that encouraged innovation. Unless they use a similar approach to the digital asset ecosystem, other countries will continue to greatly benefit, particularly in times of higher rates and fiat currency debasement.”

The post Neutronpay, Pouch Team Up on Filipino Remittances from Canada, Vietnam appeared first on PaymentsJournal.

For businesses, regardless of size, not all payments partners are equal. Finding the right partner to manage payments can be a key to improving cash flow and simplifying the payments experience, as well as making cross-border payment a piece of cake.

In a PaymentsJournal podcast, Rupert French, Product Lead at Worldpay from FIS, and Daniel Keyes, Head of Merchant Services at Javelin Strategy & Research, discussed what businesses can expect from a high-quality payments partner and how they can differentiate the best from the rest.

Differentiators in Payments Partners

Businesses barely have enough time to manage the core functions of providing products and services, so partnering with a third party to manage and optimize their payments is a wise move. It’s an opportunity to outsource a level of complexity to a third party and make sure that there’s as little friction as possible in payments.

“Your payments partner should be specializing in fund flow and simplifying the payments experience,” French said. “And there’s a huge amount of trust that business offloads to their payments partner, which has to be respected. We’re empowered with managing the primary revenue source in most cases for a lot of small, large, and medium businesses.”

A payments partner, such as Worldpay from FIS, can help with transaction data and cash liquidity in a bank account. As French notes, those two are key drivers behind the success or failure of businesses, particularly smaller ones.

In particular, improved transaction data enables a high percentage of payment acceptance with lower risk.

Payment Flexibility is Prime for Gig Economy

Gig workers often have to wait to get paid, sometimes as long as weeks after they’ve completed their work. The ability to pay gig workers any time, particularly on the weekend, is an important differentiator small businesses should look for in a payments partner.

“The possible competitive advantage presented by being able to pay those gig economy workers on non-business days with funds from online commerce could be enough of a competitive advantage to help keep that business above the waterline,” French said. “For example, consider competition for takeaway drivers on a Friday night. If you’re able to guarantee that you’ve got cash in your bank account to be able to pay that delivery right driver on the Saturday morning or on Sunday morning, that could help you keep that driver.”

Another important piece is the accuracy of data. “Being able to trust your payments partner to provide you not only the funds but also the data—which you need to be able to reconcile your prior days’ activity services requested or services provided—is absolutely critical,” French said.  

Cross-Border Payments Optimization is the New Standard

For small businesses that are international and use international gig workers, moving funds across borders at the lowest possible cost and at the highest possible speed can be crucial.

But cross-border payments can be complex and a headache to deal with.

“The rails operated by the banks invariably have cut-off times, depending on the geographies in which you operate,” French said. “There can be significant layers of regulatory control which can further complicate payment movement. What your acquirer should be aspiring to do is operating on the best possible domestic schedules on clearing card payments.”

For many small to medium-sized businesses, expanding into new markets abroad can be daunting, and not just because of learning the new market environment. Sorting out the currency conversions and payments infrastructure can be devilishly complex, and this causes many businesses to shy away. But this can be ameliorated by the right payments partner.

“By leveraging the power of your acquirer to access markets that would otherwise be fabulously complex to access, small to medium-sized business can try out explorative initiatives abroad,” French said. “So with a great payments partner, you can trial product sales within a market that you don’t want to enter fully, to engage real-world market appetite. Based on that, you can then better inform the level of investment you want to put to move into that new market.”

All of this falls under the rubric of value-added services, which Keyes said is important in differentiating payments providers.

“A lot of providers can offer other varying interfaces and so on,” Keyes said. “But when you add more value-added services, you better meet the needs of a merchant and you can really stand out from other payment providers. These value-added services are increasingly necessary for businesses and merchants to survive and succeed.

“As alternative payments became more popular, these value-added services become less of a value added (and) more of a requirement.”

French noted that just figuring out the payments aspect can be a huge task for cross-border businesses. This can distract business owners from focusing on the core aspects of their business.

“Removing the complexity of cross-border funds transfer and the regulations associated with it, to just enable our customers to really focus on what they care about, is really a motivating aspect of my own role,” French said.

In general, reach and breadth of services distinguish the haves from the have-nots among payments providers.

For reach, businesses should look at where the provider has customers or partners and how those align with the customers the business is interested in serving.

Depth refers to the depth of features offered by the provider. This could involve cross-border payments, as previously mentioned. Another popular one is the ability to advance funds based on a forecasted receivable due the following morning.

Overall, the outlook is bright for companies looking to expand abroad. By finding the right provider, they can lean on that payments expertise to get all of the infrastructure in line and have it ready to deploy when the company is ready to try out a new market.

The post Cross-Border Trade is a Cinch with the Right Payments Partner appeared first on PaymentsJournal.

Consumers in Indonesia and Malaysia can now make instant retail payments through a cross-border QR payment linkage launched by Bank Indonesia (BI) and Bank Negara Malaysia (BNM).

BI and BNM officially launched the effort earlier this week after piloting the initiative, which was first announced in Jan. 2022.

The cross-border QR payment linkage is in line with the G20 initiative to enhance cross-border payments and promote faster, cheaper, more transparent, and more inclusive cross-border payments. It’s also in line with Indonesia’s Payment System Blueprint 2025, which includes five “system visions” Bank Indonesia is working towards, such as open banking and financial market infrastructure.

The linkage between Malaysia and Indonesia complements a growing network of bilateral payment linkages within the Association of Southeast Asian Nations (ASEAN) that will contribute to further development of the region as a center of growth.

The QR payment linkage aims to strengthen the close economic ties between Indonesia and Malaysia, as well as expand markets for businesses and facilitate increased settlements in local currency. With international travel picking up, the payment linkage is expected to provide travelers with greater convenience, and ultimately, benefit the tourism and retail sector of both economies.

According to Bank Negara Malaysia Governor Ms. Nor Shamsiah Mohd Yunus:

“ASEAN is more connected now than ever. Many more users from Malaysia and Indonesia will benefit from a secure, more seamless and more efficient experience to make and receive cross-border payments. This in turn has significant potential to boost economic activities, including tourism spending in our two countries. The payment linkage will also help expand markets for some businesses and facilitate increased settlements in local currency, thereby improving financial outcomes. The QR payment linkage between Malaysia and Indonesia complements a growing network of bilateral payment linkages within ASEAN that will contribute towards a more vibrant ASEAN.”

The launch of the cross-border QR payment linkage between Indonesia and Malaysia could potentially inspire other countries in the region to follow suit. It is expected that more cross-border payment linkages will be established in the coming years, further contributing to the development of the payments industry and the region’s economy.

The post Indonesia and Malaysia Launch Cross-Border QR Payment Linkage appeared first on PaymentsJournal.

International receivables refer to the money owed by customers or clients who are based in a foreign country. This can be a challenge for businesses operating on a global scale as the collection process can be complex and time-consuming. It is essential for companies to have a solid understanding of the various regulations, laws, and cultural differences that can impact the process of collecting payments from international customers.

Barclays has partnered with leading B2B payments technology provider, TransferMate, to offer an international receivables solution for UK businesses. Barclay clients who operate with GBP (British Pound Sterling) are now able to invoice their customers in their clients’ currency, spanning more than 60 currencies and 67 countries.  

What’s more, clients will receive payment back into their GBP account, in the precise amount that was requested.  

More Accurate Receivables 

Although reaching global customers offers its fair share of opportunities, itI’s not without its challenges. Typically, cross-border payments that use cross-border wires can be expensive for buyers and sellers. Processing costs can also be substantial for the seller, and there are the constant fluctuations in foreign exchange rates, as well as other hidden fees.  

Through this partnership, Barclays and TransferMate will enable cross-border payments to go through a single integrated network, with transfers processed as a domestic payment. This translates into more accurate and cost-effective receivables for all relevant players within the payment chain. This is especially true for Barclay’s clients who operate internationally in GBP.

“This innovative solution can help Barclays customers reduce their transaction costs when receiving international payments, eliminate manual reconciliation, and always know the amount billed will be the amount received,” said Sinead Fitzmaurice, CEO of TransferMate, in a press release. “It’s another great example of how collaboration between banks and fintech’s can improve the customer experience and redefine how money is moved around the world.” 

Martin Runow, Global Head of Payments, FX and Digital at Barclays Transaction Bankingalso added:  

“From manufacturing and leisure to education and healthcare, our partnership with TransferMate will enable clients from numerous industries to offer a new payment method to their customers whilst achieving reconciliation benefits and reduced banking fees for their businesses.” 

The post Barclays Teams Up with TransferMate for Cost-Efficient International Receivables  appeared first on PaymentsJournal.

ISO 20022, a single standard approach to facilitate communication interoperability between financial institutions, their market infrastructures, as well as their end-users, has issued a deadline for both corporate bodies and financial institutions to get their systems ISO 20022-ready by November 2025.  

A survey conducted by Seeburger and Celent polled 211 banks and corporates globally to gauge where they currently stand in the process.  

Key Findings 

All payments must migrate from SWIFT MT to ISO 20022 as it is poised to enhance the quality of payments data, from end-to-end, thereby improving efficiency, compliance, and the overall customer experience.  

Given the many benefits of fully migrating into ISO 20022, the survey found that, out of the 11,000 global banks that are members of the SWIFT network, only 72% are projected to migrate to the new standard by the deadline. That accounts for 5,000 global banks that will not be ready. Missing this deadline could mean that existing products and services provided by banks could be rendered inoperable.  

What’s more, only 8% of banks worldwide believe that the entire industry will be 100% prepared by the deadline. Conversely, 56% of North American banks believe they will make the deadline. The area which demonstrated the most promise was the Asia-Pacific region, where 73% of banks expect to be ready by November 2025.  

Interestingly, those surveyed were fully aware that the migration to ISO 2002 would bring a host of benefits. Roughly 84% of respondents said they believed they would benefit, especially with AML and fraud prevention. And 33% said the additional data could be used to enhance corporate services.  

However, before banks can take advantage of these benefits, the new messaging format must be fully implemented. It is also contingent upon how the bank has addressed the migration, and if the corporate can create and process this data. If processes are not fully carried out, these aforementioned benefits may never be realized.  

Some corporates believed that their banks were not too keen on the migration itself. Some 15% of corporates with more than $15 billion in revenue also reported that they have received little information from their bank that a migration is taking place. 

The Bottom Line 

Although some corporates and financial institutions know the benefits of implementing ISO 20022, data shows that there is still a lack of knowledge. Or if there is knowledge, banks are not passing this vital information down to their corporate partners.  

The study also highlighted that over $2 trillion has been spent by corporates and banks collectively to invest in new technology to adapt to the new system. However, this has been dubbed more of a “fragmented, bare-minimum approach.” It will be interesting to see how both corporates and banks will navigate the new migration and the subsequent results of their approach. 

The post ISO 20022 Survey Reveals More Needs to Be Done Before Deadline  appeared first on PaymentsJournal.

Strike, a digital payments platform that uses Bitcoin’s Lightning Network, has announced its expansion into Guatemala to provide a low-cost and secure cross-border payment service to Latin America.

Many people in Latin America rely on remittances from abroad, and Strike is offering an alternative to traditional remittance providers by partnering with Osmo in Guatemala to enable transfers from U.S. dollars to local currency via Bitcoin.

This partnership contributes to expanding financial access in the country by allowing Osmo customers to cash out their Bitcoin balance at participating retail locations and use it to pay at more than 250 in-store locations and online merchants. The use of Bitcoin’s Lightning Network offers faster, cheaper, and more accessible digital payments to people globally, particularly in countries with a high number of unbanked individuals.

This latest effort is part of Strike’s push to expand into remittance markets around the world. To date, Strike has expanded to 11 countries, including the Philippines, Vietnam, and Nigeria.

Strike’s product is different from traditional remittances in several ways. The company’s digital payments are almost instantaneous, in contrast to traditional remittances, which can take several days or even weeks to complete.

Furthermore, Strike doesn’t rely on intermediaries like banks and money transfer operators, which can charge high fees for their services. Instead, it converts dollars into bitcoin, which is sent via the Lightning Network to a third-party partner operating in the recipient’s country. That partner then converts the bitcoin into local currency, which is sent directly to the recipient’s bank, wallet, or mobile money account. This way, the fees are significantly lower, making it a more affordable option for people who need to send money across borders.

Interestingly, Bitcoin is acting as an intermediary currency in this case, when the whole point of Bitcoin is to replace local currency. For example, Bitcoin was made the native currency of El Salvador, but so far it seems that is it has not caught on like intended. Nevertheless, use of Bitcoin as a gateway currency may in the end lead to its full adoption as a real currency.

The post Strike Expands its “Send Globally” Service to Latin America appeared first on PaymentsJournal.

To keep up with demand for global cross-border payments, Mastercard has launched a new tool that lets financial institutions set up international payments for their customers.

Via this effort, FIs will be able to offer customers international payments in more than 60 currencies across 100 markets.

In a press release, Alan Marquard, Executive Vice President of Transfer Solutions at Mastercard noted: “It’s our goal to provide choice, access, and transparency for payments across borders. Cross-Border Services Express levels the playing field and provides small and mid-tier banks, including credit unions and community banks, with the same international payments features regardless of their size and scale.”

More Flexibility in Payments

From sending money to families overseas to making international business transactions, the need to make international payments quickly and safely is more important than ever.

“Cross-border payment solutions that ride on card rails are a game changer,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “While there are still kinks that need to be worked out regarding FX transparency, acceptance and lading, the relative ease of payment versus other methods will move card-based toward the instrument of choice.”

Continued Efforts

Mastercard has been ramping up its cross-border payments efforts recently. In fact, just last month, Mastercard, PXP Financial, and Payall teamed up to “deliver safe, compliant and efficient cross-border payments and international money transfers.”

The partnership, similar to this recent launch of Cross-Border Services Express, focuses on providing more reliable and efficient ways to transfer and receive money.

And we expect to see continued partnerships such as this as the cross-border payments space continues to heat up, and more financial institutions aim to streamline the space.  

The post Mastercard Is Aiming to Make Cross-Border Payments More Efficient appeared first on PaymentsJournal.

Brexit has caused a myriad of problems for businesses in the UK. In fact, many organizations have—and are continuing—to adapt to this new and perplexing payments ecosystem. 

The Effect on the UK Payments Industry  

Over the last decade, the Payment Services Directive Two (PSD2) has been making headway, creating a “single competitive payments market for Europe.” This has helped ensure that payments made between the UK and EEA (European Economic Area) would be considered “domestic” and essentially require less burdensome payment data requirements. However, with the establishment of Brexit, the UK was cut off from this market, resulting in significant problems with the UK conducting business with the EU.  

Since Brexit, there have been some reforms made on the UK payments industry, particularly having to do with cross-border regulations. This has resulted in businesses having to follow stringent cross-border payment restrictions as well as overhauling their payment management, acceptance, processing, and reconciliation operations.  

Although some businesses have managed to execute this successfully, others have not been so lucky. As payment preferences differ by region, businesses must ensure that they are implementing the appropriate tools and tactics to boost authorization rates, customer satisfaction, as well as revenue.  

Also, under the Funds Transfer Regulation of the European Union, transferring money between the EU and the UK means that more information is required. Initially, only the payer and payee’s names and account numbers were required. With this new regulation, the dates and places of birth, customer identification numbers, official personal document numbers, and even addresses are now required.  

Business Must Remain Agile 

To address these challenges and offer solutions to thrive within this complex environment is to seek out more service integration. This is better than implementing a fragmented approach to seeking solutions that are limited to one specialty.  

Businesses should look beyond using solutions that can only facilitate NFC touchpoints or plastic cards, customers should be able to complete their purchases via an app.  

The number of mobile phone ownership continues to grow worldwide, along with mobile commerce.  This has led to more mobile payment methods such as digital wallets. As we move to a more digital space, it will be critical to make mobile payments accessible to widen customer reach.  

The post Navigating the New Payments Landscape Post-Brexit  appeared first on PaymentsJournal.

Cross-border payments have become increasingly more popular across corporations and individuals across the world. They provide an easy way for businesses to pay suppliers, customers and partners located in different countries faster and cheaper than ever before. There is a huge variety of use cases: business to business (B2B) transactions, business to consumer (B2C) commerce, consumer to business (C2B) applications, and person-to-person (P2P) transfers. Companies utilizing cross-border payment systems benefit from faster transactions while not being subjected to certain laws governing international transactions, such as currency exchange rate fluctuations. The special features that come with cross-border payments make them incredibly attractive in today’s global market environment.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Cross-Border B2B Payments: Continuous Improvement Underway

Top Cross-Border Payment Shares by Use Case

• 2% of the payments were person-to-person (P2P)
• 4% of the payments were consumer-to-business (C2B)
• 8% of the payments were business-to-consumer (B2C)
• 86% of the payments were business-to-business (B2B)

About Report

No other global payments innovation effort has garnered as much recent attention as cross-border payments, where improved user experiences have been a focal point for the financial services industry. While the early concern was around greater access and lower costs for these payments in person-to-person scenarios, the efforts naturally progressed into all aspects of the cross-border industry—the impacted use cases in the cross-border run across remittance, retail, disbursements, and wholesale scenarios.

This Javelin Strategy & Research report estimates the size of the cross-border commercial payments market across these defined individual use cases, reviews the traditional settlement methods, and discusses how innovation continues to improve the business-to-business (B2B) payments experience. Readers will understand the latest developments in how networks, processors, banks, fintechs, and central banks collaborate to substantially improve the delivery, with an emphasis on the B2B market segment, which is by far the most significant portion of these international value exchanges.

The post Top Cross-Border Payment Shares by Use Case appeared first on PaymentsJournal.

Cross-border payments are laden with challenges. Compliance, regulatory, and tax nuances are coupled with pricing complexity, cultural barriers, and fraud. As global instant-payment transaction volumes look to eclipse the 75 billion mark in 2023, it is critical that domestic rails look for ways to integrate with their foreign counterparts. There are more than 60 instant-payment networks worldwide, and few of them communicate seamlessly. Indeed, in the United States there are no published plans for even the two domestic rails, FedNow and RTP, to interoperate.

A Step in the Right Direction

The private sector has hit the market with cross-border solutions, and this is a vital step toward solving the puzzle of international payments, but the solutions, in some cases, may be closed-loop and/or may circumvent the primary instant-payment highways. Nations in the instant-payment game should take note of the memorandum of understanding on Cooperation in Regional Payment Connectivity that was signed between the central banks of Malaysia, Indonesia, Thailand, Philippines, and Singapore. Through this agreement, the ASEAN 5 countries—the Association of Southeast Asian Nations—will seek to connect their instant-payment rails through the Bank of International Settlement’s Nexus Project. The ASEAN 5 approach, at least on paper, is a model for the type of communication that should occur between influential countries in cross-border payments, at least regionally if not globally. As The Central Bank of the Philippines Governor Felipe M. Medalla stated in a recent seminar, as quoted by Business World, “Our vision is to be one with the ASEAN 5 to have cross-border payments.”

We will have to see how things progress as we get beyond the back-slapping phase and the real work of integration begins. We are still waiting for the Single Euro Payments Area (SEPA) to deliver on its promise of providing faster payments across the EU, and central banks, particularly those in the West, are not well known for sharing.

Are Real-Time Payments Really Real?

It is worth mentioning that nobody is exactly sure what the impact of instant payments will be. Will denizens of the RTP world be limited to DoorDash and Uber drivers looking for their instant fare and tip fix for the day, or will RTP truly become a meaningful new rail in the major payments landscape? Despite having the world’s largest economy, the United States ranks eighth, behind Nigeria and Thailand, in RTP volume overall and 33rd in transaction volume per capita, according to a finding by ACI Worldwide.

How will banks and card schemes react? Non-interest-bearing instruments are becoming more important each year for banks as loan revenues get squeezed, and ACH and wire fees are a significant source of those income streams. How will the banks position instant payments alongside those legacy rails? The card schemes have an ideal environment for providing global connectivity, but will they welcome the competition of another payment type?

Governments Must Lead

The gig economy is global, laptops have more range than battleships, and Greta in Germany wants to send her grandson in the United States a $20 birthday gift, now. The first step in building a globally interoperable instant-payments highway is for the leaders of the central banks to exercise a bit more outreach. Nobody is under the impression that a worldwide network is a short-term pursuit, but regional plays, like Nexus, are certainly achievable in the next three to five years. Watch this space because central banks, while protective of their sandboxes, do not like to get outdone in the press. Let us see if other regions can match the ASEAN 5 announcement. Those countries are not connecting routers just yet, but the outreach and putting pen to paper is a good first step.

Overview by Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research.

The post The Central Bank of the Philippines Extends a Hand That Other Countries Should Replicate appeared first on PaymentsJournal.

In order to accelerate cross-border payments for both contractors and freelancers, G-P (Globalization Partners) and Wise have partnered up to help businesses facilitate these faster and flexible payments. 

A main push behind the partnership is to ensure that independent workers have access to seamless payment processing systems in place, particularly as the gig economy continues to grow at an accelerated pace.  

A recent study by GoRemotely, referenced in Tearsheet, found that roughly 34% of the American workforce was taking part in the gig economy before the pandemic struck. What’s more, 80% of U.S.-based businesses, seeking top talent and desiring to shave overhead costs, also reported a plan to boost their dependence on freelance labor, based on an Intuit 2020 study on the future of gig employment.  

Businesses Aren’t Equipped for Flexible Freelancer Payments 

The gig economy shows no signs of slowing down. According to that same GoRemotely study, the gig economy is expected “to reach a worth of $455.2 billion in the U.S. in 2023.”  

And while businesses are benefitting from the gig economy—hiring freelancers for specific projects without the extra cost of an in-house employee—many aren’t paying gig workers on time. This, of course, would mean the eventual loss of such talent. Freelancers have reported that their payments either came through late or they didn’t get them at all.  

With the growing need for freelancers, businesses still lack the processes to enable flexible and faster freelancer payments. G-P and Wise are hoping to change that.  

“In the simplest terms, Wise Platform has built a way for banks, businesses, and platforms to embed the Wise API into their existing infrastructure,” said Brian Linthicum, head of Wise Platform North America. “That’s what we did with G-P — we integrated our API into their G-P Contractor offering to power cross-border payments for G-P customers.  

“We’ve seen a growing need from companies to have more control over their international payments, especially to contractors, and are proud to see G-P trusting Wise to manage and power their cross-border capabilities. We look forward to working with G-P as they break down the barriers to global business,” said Steve Naudé, Head of Wise Platform in a press release. 

The post G-P and Wise Team Up on Faster Payments for Gig Workers  appeared first on PaymentsJournal.

While many readers have been keeping up with general developments in CBDCs through these pages and other sources, the more detailed implications around how these digital currencies will be managed has been mostly lacking—at least at the digestible level. 

In this piece posted on Fintech Singapore, we have an interesting discussion around how CBDCs may impact monetary policy, which of course is one of the remits associated with central banks. One of the things holding up the digital dollar in the U.S. is the controversy around the method of distribution. In the physical retail currency world, the Treasury prints money and distributes through commercial banks. The Fed monitors the supply of money. So the relationship between central banks and the commercial world has to be defined clearly, otherwise some interesting disruptions can occur. The author cites a recent working paper from the IMF titled “Monetary Policy Implications Central Bank Digital Currencies: Perspectives on Jurisdictions with Conventional and Islamic Banking Systems,” and in it the monetary policy topic is addressed.

 The article goes into some of the risks associated with poorly designed CBDCs and places a nice chart from the source document into the discussion. The piece states that ‘poorly designed CBDCs could have unintended consequences on financial stability, monetary policy implementation, and payment systems. Therefore, understanding the potential risks and designing CBDCs that limit disruption is crucial.” One of the recommendations to limiting disruption is what we mentioned in the previous paragraph, which is the two-tiered retail CBDCs with distribution through commercial banks, minimizing deposit disintermediation. There are a few sovereign nations that are already actively using CBDCs at the retail level, though at a miniscule level compared to overall currency in circulation. The piece doesn’t specify the method of distribution being used however (e.g.; China, Bahamas, Nigeria). The author also discusses cross-border implications of CBDCs, which of course may impact capital inflows and outflows given demand dynamics and the potential speed of transactions, especially in the wholesale space (wCBDC) as adoption accelerates in a few years.

Some other charts are made available, but interested readers can easily link out to the IMF paper to spend a bit of time digesting the complex potential challenges of the digital currencies under development.

Overview by Steve Murphy, Director, Commercial Advisory Service at Javelin Strategy & Research.

The post CBDC Risk Considerations  appeared first on PaymentsJournal.

The proliferation of QR codes is seen across various industries—from the transit sector giving consumers access to Wi-Fi by scanning a code to retailers offering consumers a way to pay for goods. According to The Jerusalem Post, QR codes have an abundance of use cases for them, including enabling cross-border payments.  

How QR Codes Can Transform Cross-Border Payments 

During the pandemic, social distancing mandates drove consumers to avoid cash and point-of-sale (POS) terminals. Contactless payment methods gained in popularity, spurring merchants to make strategic pivots and provide alternative solutions, such as QR codes.  

For those that haven’t seen these popular square-shaped symbols, QR (Quick Response) codes are a type of barcode or scannable pattern that contains data such as account information, phone numbers, coupons, and website links. For the financial industry, QR codes can be a game-changer, particularly in facilitating cross-border payments. “Traditional methods, such as wire transfers and bank drafts, can be slow, costly, and prone to errors. QR codes offer a more efficient, cost-effective, and secure solution,” said Sarah Goldman, in her article for the Jersusalem Post. 

There are many uses cases for this. For example, consumers can scan a QR code to initiate a bank transfer from their account to another account overseas.  

What’s more, merchants and consumers can take advantage of QR codes in order to make cross-border payments. At the merchant’s point-of-sale, a customer can use their smartphone and scan the QR code. Funds are then transferred instantly and directly from the customer’s bank account into the merchant’s bank account.  

New Opportunities Ahead 

According to a study by Bankmycell.com, roughly 86% of the world’s population owns a cell phone, which means there is more opportunity than ever for merchants to implement QR code technology. This also means that more financial inclusion will be a possibility in underserved areas.  

The post QR Codes Can Facilitate Cross-Border Payments  appeared first on PaymentsJournal.

The ongoing challenge of cross-border payments—how to move money quickly, inexpensively, widely, and transparently between people and businesses of different countries—has received another solution: PXP Financial, based in England, announced last week that it has entered a partnership with Mastercard UK and Payall to “deliver safe, compliant and efficient cross-border payments and international money transfers.”

The PXP Financial-Payall portion of the partnership began in the middle of last year, with PXP Financial looking to Payall’s solutions for compliance and safety. Payall was conceived as a bank processor that specializes in cross-border payments and country-to-country money transfers.

With Mastercard, the partnership has a way of offering people and businesses secure and convenient ways to move money between bank accounts, cards, mobile wallets, and the like, as well as access to more than 100 markets and 90% of the world’s population through Mastercard Cross-Border Services.

What They Said

In a PXP Financial blog post announcing the partnership, leaders of the three companies celebrated the arrangement.

Kamran Hedjri, CEO of PXP Financial: “By leveraging Payall’s proprietary compliance tech and Mastercard’s innovation moving funds globally, we are now able to offer our customers speedy, safe, and simple access to international payments.”

Gary Palmer, CEO of Payall: “We’re thrilled to support PXP Financial to deliver better-than-fintech service to its customers making international payments.”

Rasika Raina, Senior Vice President of Mastercard Cross-Border Services: “Whether sending money home to families or working with global suppliers, the need for fast, reliable, and transparent payments has never been more crucial.”

The B2B Case for Cross-Border Payments

A November 2022 report by Steve Murphy, Director of Commercial Payments for Javelin Strategy & Research, focused on the business-to-business (B2B) aspects of cross-border payments. The report, Cross-Border B2B Payments: Continuous Improvement Underway, looked at the innovation in that area of international payments.

The report noted that the vast preponderance of international money movement, upward of 90%, goes toward the settlement of trade transactions for goods and services between businesses. That volume has compelled companies to take on the various hurdles to easy cross-border payments—foreign exchanges, time zones, data transparency, market regulations, and messaging standards among them—that have historically led to errors in clearing transactions.

The report also highlighted pilot programs and partnerships that are aimed at real-time cross-border payments.

The Next Step

PXP Financial, in its announcement, touted the consumer benefits of the partnership: the ability of customers “to send funds to their partners, employees and suppliers safely, efficiently and more conveniently than ever. This includes inclusive pay-out options to recipients regardless of whether they are banked or unbanked.”

Next up, the announcement said, PXP Financial and Payall will work to open “new destinations and new payment channels,” including cash pickup locations and payments made directly to cards and mobile wallets.

The post Mastercard, PXP Financial, Payall Collaborate on Cross-Border Payments appeared first on PaymentsJournal.

Cross-border payments are on the rise, and Europe is a region where cross-border revenue is soaring. In fact, European online businesses generated $100 billion Euros in cross-border revenue. According to the Bank of England, the total value of global cross-border payments is expected to grow from $150 trillion in 2017 to more than $250 trillion by 2027. The main driver for this growth can be attributed to e-commerce. E-commerce sales are projected to reach a staggering $6 trillion by 2024.

Ekata, a Mastercard company, recently released its report, “Expand Cross-Border E-Commerce: Combat Fraud — The 5 Key Challenges Retailers Can Overcome Fraud with Data,” where it cites the massive surge of cross-border payments as well as the accompanying fraud that usually follows. The report outlined key strategies and Ekata’s own solution as a formidable tool to mitigate fraud.

Let’s Look at the Numbers

Cross-border payments are vital for businesses as they sustain foreign expansion. For consumers, cross-border payments mean having the facility of sending funds to friends and family in their native countries.

With more consumers and businesses using the e-commerce space, the demand for faster, safer, and more efficient payments continues to grow as well.

As mentioned previously, Europe is seeing expansive growth in cross-border revenue, with European online businesses generating cross-border revenue of $100 billion Euros. Germany leads the pack as the largest cross-border seller, at $32 billion Euros. So, why is this relevant? This can present a prime opportunity for new players to enter the market, as Germany is known for its infrastructures to operate like clockwork.

According to Deloitte, the most mature market for cross-border e-commerce goes to China, as it has reached $1.5 trillion. Of this combined total, 72.8% is attributed to cross-border business-to-business (B2B) e-commerce. This segment is expected to reach $2.2 trillion by 2026.

On the home front, 64% of American consumers have reported making an online purchase from another country in 2021. Forty-three percent of consumers cited purchasing overseas because of the inability to purchase that product in the U.S. Close to half also mentioned lower prices for making these foreign purchases.

With Cross-Border Payments Expansion Comes Fraud

Although the statistics make the case for entering the cross-border space, businesses should be wary of the risks for fraud. And as technology continues to evolve, we will see more sophisticated attacks than ever.

Juniper Research conducted a study and estimated that retailers are at risk of losing $25 billion in payment fraud by 2024. This reflects an increase of 52% in just four years. Although these statistics are sobering, we need to get to the root causes that are putting cross-border payments at risk.

The Challenges With Cross-Border Selling

As with any payment solution, there are challenges to be reckoned with as no solution is foolproof. These are the key obstacles businesses face when selling cross-border:

1. Data Residency Laws

These laws dictate how personal data are processed and stored. One well-known law is the General Data Protection Regulation, also known as the GDPR in the European Union (EU). The GDPR has specific rules about how personal data are handled in the EU. However, processors based in the Middle East, for example, do not need to comply. Yet, if the data is from a consumer based in the EU, then the foreign processor is required to comply in the proper handling of the EU citizen’s information. Not doing so would cause a breach, leading to further consequences for the processor.

In addition to these regulations is the lack of a global customer identity standard. The format, even the reliability of individual identity data, varies tremendously by country, making it impossible for companies to implement a consistent way to verify a customer’s identity.

2. Fraud Attacks More Sophisticated

Fraud comes in many forms, each causing significant damage to a business’ bottom line. Here are some that are making its way throughout the industry:

• Chargebacks. A chargeback occurs when a customer issues a fraud claim to their card issuer that takes the consumer’s side. The merchant loses both its product and the sale. Chargebacks are costly for businesses. In a recent study, 58% of merchants stated that their chargebacks rates have increased.
• Friendly fraud. This is when a cardholder claims they never received their purchase, or they deny that their purchase was ever made when they did make it.
• Account takeover. One of the latest, most menacing attacks, this is when cybercriminals completely take over bank accounts. This can be done via phishing or malware.
• Synthetic identity fraud. A false identity is created when criminals combine fake and real personal information to commit fraud such as applying for a loan and credit cards.
• Promo abuse. This can be the fraudulent exploitation of promotional program incentives, such as a 50% coupon.

3. Fraudulent Hot Spots

Fraudulent attacks can happen anywhere in the world, but businesses must pay close attention to areas where fraud is endemic. Turkey, Nigeria, and India continue to be where fraudulent attacks are rampant. Caution when doing business there is imperative, as is having robust tools in place.

“There is a lot of sales potential, so I don’t think it’s a sound business decision to ignore them, but caution is warranted,” said Daniel Keyes, Senior Research Analyst for Merchant Services at Mercator Advisory Group. “You need to have a game plan. You must factor the risk into your prices. There are tools available to limit the losses from fraud in any country. That should be enough to give them a shot.”  

4. Overly Protective Fraud Strategies Hampering Revenue

There is such a thing as being overly cautious when it comes to current fraud protection strategies. This can take the form of rejecting a perfectly legitimate buyer. Rejecting a legitimate buyer means that the consumer will take their business and their money to a competitor, jeopardizing the opportunity to create a loyal customer.

According to a PaymentsJournal report on cart abandonment, 20% of consumers said they would abandon an online shopping cart if the checkout process lasted longer than one minute. Making the online checkout process as seamless and frictionless as possible is critical to retaining loyal customers as well as growing revenue.  

To address this overcompensation for risk, it would be best to account for all the false      positives and investigate them at different periods of time. Businesses can also partner with their Chief Revenue Officer to go over their global expansion strategy and determine the unique risks inherent in those markets.

5. Having to Look Over Multiple Identity Data Elements

Having to search through multiple sources of data to verify and authenticate identities can be challenging for merchants. To ensure accurate authentication, current application programming interfaces (APIs) and web-based services can run searches concurrently and link real-time identity data.

The Cross-Border Payments Solution

Using a multilayer approach is the key to approving more cross-border transactions while still mitigating fraud. To detect and control fraud, an effective tool to use is automated fraud screening. To capture fraud, you will need to use global consumer identity data in conjunction with a layered process.

Ekata’s Identity Engine refines your current identity verification data for identity verification and fraud prevention. This engine is made up of two different data sources: Ekata Identity Graph and Ekata Identity Network.

The data assets and advanced machine learning capabilities are used to run Ekata’s global APIs and software as a service (SaaS) solution. Both the Identity Graph and the Identity Network equip you with the data you need to see a comprehensive view of your customers’ digital identity and the risk associated with it.

The challenge to fight fraud continues. However, by using the above-mentioned fraud tools, authenticating identities will become easier for cross-border e-commerce.

The post Cross-Border Payments: Fighting <br>E-Commerce Fraud Using Data appeared first on PaymentsJournal.

GCB Bank, a major institution in Ghana, has successfully completed the first Pan-African Payment and Settlement System (PAPSS) client transaction in Ghana, according Myjoyonline. The transaction involved a Ghanaian incorporated entity initiating a supplier payment from GCB in Ghana Cedis (1 USD = 460 GHC) to a beneficiary in Nigeria who received the payment in Naira (1 USD = 122,443 NGN) instantly.

Readers can reference our posting from last year where we described the continental initiative called the African Continental Free Trade Area (AfCFTA), which has a remit to significantly boost intra-Africa trade, particularly trade in value-added production and trade across all sectors of Africa’s economy.  This in turn is part of a broader master plan called Agenda 2063: The Africa We Want.

PAPSS was adopted in 2019 and launched commercially in Jan. 2022. It is unclear from the referenced article today whether or not this is the first actual cross-border transaction on PAPSS or only the first initiated from Ghana. A quick review of the PAPSS website did not provide any data, but we would guess that there have been other transactions given the commercial launch date. The article goes on to quote some folks and provide thanks to various participants including the Bank of Ghana (central bank), the Ghana Interbank Payments and Settlement Systems (GHIPSS), which is the local equivalent of Fedwire, and the African Export-Import Bank, among others. 

Although prefunding occurs for direct participants through integration between PAPSS and the local central bank RTGS system, settlement is done on a net basis every 24 hours. So this is another ongoing development in the ever-changing cross-border payments space, something we recently covered in member research for B2B developments. There are several other instant payment cross-border initiatives underway, including those involving CBDCs, and we’ll be keeping readers updated as they release information.

Overview by Steve Murphy, Director, Commercial Advisory Service at Javelin Strategy & Research.

The post Real-Time Cross Border Payment Initiated in Ghana appeared first on PaymentsJournal.

In the continuing developments around cross-border payments, Krungthai Bank (KTB) and Visa are partnering to deliver B2B cross-border using Visa B2B Connect, according to MarketScreener.  

The release indicates that KTB is the first financial institution (FI) in Thailand to use the Visa B2B Connect solution, which was initially rolled out commercially prior to the pandemic in 2019. It now has more than 100 countries involved with the network.  

Some readers may be familiar with the solution by virtue of our member research, which tracks developments in B2B cross-border in more detail, as well as through ongoing postings on these pages. Visa B2B Connect is a blockchain-based multilateral B2B cross-border payments network that helps optimize payments for corporates by shortening the time spent via direct connections between initiating and beneficiary banks. It utilizes blockchain for communication, audit, and security functions while settling funds in fiat currency via local electronic payment systems, including real-time schemes. Visa has added several corporate banks to its user base. 

Serene Gay, Group Country Manager for Regional Southeast Asia at Visa told MarketScreener: 

“As Thai businesses continue to expand globally, 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 by providing improved transparency, increased predictability, and ultimately profitability. We are pleased to be working with Krungthai Bank to leverage our technology and network, thereby giving Thai businesses critical tools to succeed and thrive in this ever-changing global commerce landscape. Visa’s core strategy is to help clients and partners drastically improve their customers’ friction-filled experiences. The future of B2B cross-border payments promises to be simpler, secure, lower cost, and more transparent to enhance the payment experience for everyone, everywhere.”  

One of the things to be solved is the lack of transparency, which Visa B2B Connect handles by tracking payment status in near real-time. Reducing intermediaries is another advantage, as well as reducing costs.  

The posting then concludes with a mention of KTB’s Digital Remittance Solutions project, which they state “aims to strengthen the bank’s international business services and offerings based on the X2G2X strategy to collaborate and explore new opportunities with partners including government agencies.”  

There have been many developments in Asia as we continue to track the space and interested readers can browse through and search for others on these pages. Distributed ledger technology continues to find ways into treasury and trade services, as we also pointed out in another recent member paper.  

Overview by Steve Murphy, Director, Commercial Advisory Service at Javelin Strategy & Research.

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Most readers will be familiar with the various systems available in the U.S. for transferring funds between entities, be it for personal or business purposes. We recently covered that Nacha, the ACH governing body, grew its ACH Network volume during 2022.

Nacha posted that the ACH Network processed 30 billion payments in 2022, encompassing $76.7 trillion. Those figures were up by 3% and 5.6% over what the network handled in 2021.

There are both credit and debit payments in eight separate categories across ACH, including Same Day ACH (SDA). SDA also has sub-categories, including B2B. Overall B2B payments across Same Day ACH are up 44% year over year. We would expect that one reason for the increased SDA for B2B network activity was the transaction limit increase from $100,000 to $1 million in March 2022. Overall, SDA transactions totaled 697.5 million and were valued at $1.7 trillion last year. Those were increases of 15.5% and 86.3%, respectively, over prior.

What’s more, Nacha and the ACH operators (The Fed and TCH) introduced a ‘late night service’ last year, which allows for payments file delivery up until 11:30pm on business nights. This has made file delivery more efficient and has apparently been particularly beneficial on Fridays, with 50 million new files delivered on average.

Interested readers can click out to the Nacha site as well, where there is a fair amount of historical data available for ACH by category. Again, a continuing trend for faster and better, with B2B one of the use cases where strong growth is expected, which will be boosted by the launch of FedNow later this year. Members will also be familiar with some of our thoughts on faster payments given recent research on the topic, as well as the many postings on these pages related to payables in general.

Overview by Steve Murphy, Director, Commercial Advisory Service at Javelin Strategy & Research.

The post Business-to-Business ACH Use Cases on the Rise appeared first on PaymentsJournal.

There are a multitude of initiatives underway across various global markets about improving cross-border payments, including P2P, C2B, and B2B use cases. We have kept up with developments on these pages and also in member research.  Where do real-time remittances come in?

In this particular referenced posting from Reuters we have an announcement that Singapore and India have created a link between their respective sovereign real-time payments schemes (India’s UPI and Singapore’s PayNow), which will allow for instant mobile phone funds transfers between the two countries. According to Reuters, Singapore has already established something similar with Thailand and is working on a link with Malaysia as well. The article indicates that current retail payments and remittances between the two countries are $1 billion per annum, per Singapore’s Prime Minister Lee Hsien Loong. Some readers will know that India is one of the largest receiving countries for remittances. 

This is in line with the G20 initiative going back to 2014 for improving remittance flows. Part of the responsibility of participating countries is to issue periodic reports on sovereign progress. As a result of this G20 focus, the World Bank set up partnerships with multiple countries in both the public and private sectors and provides financial and technical assistance for improving access to millions of unbanked individuals through the International Finance Corporation.   

More recently there have been additional focal points for improving cross-border payments, including an effort being shepherded by the Financial Stability Board (a G20 sponsored organization) in conjunction with the Bank of International Settlements (BIS) to execute improvements through a Roadmap for Enhancing Cross-Border Payments.  The article indicates that “to begin with, State Bank of India, Indian Overseas Bank, Indian Bank, and ICICI Bank will facilitate both inward and outward remittances while Axis Bank and DBS India will facilitate inward remittances.”  

Meanwhile in Singapore, it will be DBS-Singapore and Liquid Group, a non-bank financial institution. The initial limit for an individual in India will be 60,000 rupees, or about $725. 

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Javelin Strategy & Research.

The post India and Singapore Set Up Real-Time Remittances  appeared first on PaymentsJournal.

There’s been a lot of chatter around wCBDCs lately, particularly as it relates to retail—that is—replacing consumer and small business cash on hand with centrally controlled digital money for daily use in domestic commerce and various other transactions. 

By and large, that remains the debate in the U.S. vis-à-vis the digital dollar and how/who might manage that whole thing, from the perspective of consumer privacy et al. This particular posting from CoinGeek takes a different approach on retail CBDC, which is the cross-border version of it. One might logically conclude that remittance is the main objective, but surely other commercial activity comes into play. The initiative mentioned, called Project Icebreaker, is between the central banks of Israel, Sweden and Norway. We’ve been tracking developments in CBDCs (of all types) and other cross-border payments initiatives, mostly from the B2B use perspective, where high value gross transactions in the trillions are an everyday occurrence.

Although pieces like this are always lacking in detail—one would have to get the inner IT circle in a huddle to really understand how these systems are developed and tested—the idea is to eliminate the ‘intermediaries’ on typical cross-border transactions (e.g.; banks, MTOs, currency exchanges, etc.) in order to create atomic settlement (blockchain-based and instant) between two or more currencies. In this case, it’s on behalf of two individuals, a consumer and a business, or even a C2G scenario. 

The CoinGeek article claims that this effort between the central banks has been underway for roughly 16 months and has had experimental success, although that is the extent of the detail. There is a bit more discussion around risks and the mix of private and public participation in the end game, so more of the same as we hear about these various ongoing initiatives. We expect to be posting many more of these as multiple entities and combinations thereof continue lining up (mostly you don’t hear about them until you do) to try their version(s).

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post CBDC Intermediaries to be Eliminated in Project Icebreaker appeared first on PaymentsJournal.

As the economy becomes increasingly global, businesses are sending and receiving payments to and from a multitude of countries. This has resulted in a significant increase in cross-border payments in recent years, and this trend will only continue to rise. Yet, cross-border payments still rely on inefficient legacy processes and methods, and thus, are an area ripe for innovation.

Since cross-border payments can often be unpredictable and costly, businesses that operate globally need to implement solutions that enable seamless, secure, and fast global transactions. To share best practices and strategies on how this can be done, Wells Fargo recently issued a white paper on effective and innovative cross-border payment strategies.

Dealing With Growth and Complication

Cross-border payments are on a significant growth trajectory. The white paper noted that businesses processed approximately $145 trillion in cross-border transaction value in 2021, which represents a compounded annual growth rate (CAGR) of 5% since 2018.

Business-to-business (B2B) payments make up the overwhelming majority of cross-border payments, as seen in the chart below based on data from Ernst & Young Global Limited.

Cross-border payments can be a multistep, costly process rife with friction. They involve a sender initiating a cross-border payment transaction through their bank, the originating bank. The sender’s bank then makes the payment using correspondent banks and/or financial market infrastructures (FMIs). Finally, the beneficiary bank (the recipient of the payment’s agent) receives and processes the payment, finally making money available to the recipient.

“Processing time can vary greatly between the in-flight intermediary leg and the beneficiary leg,” said Joanne-Strobel-Cort, Head of CIB Segment Solutions Advisory, Global Treasury Management at Wells Fargo. “Processing time is dependent upon several factors including the number of banks, banking transfers, or entities required to get the payment to its final destination. Friction in cross-border money movement can occur at any point, and is often the result of bank or region-specific informational requirements.”

The process can often vary depending on whether it involves book or off-book transfers. Book transfers are those where there are common banks on both sides of the transaction. Off-book transfers are those where the sender and receiver have accounts at different banks.

As a result, there is a great deal of variability in the steps required and the time it takes for payments to reach the beneficiary. The largest friction point often relates to the information required by the intermediary bank and receiving bank to process the payment. Depending on which country the payment is going to, cross-border payments can take up to several days to settle.

Processing Challenges Associated with International Money Movement

Several challenges in the process prevent the seamless and predictable processing of cross-border money movement.

One is predictability. As noted in the section above, there can be multiple touch points in the process; payments don’t simply go from point A to point B. Then, there is the cost involved. Several banks, clearing market infrastructures, and payment service providers may be involved in processing cross-border transactions, and each one may generate a fee. The white paper noted that the average cost to complete a cross-border payment can range anywhere from 6.5% to 11% of the total transaction amount, a stunningly high figure.

Different country-specific requirements can also play a big role in creating friction in international money movement. In some countries, incoming payments can’t settle unless a human is on the other end of the transaction manually approving a payment before it is credited to a recipient’s account. When significant time zone differences are involved, this requirement for human involvement can also lead to delays.

International money transfers also typically have a longer processing chain compared with domestic transfers, given the need for more rigorous screening.

“If proper documentation is not received or the transmission of payment information is not fully passed through each correspondent bank payment processor, market infrastructure, or beneficiary’s bank, the transaction can be sent back,” Ms. Strobel-Cort stated. “We are looking for the industry move to the ISO 20022 format to vastly improve the structured movement of information between participants and market infrastructures in cross border payments.  Additionally, SWIFT’s new Transaction Management Platform should improve immutability of information in specific fields as information passes between participants of the cross-border payment ecosystem,” adds Strobel-Cort.  She further explains that “In addition to validating the necessary information, cross-border transactions typically undergo a sanctions screening within the originating country (as well as the beneficiary country and any intermediary agent country in between) to comply with sanctions laws, which may also add friction.”

Strategies for Streamlining Cross-Border Payments

Luckily, there are strategies companies can put into place to make the process more frictionless and predictable.

First, businesses should always provide full information for both originators and beneficiaries; this includes full street address, full names, and complete city, state/province, country, and postal code, along with any required identifiers such as a passport number for government identification.

It’s also important to embed prepayment tracking analysis and validation to ensure as smooth a process as possible. This includes validating all information about the receiving party — especially if it is a new receiver — and validating all payment information before the transaction is initiated. Companies should also work with a processor or bank that provides the ability to track and monitor the transaction throughout the transaction process to ensure there is reporting in place if a transaction fails midstream, the white paper stated.

Additionally, businesses should explore the use of artificial intelligence (AI) to identify and automate repetitive processes. Machine learning can enable automated, rules-based, repetitive payments, allowing predictable transactions to be executed with a minimum number of processing steps. Also, if there are regular problems with certain types of transactions, AI tools can automate them, so the same issue doesn’t occur each time.

Finally, it’s important to find a partner that can fill more specific needs than can be done with internal resources. The white paper noted some examples:

• Data translation firms that can turn data and transform them to the receiver.
• Data security firms that are highly skilled at helping prevent fraud and keeping data secure across borders.
• Data or fintech firms that can make data actionable by transforming them into a usable format for cross-border transactions.

Conclusion: The Continued Growth of Cross-Border Payments

As noted, cross-border money movement shows no sign of decelerating, so this will only become a bigger issue for companies in all geographies. As such, large banks, payment processors, associations, governments, and fintechs are all racing to meet heightened expectations for money movement.

The winners will be companies that recognize the opportunity to simplify their processes and are eager to drive innovation for themselves and their global business partners. With the proper rigor, partnerships, and investments in automation, businesses can make cross-border money movement more predictable, seamless, and timely.

Access the Cross Border white paper with this link.

The post How to Implement Effective and Innovative Cross-Border Payment Strategies appeared first on PaymentsJournal.

As recently as two months back, we provided member research on the cross-border B2B payments landscape, which has been one of the hotter topics during the previous six to 24 months. In this research we pointed out that the largest cross-border value transfer category exists to satisfy intra-corporate liquidity and foreign exchange needs, capital market transaction settlements, syndicated loans, and bank reserve transactions. These value transfers are not part of the various B2B cross-border payment market value estimates since they are not directly associated with providing goods and services. In many cases, they are book transfers without foreign exchange involvement, with the value associated on all annual U.S. non-cash funds movement (domestic and cross-border) for all uses, including bank reserves, at more than $1 quadrillion. So, one can see that far more funds movement takes place than payments associated with cross-border commerce, which we estimated at $33 trillion, or 3.0% of the total funds transfer value.  

Even more recently we updated through these pages on the latest endorsement of wCBDCs, this coming out of the BIS through their CPMI committee. In this referenced article posted on Fintech Futures, the author goes more into the BIS report and the settlement differences between a PvP cross-border version and one done by continuous linked settlement (CLS), or a central bank approach.  

In effect a PvP cross-border settlement model is less risky since in its best iteration it allows value transfers to occur simultaneously between banking entities based on their own positions at a specific point in time, not necessarily following pre-funding requirements at central banks. So the BIS version utilizes DLT and stablecoins in the truest sense, meaning less FX interference based on the intrinsic safety of a trusted stablecoin.  

Obviously there are limits now given the lack of available stablecoins and multilateral transfer systems, but that is what has been building quite steadily now for the past six to 12 months. The expectation is that the technology will rapidly evolve over the next few years, and we have already pointed out some of these projects in the referenced prior postings.  

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post In Cross-Border Payments, Settlement Type Matters  appeared first on PaymentsJournal.

There’s been an abundance of information on cross-border payments and CBDCs, and here is yet another that highlights a recent drop by the Bank for International Settlements (BIS) through their CPMI committee. We’ve been tracking the increased CBDC activities for several years now, with the earliest efforts tying to many retail uses. During the latter part of 2022 there has been more of an increase in testing wholesale CBDCs (wCBDCs) for large value transactions. This particular BIS report, which readers can access through the referenced article link, discusses multilateral distributed ledger payments systems, of which there are now more examples of live testing. 

The CBDC versions are Project MBridge, Project Dunbar, and Project Jura—as well as several private versions underway. Multilateral simply means that there are typically more than two currencies being transacted with a larger pool of FX liquidity capabilities globally, as seen with global systems such as Mastercard and Visa. Therefore, this is really nothing new, just another report that helps push forward the desire for more efficient cross-border settlements for high value transactions such as commercial paper, liquidity transfers, capital market exchanges, and syndicated loans. By more efficient, we mean cheaper, faster, and more transparent—eventually replacing the multi-touch correspondent banking system that has been the norm for decades.

One of the private efforts mentioned is Baton Systems. That system has been in use by HSBC and Wells Fargo, and one can link out to find more information around the DLT platform from that firm. Apparently the two banks have already conducted more than $200 billion in transactions between them on the DLT system from Baton. However, HSBC has reportedly transacted more than $4 trillion internally between bank subsidiaries, something that they are calling “FX everywhere.” 

Major advantages pointed out by banks is that by using DLT, they can share FX transaction records, reducing the need for reconciliations. The solution enables payment-versus-payment (PvP) net settlement in commercial bank money compared to continuous linked settlement (CLS), which operates in central bank money, thereby improving timing and reducing risk.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post BIS Is Endorsing wCBDCs appeared first on PaymentsJournal.

In another topical piece around cross-border payments, an article from Finextra covers the increasing use of International Bank Account Numbers (IBANs) in virtual form. IBANs are used as a common structure for exchanging funds between bank accounts in cross-border scenarios.

Members can assess our research on virtual account numbers, which are used to scale down on physical bank account numbers. Virtual accounts are a set of non-physical accounts, essentially sub-ledgers that shadow the actual bank account. Companies use virtual accounts to improve working capital management. In effect, virtual accounts are used for redirecting transactions to the underlying real account. Since these virtual accounts are not actual bank accounts, from a bank’s perspective they are treated as off-balance-sheet items. Multiple virtual accounts can be opened for a corporate and then mapped to a single real bank account. While virtual accounts are merely a reporting tool, each individual virtual account provides the same segregation of data, balance analysis, and transaction identification as a physical account. Virtual IBANs work in a similar way.

In a typical cross-border payment, banks will have to have accounts opened in each country/currency for which they want to exchange funds on behalf of themselves or a client. A virtual IBAN cuts back on that need and provides for some other benefits, such as reduced friction from errors, lower costs from lack of reprocessing (the article suggests that up to 5% of cross-border payments are subject to an inquiry or investigation) and fewer FX conversion fees and potential revenue boosts since offering more payment options can increase business. 

The use of virtual IBANs promote borderless banking, cutting through many of the complexities associated with processing payments in multiple jurisdictions and payment formats. The piece concludes by stating that as global markets open up, more IBANs will be used, so legacy bank infrastructure will be less of a factor in delays and lack of transparency, which in turn provides a competitive advantage to those businesses taking advantage of the latest capabilities. 

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Virtual IBANs Are on the Rise appeared first on PaymentsJournal.

The New Year begins and already there’s a spate of pieces on cross-border—in this case remittances—which is the person-to-person version of the various use cases. 

We discussed the uses in recent member research, although that piece was primarily dedicated to B2B cases. In this referenced article posted at Crowdfund Insider we have a rehash of an update around remittances that was recently released by the payments firm Wise (formerly Transferwise), which covers an issue most readers of these pages know to be the relatively high cost of international funds transfers between individuals. The author relates some of the points made in the mentioned update, which includes a UN Sustainable Development Goal going back to 2015 for the purpose of lowering remittance costs. The article quotes a G20 total remittance transfer total of $212 billion last year, which purportedly cost almost $12 billion in fees (roughly 5.5%), which is similar to other numbers we have seen from the World Bank.

In our member research we also pointed out the 2014 plan to facilitate remittance flows from the G20[i] as one of the foundational initiatives to improve remittance costs. Part of the responsibility of participating countries is to issue periodic reports on sovereign progress. As an example of the market size, in the 2021 report by the United States (U.S.)[ii], the 2020 remittance outflows in the U.S. alone were stated to be $68 billion at an average cost of 4.88%, This G20 effort is likely cojoined with the UN version in some fashion.

The author summarizes the report by indicting that the key reason remittance prices are still quite high is the lack of adequate transparency for the funds transfer process, for which sending clients may be told are performed cost free with no commission, or sometimes with relatively modest flat fees. However, the hidden cost will typically be FX rates, which can negatively impact the transaction costs. The remainder of the piece again points out the report from Wise, for which a link is provided for interested parties to download. Following is a bit of an advert for Wise, which indicated large personnel growth in 2022 of 49% over prior year, mostly U.S-based in primarily Austin and Tampa.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Remittance Costs Continue to be Scrutinized appeared first on PaymentsJournal.

There’s no doubt that the payments industry has seen massive growth. Technological innovation has led to the development of solutions that offer more security, more speed, and more financial inclusion. An article by the OMFIF highlights DMI’s “Future of Payments 2022” report, which explores the initiatives that innovators are pursuing to develop new payment structures, and how they’re addressing the challenges within the cross-border payments industry.  

When it comes to domestic payments, progress is well underway. Digital payment solutions are plentiful and accessible, especially in emerging markets where mobile payment solutions have seen significant adoption. However, this cannot be said for cross-border payments. In emerging markets, users often must bear the exorbitant costs to send funds to family members.  

Another issue that is explored is the difficulty in connecting various domestic payment environments. This is mostly due to the complexity of their own unique architecture. Traditional players are doing their part in enhancing their services, especially with security and speed.  

The report also looked to gauge attitudes towards the central bank and the central bank digital currency. Respondents believed that central banks didn’t have the improvement of cross-border payments as their primary goal when it comes to developing CBDCs. However, respondents said that the interlinking of domestic CBDCs could prove beneficial for cross-border payments.  

We have written about CBDCs as an effective delivery method in cross-border payments here. 

“Most of the CBDCs being tested around the globe by central banks are for purposes of retail use cases, where the digital currency simply takes the place of ‘walking around cash’ in bank notes and coins,” said Steve Murphy, Director of Commercial Payments at Mercator Advisory Group. “However, the real cross-border implication is in wholesale CBDCs. More recent testing of large value payments using CBDCs is where we will see much development over the coming year.”

The post Cross-Border Payments Need Innovative Solutions appeared first on PaymentsJournal.

Cross-border payments are an increasingly necessary part of any global enterprise. They provide the ability to quickly and securely transfer funds around the world. Enabling these transactions requires the right infrastructure and partnerships. Consumers receive payments efficiently, within a reasonable period of time, and with minimal cost.

A new partnership between Mastercard and Paysend will enhance the current cross-border payment experience for consumers worldwide. A recent article from Finextra reported that the collaboration will leverage their combined resources and networks. This will facilitate both the sending and receiving of payments in “near real-time.” These funds can be transferred directly into bank accounts and a host of cards in various networks.

Ukraine is the first country that is receiving the benefits from this near real-time payment solution. Inga Andreieva, General Manager of Mastercard Ukraine and Moldova said: “It is our critical role as a technology company to harness modern payment technologies in a way that helps to address the most urgent needs of our consumers. Today, Mastercard and Paysend’s partnership is already enabling Ukrainians to seamlessly receive payments to their cards from friends or family around the world, and we believe it will bring even more cross-border payment opportunities to our consumers further.”

Mastercard and Paysend will expand these services into other countries. Accomodating real-times payments is more important than ever. The reason both consumers and business stand to benefit has been covered here.

“One can look back to the 2014 plan to facilitate remittance flows from the G20 as one of the foundational initiatives to improve remittance costs,” said Steve Murphy, Director of Commercial Payments at Mercator Advisory Group. “Part of the responsibility of participating countries is to issue periodic reports on sovereign progress. There are also other innovations efforts underway through fintech partnerships and this is just another example of the ongoing improvements to cross-border access and speed.”

The post Mastercard and Paysend Join Forces to Enhance Cross-Border Payments appeared first on PaymentsJournal.

A recent article from Digital Commerce 360 looks at cross-border payments, which is a fast-growing channel within the payments landscape. It’s written by a senior executive at Euronet Worldwide, a cross-border payments network that provides various card payments-related services. The author covers pandemic-related issues—particularly supply chain disruption—which continues to this day. And it covers the lack of easily used payment rails to expand relationships across the globe. It cites a recent study for which a link is provided.

Developing Markets for Cross-Border Payments

This is most clearly recognized in developing markets where legacy infrastructure doesn’t necessarily serve them well enough. The most glaring example of supply chain disruption is China. Ongoing lockdowns have caused many companies to seek other markets. They seek reliable production of goods to fit their supply chain needs. The alternative markets mentioned include Bangladesh, India, and Mexico. There is also a link out to a supply chain working group paper. It summarizes efforts between the U.S. and Mexico about rebuilding supply chains.

Legacy Cross-Border Payments Infrastructure

The author then gets into the specifics of legacy infrastructure shortcomings. This includes the multiple bank and account requirements, with the resulting lack of speed and transparency. We have covered this often. Member research most recently covered this. We point out the many ways cross-border payments are improving. We then go into how companies can resolve some of these issues, especially in emerging markets where many banks and fintechs have little or no expertise. This general solution set is related to next generation payments infrastructure, which then allows for more modern experiences such as preference for mobile transactions, a key entry requirement for emerging markets. So the combination of better eCommerce platforms and improved infrastructure will allow companies to further penetrate foreign markets and allow for greater supply chain resilience. 

As we continue to see more innovation in cross-border payments, including B2B scenarios, and as Commerce growth continues to expand, this would seem like reasonable advise for those seeking a good forward strategy. Certainly worth a quick read for those seeking information on the subject, especially given economic forecasts that look unpromising during the coming year.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Cross-Border Payments: Continued Innovation Is on the Horizon appeared first on PaymentsJournal.

The Russian Central Bank (RCB) said that roughly 50% of Russian cross-border payments are being made using currencies other than the euro and the dollar. In an article by Euronews, Russia seems to be gradually parting ways with currencies hailing from “unfriendly nations.”  

“Toxic currencies,” as Russia refers to them, are those from countries that have imposed sanctions on the country. The use of alternative currencies was up from 21% at the beginning of the year. And Russia has been increasingly turning towards the Chinese yuan for cross-border payments.   

According to RCB, Russia has invested in 139.6 billion rubles (or $2.28 billion in Chinese yuan) this year alone. As it makes its transition to the yuan, RCB is also ensuring that it can include imports, exports, as well as payments for capital transactions.  

Current sanctions prevent major Russian banks from using the SWIFT international payment system, banning them from making certain transactions.  

We covered the call of Western countries demanding that Russia be cut off from SWIFT here. Of course, it remains to be seen whether such actions will deter Russia’s aggression or weaken its economy.  Russia does have it’s own alternative to SWIFT called the System for Transfer of Financial Messages (SPFS). According to the Russian Central Bank, there are more than 400 Russian member banks that participate in this network.

“This was to be expected, as we have pointed out in several postings in PaymentsJournal,” said Steve Murphy, Director of Commercial Payments at Mercator Advisory Group. “This runs the gamut from alternative payment systems to alternative currencies.”  

“I don’t think anyone convinced themselves that Russia would simply accept the sanctions without taking countervailing actions,” he added. “The question remains how effective these alternatives will be and what is the longer term impact.” 

The post Amid Heavy Sanctions, Russia Turns to the Chinese Yuan for Cross-Border Payments appeared first on PaymentsJournal.

An interview summary posted by The Paypers involves the CEO of a UK-based payments startup called Berg Money. The article suggests a PaaS model with cross-border payments Small and Medium Enterprise (SME) scenarios as the target market, however the website indicates a somewhat broader offer that includes loans, which we assume if for payments liquidity and limited supply chain finance offers.

B2B Payments Playing Catch Up

In any event, the CEO responds to questions with many of the things that we have been pointing out for commercial & enterprise payments over the past few years. This includes the B2B payments space playing catch up for the overall end-to-end experience, which we have often attributed to two main factors—consumer experiences are easier to create and monetize versus B2B flows and the neobanks and fintechs needed time to figure out the more complex flows for commercial business situations. 

Other points made drift into similar ones that readers have been seeing on these pages for quite some time vis-à-vis cross-border payments. These include the expense involved, the lack of transparency, along with a growing demand for mobility in the transaction delivery. Based on recent research companies lose 4-5% of their revenues due to payment inefficiencies and fragmentation.

Use Cases that SMEs Experience

Reading further the piece goes into the typical use cases that SMEs experience in cross-border transactions. These are needs such as multiple currencies to settle between buyers and suppliers in local money, the rise of B2B eCommerce which extends the reach of various products and services into foreign markets, and gig economy payouts as companies hire in remote location for access to certain skillsets. 

The CEO goes on to discuss differentiation between this company and competitors, which is the ability to handle the end-to-end experience for SMEs with a higher level of service. He discusses where SME payments may be going and you’ll find a dose of artificial intelligence (AI) as well and distributed ledger technology, for which we have also been calling out in various places, including recent member research. Worth a quick read for those interested in the SME space and cross-border with innovative approaches to payments.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Fintechs Drive Cross-Border Payments for Small and Medium Enterprises appeared first on PaymentsJournal.

Cross border payments refer to the movement of money between two countries. In the past, these payments were often slow and expensive, due to the need to exchange currency and move funds through the banking system. However, the advent of digital currencies has made cross border payments much faster and easier. For businesses, this can mean lower costs and faster payment processing.

The Royal Bank of Canada has unveiled Swift Go, a solution that allows businesses to send cross border payments anywhere across the globe, directly from their bank accounts. In partnership with Swift and JPMorgan Chase, Canadian businesses can send up to $10,000 in foreign currencies. According to Finextra, the collaboration makes RBC the first Canadian bank to offer this solution to its business clients.

More Canadian businesses are realizing that international payments must be fast and frictionless in order to survive in this ultra-competitive market. According to Lisa Lansdowne-Higgins, Senior Vice President of Business Transformation and Deposits at RBC:

“By offering cost-effective, fast and predictable cross-border payments, the introduction of Swift Go will make it easier for Canadian companies to plan their cash flow, forecast their liquidity position and do business globally.”

Although legacy systems are still being used to make payments, more businesses are expecting to be paid via electronic payment methods. In order to make this a reality, businesses must consider investing in digital payment technology to modernize their outdated systems.

“No other global payments innovation effort has garnered as much recent attention as cross border payments, where improved user experiences have been a focal point for the financial services industry,” said Steve Murphy, director of commercial payments at Mercator Advisory Group. “At greater than 80% of value transfers, the B2B use case predominates cross-border payments for goods and services.”

The post RBC Launches Cross Border Payment Solution appeared first on PaymentsJournal.

Many readers may have heard about Project Hamilton since we previously covered that initiative. For those not familiar, it’s the development of the digital dollar between MIT and the Federal Reserve Bank of Boston. To our knowledge, they’re in the middle of Phase 2, designing a high-performance payments system.  

The New York Innovation Center

The Federal Reserve Bank of New York houses the New York Innovation Center (NYIC). This group collaborates with the broader Federal Reserve System, the BIS Innovation HUB, the private sector and academia. They collaborate in order to enhance the global financial system. The NYIC has been working on Project Cedar. It is an initiative to study the opportunities of using blockchain to enhance the cross-border payments system. The cross-border payments systems are likely using central bank digital currency (CBDC). The organization recently released its Phase 1 report.  

A recent posting from Fintech Global gives us an update on the latest planned activity. As part of Project Cedar’s Phase 2 effort, the New York Fed is teaming up with the Monetary Authority of Singapore (MAS, Singapore’s central bank). It will explore the use of wholesale CBDC (wCBDC) for cross-border payments. Most of the global initiatives on CBDCs to date have been to develop retail versions. These retail versions hope to replace physical bank notes and coins. However, new initiatives are targeting wholesale (high-value) transactions such as capital markets settlements. The phrase “atomic settlement” is used within the posting as one of the tacit goals, which essentially means almost instantaneous settlement of foreign exchange transactions, which in traditional spot market deals can require up to two days. The New York Fed will produce a report next year, according to the article.    

Pilot Projects

There has already been one reported successful CBDC pilot completed in Asia, called Project mBridge, which we reported here as well. We know that MAS has been very active in this general space. It recently participated in the successful institutional DeFi trade space with JP Morgan, SBI and DBS Bank in something called Project Guardian. That effort conducted foreign exchange and government bond transactions against liquidity pools comprising of tokenized Singapore Government Securities Bonds, Japanese Government Bonds, Japanese Yen (JPY) and Singapore Dollar (SGD).    

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post The Federal Reserve Bank of New York and MAS Team Up on Wholesale CBDCs  appeared first on PaymentsJournal.

There’s lots of discussion around cross-border payments activity at recent industry events, including the CPI Summit and AFP 2022. This comes as no surprise since the topic has been an innovation priority from the G20 and BIS for several years. One of the delivery methods increasingly discussed has been CBDCs, which are live in some limited form and in pilot across a number of markets. 

Most of the models tested are retail use cases, which are replacing paper bank notes in circulation with digital currency. An article in the Tokenist discusses a recently completed pilot test between five entities using four CBDCs and 20 commercial banks, but in a wholesale payment uses case.

According to the Tokenist, “the four central banks transferred $22 million on behalf of their corporate clients across 20 commercial banks” and they also ran “164 CBDC transactions from corporate clients.” The piece also linked out to a separate report released by the Bank for International Settlements (BIS), in collaboration with the Central Bank of the UAE (CBUAE), People’s Bank of China (PBoC), Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BoT). The effort is called Project mBridge and involves a blockchain infrastructure called mBridge with a five-payer protocol.

The report found that there was an increased transaction speed—seconds versus several days. There were also lower costs, which weren’t specified, but the article estimates 2020 cross-border transaction costs of $117 billion. Another benefit cited was the reduced FX risk, since faster transactions reduce the impact of currency valuation swings. 

We’ve also previously covered this how this space is evolving, and you can view that here.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Cross-Border Payments Pilot Using CBDCs Is Successful appeared first on PaymentsJournal.

Cross-border payments are not only a convenient way to send money between countries, but also a necessity for many consumers. That’s especially true for those in Saudi Arabia, according to research from Mastercard’s “Borderless Payments Report 2021/2022.”

The study found that nearly three-quarters (73%) of respondents in Saudi Arabia made a cross-border payment within the past 12 months—primarily to help financially support their family who resides outside the country.

Many of the consumers surveyed said they’re in a good place financially, with nearly a third of respondents making more money than they did before the pandemic. However, roughly half said their families are “still struggling to recover financially.”

The Mastercard study also found that overall, trust in cross-border payments is increasing among respondents in Saudi Arabia. Some 89% of respondents said they feel confident about the safety and security of online payments.

The post Confidence in Cross-Border Payments Is High in Saudi Arabia appeared first on PaymentsJournal.

We’ve commented on cross-border developments in the B2B space before and expect ongoing developments. This latest collaboration features JPMorgan and Visa, who have separate blockchain networks for cross-border payments and will now integrate the two. 

The Visa B2B Connect network has been live for about three years and reaches dozens of global markets. It has a blockchain foundation and facilitates settlement in fiat currency. JPMorgan’s Liink is part of its Onyx initiative and is also a blockchain-based network designed for wholesale cross-border payments. One of its main assets is Confirm, to which Visa Connect has completed integration work, and it validates account information prior to payment initiation. Bringing together the two will expand market access for participating banks. The release indicates that Confirm can verify 2 billion accounts at 3,500 banks.

There is speculation as to whether the new partnership will have an impact on SWIFT, and we would expect that it will eventually be a viable alternative. It would seem obvious, however, that establishing modern networks for B2B cross-border transactions is something that is in demand. 

Meanwhile, Ravi Menon, Managing Director of the Monetary Authority of Singapore, gave a keynote speech where he mentioned that the current state of cross-border payments is “slow, costly, opaque, and inefficient, relying on an archaic network of correspondent banks.”

He believes the development of “private sector blockchain-based payment networks” could be the solution to resolve this problem.

The partnership between Visa and JPMorgan could be a strategic one that will prove beneficial in the ongoing efforts to effectively manage and facilitate cross-border payments.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post JPMorgan and Visa Integrate B2B Cross-Border Networks appeared first on PaymentsJournal.

Many readers may not be aware of the Financial Stability Board (FSB), which was formed as a revised version of a similar group out of the G20 in 2009, and eventually resourced as an enduring organization. 

The G20 have been advocating for improved cross-border payments systems since 2014. A recent article in Finextra provides an update on the G20 roadmap for better cross-border payments, with the FSB publishing a couple of progress reports to be delivered to G20 Finance Ministers and Central Bank Governors for their meeting in Washington DC this week.

Apparently, the FSB and BIS’ Committee on Payments and Market Infrastructures (CPMI), along with other partners, are starting to prioritize future work based on analysis and feedback. It seems that there are any number of initiatives already out there, so it’s not 100% clear what’s new here.

There are three priority themes identified in the roadmap update, which the article states as:

• Payment system interoperability and extension
• Legal, regulatory and supervisory frameworks
• Cross-border data exchange and message standards

As we’ve previously mentioned, the G20 has been expecting work that has targets for enhancing the cost, speed, access, and transparency of cross-border payments. Originally, that had consumers as the main priority, but relative enhancements are good for all use cases in the end. The roadmap has a 2027 end date for achieving all these goals, so with other initiatives well under way, this is more or less a way to keep some standardization in approaches.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post FSB Provides Update on Cross-Border Payments Roadmap appeared first on PaymentsJournal.

In member research late last year, PaymentsJournal explained an initiative (IXB) launched in 2021 between TCH, EBA Clearing and SWIFT to bring real-time cross border payments between the U.S. RTP system and Europe’s RT1. 

The initiative is called IXB (Immediate Cross-Border) and yesterday a new article on the TCH website announced that the pilot is on track for live processing of Euro and U.S. dollar exchanges in real-time during the coming months. This is an example of private organizations combining expertise to deliver a highly anticipated new service. As we have highlighted on PaymentsJournal, there are several initiatives attempting the same thing in various regions. So this is an exciting development for one of the high volume global trade corridors.

The article goes on to explain that 25 financial institutions on both sides of the pond have been closely cooperating with the IXB pilot initiative in order to take the pilot service live and into full commercial rollout during 2023. Although no specific timeframe is mentioned, the article also states that additional currency corridors will be added closely following the rollout, so it is clear that a more global service for major corridors is in the end game for the IXB service. One can only speculate, but likely priorities would be other high volume corridors (e.g.; Asia Pacific). 

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post IXB Nearing Full Commercial Launch appeared first on PaymentsJournal.

TORONTO, October 6, 2022 – Today, Visa Canada and TD Securities (“TD”) announced an innovative collaboration as TD becomes the first Canadian financial institution to join Visa B2B Connect, a cross-border business-to-business (B2B) payments network, enabling account to account, international payments quickly, securely, and with predictability.

According to Visa research, cross-border money movement represents a $10 trillion opportunity for the payments industry, but significant obstacles exist when it comes to cross-border payments. Nearly 70% of Corporations surveyed from across 20 countries, reported systematic issues with poor visibility and inefficiency as pain points with cross-border payments.[2]

Visa B2B Connect aims to address these challenges by modernizing existing global payment processes through its digital-first capabilities. The unique network dramatically simplifies international corporate cross-border payments by facilitating transactions between the bank of origin, directly to the beneficiary bank. By increasing the visibility and predictability of the transaction flow, Visa B2B Connect simplifies global payments and creates more cost-effective cross-border transactions by improving fee transparency, transaction accuracy, and helping companies manage their cash flows and streamline settlement.

“We are committed to making global business payments effortless, secure, and fast – and this requires a modern cross-border payment system,” said Jim Filice, vice president and head of New Payments at Visa Canada. “With Visa B2B Connect, we’re excited to be working with TD as the first Canadian financial institution on the network. Together with TD, we’re proud to help their business clients connect with other businesses across the globe to simplify the way they move money.”

“We’re thrilled to be the first financial institution in Canada to join the Visa B2B Connect network,” said Akhil Lamba, Executive Managing Director and Head of Global Transaction Banking, TD Securities. “This collaboration is part of TD’s ongoing commitment to delivering innovative payment solutions to our corporate clients, along with seamless client experiences that make doing business internationally, faster with more end-to-end transparency and predictability.”

Visit Visa B2B Connect to learn more how Visa helps its clients and partners move money globally.

About Visa

Visa (NYSE: V) is a world leader in digital payments, facilitating transactions between consumers, merchants, financial institutions and government entities across more than 200 countries and territories each year. Our mission is to connect the world through the most innovative, convenient, reliable and secure payments network, enabling individuals, businesses and economies to thrive. We believe that economies that include everyone everywhere, uplift everyone everywhere and see access as foundational to the future of money movement. Learn more at Visa.ca.

[2] Research was conducted by East & Partners on behalf of Visa Inc. in June 2019, looking at cross-border payments across 20 countries.

The post Visa and TD Modernizing Cross-Border Money Movement for Businesses with Visa B2B Connect appeared first on PaymentsJournal.

In a recently contributed piece for Forbes, Daniel Webber, founder and CEO of FXC Intelligence, discusses how the “crypto winter” has impacted many start-ups that have sprung up in the cross-border payments space in the past few years.

The article mentions that the potential dampening of this market is based on the regulatory framework that was just released by the U.S. Treasury Department, in response to the March 2022 executive order from the White House—which we have commented on. This causes crypto companies to look for profit opportunities and one area of obvious interest is cross-border payments given the FX implications.

The author questions the conventional wisdom around cryptos being cheaper and faster (overall just better) than traditional fiat methods. An example of the cheaper general belief, which he says is disputable given the underappreciated costs of moving value between wallets. He suggests that in many cases, traditional and crypto FX costs can be very similar, depending on the supporting cast behind the transactions. He then goes on to discuss potential crypto benefits, especially for remittances. The point being that cryptos are generally much more volatile than fiat currencies in longer windows, but sometimes less volatile in shorter timeframes (i.e.; Sri Lankan rupee)—and with the speed of crypto settlement versus traditional money transfers, it can be a differentiator.

The article also focuses on CBDCs as a real next step, so worth a read for interested parties.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Crypto Is an Opportunity for Cross-Border Payments appeared first on PaymentsJournal.

An article from Finextra summarizes an extract from a recently released borderless payments report from Mastercard. The reference report covers multiple markets including cross-border payments across the globe, including survey data from consumers and small businesses. But this summary mostly covers data around Canadian consumer respondents and their remittance activities. 

Generally speaking, more people are sending money cross-border than ever before. This made sense during the pandemic since little world travel was taking place. However, this trend is continuing in the post-pandemic timeframe. We know from other sources that the United States generates the most outbound remittance activity of any country—roughly $68 billion, according to the World Bank—but the article doesn’t mention the applicable equivalent in Canada.

Some of the summarized report findings for Canada include the relative importance of keeping personal and financial information secure (41%) and current confidence in such protection (87%), which seems fairly high to us. However, the broader survey confidence number was 88%, so not really a Canadian anomaly. This is just another indicator of the prioritization of cross-border transactions at the card networks. 

Remittances are less than $700 billion globally, but the B2B space has a much broader upside.  As we have pointed out in various postings of our own, cross-border payments has been a hotbed of innovation for the past few years, which includes newer initiatives that promise real-time capabilities. The World Bank (through the G20 facilitation plans now almost a decade old), has been encouraging participating countries to improve their efforts in the cross-border space, so we will continue to see faster and less expensive solutions as we move into this decade.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Canadians See the Value for Families in Cross-Border Payments appeared first on PaymentsJournal.

A Banking as a Service (BaaS) collaboration between Visa and Finastra is set to enhance cross-border payments for small and medium-sized businesses and individuals. The agreement enables Finastra to create a new functionality on its Payments Hub solutions to allow access to, and utilization of, Visa Direct, which in turn provides push to account payment capabilities across the Visa network. 

Finastra’s bank clients can integrate with Visa Direct through the company’s FusionFabric.cloud open development platform. It appears to be a win-win as Finastra further builds its Hub capabilities and Visa expands its network uses for payouts.

In a related article released by Payments Dive, Visa is increasing its efforts with B2B and remittances, given the large market that these combined uses account for. Although these estimates often vary widely, Visa’s Chief Financial Officer, Vasant Prabhu, indicated that the B2B ‘cardable’ market is $20 trillion opportunity, whereas remittances are currently an $800 billion market. 

We have been tracking the growing B2B strategies of the three major card networks for years so this is nothing new, but it signals the potential growth opportunities, and reinforces the ongoing focus.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Visa and Finastra Team Up for BaaS Offering appeared first on PaymentsJournal.

Cross-border payments have always been a challenge. In the digital age, it’s even more difficult to move money around the world quickly and cheaply. However, digital currencies like Bitcoin and Ethereum are beginning to change that. By using blockchain technology, these digital currencies can be sent anywhere in the world in a matter of minutes, and for a fraction of the cost of traditional methods. digital currencies are still in their early stages, but they have the potential to revolutionize cross-border payments. Central banks are even exploring the possibility of issuing their own digital currencies, known as CBDCs. This would allow them to take advantage of the speed and efficiency of digital currencies while still providing the stability and security that comes with government backing.

This piece is posted at NDTV Profit and speaks to the ubiquitous combined subjects of cross-borders payments along with digital currencies.  India’s Finance Minister stated that the budget includes funding for a pilot launch of a digital rupee in the 2022-2023 fiscal year.  There are numerous studies and various pilots underway across the globe, with mainly retail uses cases, but also an ingrained expectation that CBDCs will eventually help to reduce the cost of cross-border payments, initially in the remittance space but eventually C2B and B2B as well.

‘’Central bank digital currency (CBDC), to be launched this year, could become a tool for reducing time and cost for cross-border transactions, Reserve Bank Deputy Governor T Rabi Sankar said on Wednesday….The RBI has proposed to launch on a pilot basis this year, as announced in the Budget by Finance Minister Nirmala Sitharaman….In the Union Budget for 2022-23, the finance minister had said the RBI would roll out a digital equivalent to the rupee in the current financial year….”We have to understand that internationalisation of CBDC is crucial to addressing the payments issue that bodies like G-20 and Bank for International Settlements (BIS) are dealing with now,” he said at India Ideas Summit.’

We have pointed out a number of use cases for cryptos in the B2B space in recent member research. Momentum has been growing for several years around the potential for cryptos in wholesale uses, and stable coins as well as certain other currencies have been used in liquidity transfers.  However, the imaginings around CBDCs as a wholesale currency use is likely more than a few years away. While the cost effectiveness remains the most important dimension of cross-border digital currencies, fraud management remains a major concern as well.

‘There is a lot of scope for improvement in terms of both cost and speed, he noted….CBDC is probably the most efficient answer to this, he said, adding, for example, if India CBDC and the US CBDC systems can talk to each other, we don’t have to wait for settling transactions….”That massively takes out the settlement risk from cross border transaction that reduces time, that reduces cost. So, CBDC internationalisation is something that I’m looking forward to,” he said….Concerning fraud management, Sankar said digital payment needs to be scaled up while preserving system integrity, which essentially means technical stability….’”It just doesn’t mean that the technical failures of transactions have to be minimised, it also means that transactions themselves have to inspire confidence, we cannot have too many instances of frauds,” he added.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post India to Pilot Digital Currency – a Digital Rupee appeared first on PaymentsJournal.

The global supply chain network relies entirely on cross-border payments, and new research shows that the value of these transactions is estimated to increase from almost $150 trillion in 2017 to over $250 trillion by 2027, equating to a rise of over $100 trillion in just 10 years.

With this astronomical rise, business leaders should be prioritizing improving security and reducing the risks associated with intricate cross-border payments.

What are the challenges with cross-border payments?

According to The Bank of England, cross-border payments continue to lag domestic ones in terms of cost, speed, access, and transparency. Here is a look at these challenges with cross border payments in more detail:       

1. High costs: These payments are notoriously expensive due to the involvement of multiple parties across borders. The costs of market regulation also add up and pile on costs, alongside rising FX costs. In some instances, a cross border payment can take several days and can cost up to 10 times more than a domestic payment.  
2. Slow transactions: Cross-border payments can take approximately five working days to process, generally having longer settlement times. This could cause cash flow issues for businesses.
3. Security issues: Each country has its own regulations, adding multiple layers to security processes around even a single transaction. However, countries with less regulation tend to be hotspots for fraud and crime.This was seen during the $81 million heist on Bangladesh’s central bank in 2016.
4. Lack of transparency: Both businesses and consumers want transparency when it comes to cross border payments. In fact, a 2017 SWIFT and EuroFinance survey found that 64% of corporations want real-time payment tracking capabilities, while 47% wanted better visibility regarding the costs and deductions involved. This transparency is essential for tracking payments and avoiding hidden costs.

To tackle these issues, the Financial Stability Board (FSB) recently issued the report, G20 Roadmap for Enhancing Cross Border Payments, to make long-term improvements. The roadmap sets quantitative targets at a global level for addressing typical challenges such as speed, transparency, cost, and access. Targets such as ‘ensuring recipients receive the funds within one hour’ by the end of 2027 require commitment from the public, along with upgrades of every organization’s payments infrastructure to cloud automation.

Under these measures, automation can take the typical complexity out of cross-border payments and offer greater transparency. In turn, it reduces the risk of fraud and security breaches. supports economic growth and global development, and helps to increase profits for forward-minded companies.

The pandemic and global payments

If the pandemic did one thing, it brought to life the inefficiencies of the past, and altered the journeys of companies that have traditionally stuck to manual processes. Companies scrambled to find automated solutions to support remote work during quarantining, especially for back-office operations such as accounts payable. Businesses that already partially, or fully, adopted AP automation and payment solutions were ahead of the curve.

Automation meant that the AP team could work in real-time, from any device or location, to seamlessly pay invoices on time and maintain strong supplier relationships when retaining business mattered most. Many companies, however, recognized their strategic weaknesses in their global supply chains.

The value-chain shifts that began two years ago will fuel the need for automation to examine current supplier relationships and explore new ones in a global marketplace. With multiple currencies and regulatory protocols, automated payment solutions take the complexity out of international payments. As a result, acts of fraud and security risks are quickly and easily identified before they become costly problems.

Reinventing cross-border payments

So what can we do? With the current state of the global economy and the challenges of hybrid working, reinventing cross-border payments is crucial to retaining profitability and productivity.

There are many solutions that facilitate cross-border payments, Medius Pay, for example, ensures cross-border payments are sent the same day with no wire fees, cutting costs and saving time. International payments are sent through a global network of local bank accounts with full end to end transparency of settlement, reassuring the end user of the safety and accessibility of their payments.

With cloud AP automation, one interface can be used to make domestic and cross-border payments in real-time because the AP team and C-suite have the latest resources at their fingertips, regardless of time or location. An electronic invoice-to-pay process removes time-consuming and costly manual steps and takes control of security, audits, and payment approvals. Getting rid of manual processes also eliminates costly human errors and security breaches that impact a company’s reputation globally and profit margin.

As cross-border payments become the wave of the future in a growing global marketplace, AP automation and payments solutions are a necessary investment. Combining AP automation with payment automation can generate significant savings through rebates and discounts, helping companies realize a fast ROI on their automation investment.

The post Can AP Automation Improve the Pace and Security of Cross-Border Payments? appeared first on PaymentsJournal.

In a global economy, cross-border payments are an essential part of doing business. However, these payments can be complicated and expensive. In order to streamline the process and reduce costs, many businesses use a cross-border payment service. These services allow businesses to send and receive payments in multiple currencies, making it easy to conduct transactions with international partners.

There is another new entry into the cross-border payments space, this one from American Express and targeted towards small businesses in the U.S. The piece at Finovate summarizes the product description as being tied to small business cards, hence the rewards feature.  As readers of these pages will know, we have commented on cross-border before and one of the key issues with these payments is the complexity, so Amex strives to eliminate that obstacle with 12 currencies ready for payment.

‘American Express Global Pay allows U.S. businesses to make domestic and international B2B payments to suppliers in more than 40 countries and in 12 currencies using the mobile-optimized website. Eligible customers can earn one Membership Rewards point for every $30 in equivalent foreign exchange payments…..“Businesses today start, grow and compete on a global scale,” said American Express Executive Vice President of Global Commercial Services Dean Henry. “Our U.S. Small Business Card Members told us they want an international payment solution focused on simplicity, convenience and the chance to earn rewards – so we built American Express Global Pay to enable these businesses to easily and effectively manage their B2B payments globally on a secure platform, backed by the trusted service and unique benefits of American Express Membership.”

Readers can link out directly to the Amex announcement as well, which has some detail about a recent survey indicating that a great deal of small and medium sized business owners are expecting an increase in cross border trade in the coming year and find that x-border complexities are a problem.  More activity in this lively space.  No fee structure is explained but users will determine that when they set up a payment but before sending.

While American Express has not disclosed exact fees, the company said that it will display the fees when the business is creating the payment. “In addition to these fees, we also make money from the purchase and sale of foreign currency,” American Express said. “Recipient banks or intermediary banks may charge their own fees, which can reduce the amount delivered to your recipient.”

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post American Express Ventures into Cross-Border Payments appeared first on PaymentsJournal.

The globalization of the economy has led to an increase in the number of cross-border payments. A global payment is a payment that is made from one country to another. Global payments can be made for a variety of reasons, including trade, investment, tourism, and remittances. In order to make a global payment, businesses and individuals must have a bank account in the country that they are sending the money to. They must also have a way to send the money, which can be done through a wire transfer, credit card, or debit card.

This piece posted at Zawya is yet another on the topic of cross-border payments, with the geolocation in this case being Africa.  We have commented on this subject and location recently but this piece discusses the remittance scenario, mostly for Africans who live outside the continent as it seems.  There is a large annual remittance inflow and the costs remain some of the highest cross-border remittance payments charges in the world, if not the highest.  So the author discusses this and how fintechs are expected to come to the rescue.

‘For centuries people have crossed borders to live, work, and trade. While cross-border payment systems are crucial for financial inclusion and growth in a globalised economy, cost and efficiency challenges remain, particularly in Africa. Mark Dankworth, president of business development Africa at Ukheshe Technologies – a pan-  African fintech enablement partner – says fintechs are at the forefront of improving cross-border payments on the continent…“There has been a significant increase in the movement of funds through digital platforms over the last five years. As mobile penetration continues apace in Africa, the continent is ready to take the next steps toward cross-border solutions that are less expensive, faster and more secure than ever before….”As the next frontier for major expansion and innovation, new technologies are necessary in unlocking massive untapped potential,” says Dankworth.’

Although many readers will be familiar with the fact that mobile money transfers have become quite common in Africa during the past decade and more (e.g.; M-Pesa) apparently the cross borders transfers remain expensive.  Other issues also interrupt easy funds movement, such as the myriad of regulations that exists in each country, access to local funds and so forth.  The fintechs are apparently working with banks to overcome these hurdles, so we’ll see what happens with cross-border remittance payments over the next couple of years.

‘There has been a clear acceleration in the demand for online money transfers as African consumers become more comfortable with digital payment solutions. Dankworth says technologies such as digital wallets and payment gateways are some of the ways through which fintech is simplifying the complex cross-border payment process while also improving ease of use and convenience for end consumers….“Dropping the cost of remittances is where the biggest opportunities in the market now lie. In the African context, it will be vital for customers to feel in complete control of their money and for the solutions they use to be seamless, interoperable and easy to use, which is where fintech enablement partners like Ukheshe are making the biggest impact.”

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Cross-Border Remittance Payments to Africa appeared first on PaymentsJournal.

Digital technology is enabling more industries to expand outside of traditional borders to reach more customers and take advantage of new sales opportunities. However, some industries are still establishing the infrastructure they need to benefit from cross-border sales.

Business-to-business transactions are one such area with a lot of growth potential. But to realize the full benefits of selling internationally, B2B businesses need to address the challenges of cross-border payments to get the best ROI.

Why Are B2B Payments Going Cross-Border?

Like with other industries, this is an ongoing shift in how business is being conducted. It is projected that 95% of all purchases will be online by 2040, which makes selling internationally much easier. In fact, this comes with a projected $250 trillion value for all cross-border payments by 2027.

Much of this is driven by the adoption of new tech and software. The possibilities offered by blockchain technology and artificial intelligence allows businesses to automate more of their transactions, in addition to alleviating many of the complications that come with cross-border commerce.

Trends Reshaping Cross-Border Payments

The companies successfully expanding into new international markets understand the challenges and are taking specific steps to ensure their success. We’ve identified three trends from B2B sellers that are growing their cross-border payments:

• Accepting Additional Payment Methods: When we looked at customers who received invoices from B2B organizations, we found they’re increasingly using more modern payment types, specifically:

• 21% of payments are taken by credit card
  • 12% of payments are by local bank transfer or ACH
  • 13% of payments are by wire transfers

A majority of B2B sellers have recognized this evolution, as, according to a B2B Progressing Payments Report, 53% of them reportedly want to accept more electronic payment methods, which can include local payment methods such as digital wallets and virtual cards.

• Emulating a B2C Style for Transactions: While many B2B businesses are still being paid via legacy methods, B2B buyers are increasingly expecting a digital experience that mirrors the ease of B2C transactions. On average, 23% of B2B customers are required to pay in-person and 22% pay over the phone, compared to only 31% of customers who are able to pay online or via a mobile app. Those suppliers who want to compete for international business need to provide modern, convenient digital transactions through embedded payments or Payfac-as-a-Service capabilities.

• Employing Accounts Receivable (AR) Automation: Businesses are integrating AR automation for good reason, and those that rely on outdated, legacy and often manual technology are damaging their cash flow. According to the payments report, 29% of businesses were not able to process paper check payments because no one was in the office, and 39% were significantly delayed in processing check payments because of mail delivery. Those businesses that automate their AR process are better able to complete transactions, cross-border or otherwise.
  

To navigate the complex nature of cross-border payments, businesses must be willing to invest in the technology needed to overhaul their legacy systems and outdated payment methods. Of the B2B executives we surveyed, 95% agree their organization should be investing more in AR automation and digital payment technologies.

Future Outlook

Expanding into cross-border payments is more than just conducting business-as-usual with new technology. A majority of businesses, 68% by BlueSnap’s estimate, only process payments where they’re headquartered instead of through a local entity where their customers are located. These businesses are also likely to continue using payment processing services localized within their home country or rely upon only a few select banks to process their transactions.

Why is that a problem? Without local card acquiring, these businesses are less likely to successfully process cross-border payments. Of those companies surveyed for BlueSnap’s Cross-Border Digital Payments report, 40% had a payment authorization rate of just 70% or less. That’s more than lost revenue — it’s an inconvenience for buyers and an impediment to growth.

To succeed, B2B cross-border payments need to employ modern invoicing and billing solutions in combination with local card acquiring and support for local payments. Those businesses that ally with the right global payment partner and can efficiently provide these services will be the ones to successfully compete and grow.

The post B2B Cross-Border Payments Are Growing — Here’s Why appeared first on PaymentsJournal.

Artificial intelligence (AI) is having a major impact on the financial sector. Fintechs are using AI to develop new products and services that are transforming the industry. From chatbots that provide customer support to automated investment systems, AI is revolutionizing the way financial services are delivered. Perhaps most importantly, AI is helping financial institutions to become more efficient and effective. What does this mean for cross-border payments?

This piece is posted in Fintech Finance and discusses AI in the cross-border payments space, with various benefits increasing for the use of this latest gen tech.  We have been providing member research in this area as it relates to various uses across financial operations in treasury management functions.  The greater the adoption of digitized systems and processes, the more data that is made available for the nuanced algorithms that can help to reduce human intervention, which translates to lower cost and faster processing.

‘Recent research by IBM shows global uptake of AI is becoming more prevalent across all industries, with over a third (35 percent) of businesses reporting its use in 2022 – a four-point increase from the previous year. Another study by Nvidia has found that 37 percent of financial services companies plan to use AI in order to gain a competitive advantage. What’s clear from these figures is how AI has spread across multiple business practices, with fintechs investing time and resources in AI as a means to differentiate themselves from competitors.’

In addition to the speed of transactions the author also touts the potential improvement in the security of cross-border transactions as well.  This happens through AI’s ability to monitor suspicious patterns across a network and prevent fraudulent cross-border payments, keeping the money where it belongs and reducing reputational and regulatory risk as well. So once again the continued addition of digitization to financial processes allows for the broader and more effective use of various other tools that improve overall company performance.

‘“AI’s value from a security perspective extends to Anti Money Laundering (AML) screening processes. Financial providers are now developing technology that can verify transactions automatically, which removes the possibility of human error and also reduces processing time, since manual checks are no longer required,”….Naushad concluded, “AI is now established as an essential component for financial services and the companies that provide them. Companies that downplay AI’s significance will quickly be left behind by more enlightened, forward-thinking competitors who have taken the time and the effort to invest in and integrate AI into both their customer-facing products and services and their back-end systems.”

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post AI and Cross-Border Payments appeared first on PaymentsJournal.

The use of blockchain technology is growing rapidly, with applications being developed in a wide range of industries. One area where blockchain is particularly well suited is cross-border payments. The payments industry is complex, with numerous intermediaries involved in processing transactions. This can make payments slow and expensive, especially when dealing with foreign currencies. Blockchain provides a solution to these problems by creating a decentralized system for payments.

This posting is found at Fast Company and it reviews the potential for transforming the LATAM economies through improved payments, underpinned by cross-border blockchain technology and common digital currencies for cross-border payments, allowing for greater participation across the full breadth of businesses in the region. This is an ongoing theme across the globe, as many readers of these pages will know. The only real question now is where, when, and how.

‘For many business owners exporting products, it’s hard to entertain the idea of having to wait weeks to be paid. But that’s the situation facing entrepreneurs in Latin America. “It comes down to cashflow, and there’s a lot of uncertainty. You can’t have transparency of where your money is, and how long it will take to get paid, so it’s a case of wait and see for the business owner,” Gilbert Verdian, founder and CEO of Quant Network, explained…

.According to Deloitte, a complete structural transformation of the LATAM economy is needed to fuel growth. The World Bank says there is “enormous potential” in renewable electricity, but the largest transformation may result from accelerated digitization, which could create job opportunities and boost financial services in the region. Verdian wants to be part of this transformation, and it seems certain that blockchain—the revolutionary technology behind digital currencies that promises to automate transactions and transform industries—will play a key role.’

There are all sorts of initiatives underway in various global regions to improve intra-regional participation through better financial processes. This has been encouraged by the World Bank and BIS, and a number of private efforts have already been launched with expansion potential. The group mentioned in this posting is LACChain, which is a global alliance integrated by different actors in the blockchain environment and led by the Innovation Laboratory of the Inter-American Development Bank Group (IDB LAB) for the development of the cross-border blockchain ecosystem in Latin America and the Caribbean. Readers can link out through the article into both English and Spanish versions of their collateral. So progress is being made.

“It’s been more than a year since we started an ambitious line of work with Quant to enable a solution for tokenized money on LACChain,” says Marcos Allende Lopez, LACChain technical leader. “As a committed partner, they’ve brought exceptional expertise and technical proficiency to the project.”…

Quant’s work with LACChain to support interoperability and secure smart contract creation facilitates a range of use cases to help communities sustainably build the digital infrastructure of the future. “That’s when local businesses and citizens can actually start trading, and they’ll have the wallet on their smartphones and be able to use LACChain like any other app,” says Verdian…

As if connecting 12 countries isn’t enough, Verdian and LACChain have a bigger vision, where LACChain will be able to connect to other regional DLT ecosystems in America, Europe, Asia, and Africa. “We’re seeing the beginning of regional trade networks already,” he says, but Quant wants to see a time when all these closed-loop ecosystems are connected in one big global trading network…

“While blockchain technology is still nascent, as more companies, institutions, and governments embrace it, its potential can be fully realised.”

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Cross-Border Blockchain Can Transform LATAM Economies appeared first on PaymentsJournal.

The cross-border payments industry is in the midst of a major transformation. A new breed of payment companies is emerging. CBDC enables real-time cross-border payments between banks, and it has the potential to revolutionize the way cross-border payments are made.

Today, cross-border payments can be slow, unreliable, and expensive. They can take days or even weeks to process, and they can be subject to significant delays and fees. CBDC promises to change all that. With CBDC, cross-border payments can be made in real time, at a fraction of the cost of traditional methods.

This piece is posted in Ledger Insights and provides a brief summary of a just-published 61-page BIS report (from the Committee on Payments and Market Infrastructures) around the topic of CBDCs in cross-border payments. Interested readers can link out through the article and download the paper. The piece’s author goes through some of the reasons that better x-border payments are desirable (and the BIS has been encouraging innovation in the space for a couple of years) and why CBDCs have been considered as one potential solution. However, it seems that CBDCs as a quick fix will not be in the cards.

‘…The report was prepared for the G20 as part of a program to enhance cross border payments, where CBDC is one of 19 building blocks. Almost every suggestion in the paper comes with a caveat, leaving the message that CBDC will not be a silver bullet to address the frictions in cross border payments…

The problem statement is quickly dispensed with. Cross border payments involve high costs, low speed, limited access and insufficient transparency. Why these are such significant issues is taken for granted. And the answers to the ‘why’ question underline the reasons CBDC might not be the best tool, apart from regional applications.’

The summary then goes on to point out of some of the deficiencies to a CBDC global fix, including the need for interoperability and access to central bank accounts for non-banks and governance, to name several. It goes on the state that these things could be fixed, but nothing will be coming in the short term, despite potential benefits. Interested parties can read through. One might see some regional substitutes as a more reasonable goal over the next several years.

‘A quick read of the paper gives the impression of a cross border CBDC being a major opportunity. But to achieve its potential, there would need to be a massive willingness to both collaborate and change the status quo, which leaves more questions than answers…

If central banks don’t resolve the CBDC challenges, the problem will get solved in others ways. Some countries are addressing the remittance issue with bilateral agreements such as between Malaysia and Cambodia. A handful of countries with strong CBDCs and economies might use their own CBDC regionally. Stablecoins could end up getting traction for everyday payments across borders. Both of these raise dollarization issues. And BigTech can ride to the rescue.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post CBDCs & Cross-Border Payments: A Potential Solution, But Not Yet appeared first on PaymentsJournal.

When it comes to making financial transactions, speed is becoming increasingly important. In our fast-paced world, instant payments are becoming the norm, and the global markets are taking notice. Cross-border payments are one area where instant payments can have a major impact. Traditionally, international payments can take days or even weeks to clear, but with instant payments, the process can be completed in just a few seconds. This not only saves time, but it also reduces the risk of fraud and other issues. As the global economy continues to become more interconnected, instant payments will become increasingly important. For businesses and individuals alike, the ability to make fast, convenient, and secure financial transactions will be essential.

As most readers know, we keep a close eye on developments in the faster (and instant) payment space, both the U.S. domestic as well as global markets. It has been a very active area of innovation during the past six years with dozens of new systems launched and more underway. This referenced posting is in the Paypers and summarizes an interview with the CEO of the Pan-African Payments & Settlement System (PAPSS). The system works through participating central banks, which hold pre-funded local currency settlement accounts with directly participating banks. The cross-border currency positions are net settled once per day (11 AM UTC).

‘At a time when cross–border trading is high on the Africa’s agenda, a single continental market makes it necessary for homegrown payment gateway to facilitate trade and investment. PAPSS was adopted in July 2019 in Niamey, Niger by the African Union Heads of State as the payment and settlement system to support the implementation of the African Continental Free Trade Area (AfCFTA). It is a Financial Market Infrastructure that has been developed and initiated through a collaborative effort of the AfCFTA Secretariat, Afreximbank and the African Union Commission. PAPSS is expected to create new financial flows and successfully facilitate trade and other economic activities among African countries.’

The interview summary goes through a number of topics if readers wish to link out to the posting. The system launched commercially in January of 2022 and currently has eight central banks and an unspecified number of commercial banks signed up. The ambition is to have all of the commercial banks on the African continent connected by end of 2025. Worth a quick read through for those keeping current with cross-border and instant payment initiatives globally.

‘As a new payment system, the key hurdles it faces are:

Acceptance and adoption – It’s always a challenge to move people from the ‘status quo’. It will take an appreciation of the value that PAPSS is bringing in terms of speed, low cost and guarantee of receipt of funds by the commercial banks and their being able to translate this to their customers doing cross border transactions. PAPSS is equipping its participants (today, commercial banks and in the future, fintechs) with the ability to articulate these benefits in a way that empowers their customers.

Adapting to new standards – PAPSS uses the latest standards in payments, ISO 20O22. While similar to the current standards, it will still require an adjustment to use these standards while the world migrates later this year. PAPSS is actively supporting its participants in this transition.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post PAPSS Aims to Connect All African Commercial Banks by 2025 appeared first on PaymentsJournal.

This article is posted in Bloomberg and discusses plans by India’s NPCI, which is an umbrella organization for operating retail payments and settlement systems, to create less expensive cross-border payments. India has been on a digital payments transformation path for the last decade and NPCI is responsible for creating the new backbone, while managing a number of different systems. One of the systems managed by NPCI is the Unified Payments Interface (UPI). This is a real-time system for instant transfers, using digital remittances, between individual bank accounts and also between consumers and merchants.

‘Indians overseas remitted $87 billion last year, the biggest inflow for any country tracked by the World Bank. The remittances market, where it costs $13 on average to send $200 across borders, is ripe for disruption, according to Ritesh Shukla, chief executive officer of NPCI International Payments Ltd…

“We have displaced cash in India to a large extent and are now looking to repeat the success in cross-border corridors,” said Shukla. “Overseas Indians can use our rails to remit money inwards straightway into their bank accounts, and for the markets where Indians travel frequently, we will build acceptance for our instruments.”

The plan underway is to connect the UPI platform to payments systems outside of India in order to facilitate faster digital remittances between countries. Data in the article suggests that the transaction value across UPI has roughly tripled since May of 2020. Many readers will know that there are numerous initiatives underway globally for creating better cross-border experiences and expenses, primarily retail in nature but also involving some wholesale payments as well. This initiative by NPCI bears watching as execution gets going, which we assume will be forthcoming as an ongoing series of announcements.

‘UPI’s linkage with overseas nations will further anchor trade, travel and remittance flows between the countries and lower the cost of cross-border remittances, the Reserve Bank of India said in a report…

The Reserve Bank of Indiaset up NCPI along with the country’s lenders to make retail payments faster, more accessible, and cost-efficient. A user just needs a virtual payment address to instantly transact with vendors and exchange cash between friends or family members.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post India’s NPCI Is Facilitating Massive Amounts in Digital Remittances appeared first on PaymentsJournal.

B2B cross-border payments refer to the digital tools used by businesses to send and receive payments from vendors and customers in other countries. B2B cross-border payments can be used for a variety of purposes, including global payments, supply chain financing, and remittances. In recent years, there has been a surge in the use of B2B cross-border payments, driven in part by the increasing globalization of business. B2B cross-border payments are typically facilitated by banks or specialist payment providers. However, there is a growing trend towards the use of digital currencies and blockchain-based solutions for B2B cross-border payments.

For those interested in what’s happening in the UAE, this piece from the national news business section discusses a recent report from Mastercard (borderless payments) that covers consumer and small business cross-border payments across multiple markets. This particular posting is about the UAE, which is also covered in the same report. Readers who have been following the subject will have picked up on the increased interest in e-commerce and reaching across the borderless (somewhat) internet for more personal and client access.

‘Up to 44 per cent of SMEs in the Emirates said business has been better, with 66 per cent posting growth in online sales and 77 per cent planning to tap into more international markets moving forward, MasterCard said in its annual Borderless Payments Report…

Cross-border payments were a critical component in this rise in activity, with almost two thirds (64 per cent) saying it enabled their business to grow and 53 per cent claiming they are now leveraging this platform more than in the pre-pandemic era…

“With international travel halted and government boundaries sealed tight, cross-border payments helped keep millions of people and businesses afloat,” Stephen Grainger, executive vice president for cross-border services at MasterCard, wrote in the report.’

While we have covered e-commerce in the B2B space in member research, this particular piece is more oriented towards consumer and small business activity. However, the common ground is the surge in comfort with using the digital tools being made available by vendors sensitive to more global payments needs. Where this is most clearly seen is in merchant acceptance capabilities (pay how you wish) and the growing ease of use and lower cost of remittances during the past several years. Some readers may wish to review and click through to the broader study to gain some valuable insight.

‘Businesses and consumers across the region and the world continue to shift towards online economic activity as technological advancements have provided safer and more convenient ways of fulfilling transactions…

The UAE’s e-commerce sector is forecast to grow 60 per cent to more than $8 billion by 2025, from 2021, according to a recent report by Euromonitor International…

Globally, the market is expected to hit $55.6 trillion by 2027 at a compound annual growth rate of about 27.4 per cent, from an estimated $13tn in 2021…

The growth in earnings of UAE SMEs is almost at par with the global average of 46 per cent, up from 39 per cent in the prior year, with two thirds saying they have recovered to at least pre-pandemic levels, the study added.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post SMEs in the UAE Are Growing Thanks to Digital Tools and Cross-Border Payments appeared first on PaymentsJournal.

This piece is in Forbes and discusses one of the hot button topics of the past year or two, something we have covered in both member research and various postings on these pages as well. That subject is BNPL and in this case, the contributing author focuses on the relative absence of x-border options provided by those companies offering BNPL services, which then leaves a demand gap. We typically cover B2B uses, which for this space to date is generally limited to the small business arena. 

‘This landscape is putting the industry under considerable pressure, but there are undoubtedly still major opportunities in the space. A recent report by my own company, FXC Intelligence, found that the vast majority of BNPL offerings can be grouped into seven categories – app, browser extension, B2B, card, finance, marketplace and super app – although many players such as Affirm, Klarna and Zip operate across multiple models…

Recent launches from companies including Apple, NatWest, Santander and Zopa, as well as new offerings from those already in the space, including PayPal, show that there are still major opportunities in BNPL. However, one area that remains significantly under-explored is cross-border BNPL.’

The author goers on to discuss various places where BNPL lenders are leaving money on the table, including the merchant transaction fee that they typically charge a store, the actual currency conversion, and also potential late fees where applicable. Most of these scenarios are retail transactions of course, and x-border is likely in the 10-15% range of total (but we expect growing, especially in B2B cases), but there are some pretty decent and non-exotic corridors open (e.g.; U.S. and Canada) so it should be considered. The author also talks about some of the hurdles, and for many the risk profile is not worth it. Worth a quick read to get the full point.

‘Despite the challenges of cross-border BNPL, it does represent a vital means of competing in a market that is becoming increasingly crowded. Larger players with a strong international presence already offer the service, and if it provides merchants with additional sales, it is going to present a strong additional case for smaller players looking to punch above their weight.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Cross-Border BNPL Is Under-Explored appeared first on PaymentsJournal.

Here is a posting in Finextra about the relatively complicated FX market and how banks in general have not adapted to a business model or systems to accommodate the needs of SMEs on cross-border exchanges. The author is with a fintech that delivers a payments platform seemingly intended to support banks in such an endeavor (although we have not had a briefing so this is an educated take). Those readers familiar with x-border and the way banks manage their FX departments will know it is a select few that scale up and it is in the form of correspondent banking services, which can tend to be a bit opaque. So the author is advising banks to get on their giddyap and move faster to solve the problem on behalf of an SME space that may be drifting away.

‘A very big shift in market appetite is occurring. While businesses like OakNorth, Shawbrook and Redwood – the brand-new challenger banks in the UK – are laser focused on serving the SME market, there is no challenger bank laser focused on serving SMEs when it comes to foreign exchange (FX). It is for this reason that we have seen an almost biblical migration of SME’s away from traditional banks to seek better FX and international payment services elsewhere. There is an opportunity here for traditional banks to leverage, and they must before it’s too late.’

I am currently at an event that is knee deep in middle market trends in payments and it seems fairly clear that banks are not ready to cede vast portions of a market that represents roughly a third of U.S. GDP (likely a similar economic dynamic across the globe, perhaps even greater). There is certainly fintech representation since they can move more nimbly so collaboration is an ongoing key, as it has been for several years. Interested parties should read through the provocative posting to gain some insight.

‘This will progress into a continued drive to further transparency in pricing, and FX will become more embedded in a payment flow as the margins will be so fine…

There has been a real shift especially when it comes to cross-border exchanges and FX, but what we’re seeing is a real desire for transparency and a real desire from customers for fairness. There is an opportunity for banks to spin up and create revenue driving propositions very, very quickly here.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Banks Must Accommodate SMEs on Cross-Border Exchanges appeared first on PaymentsJournal.

During times of economic volatility, remittances can be an important source of much-needed funds, particularly in emerging markets. The remittance economy refers to cross-border transactions from a migrant worker to their home country. In many developing nations, remittances have been key to driving financial development and growth.

Research shows that following a drop in 2020, global remittances are expected to increase by $31 billion in 2022 as economies recover from the coronavirus pandemic. As a result of the Ukraine-Russia conflict, for example, the World Bank estimates that remittances to Ukraine will increase by 8% to $20.5 billion this year. In fact, remittances in the country were already on the rise with the World Bank saying such payments from Ukrainians abroad spiked by 28.3% in 2021, surpassing $19 billion.

In this article, Rajesh Dhuddu, Global Head for Blockchain & Metaverse Practice at Tech Mahindra, explores the issues with remittances today and the potential for blockchain to transform legacy processes.

Why is it important to enable seamless cross border payments?

Remittances play a vital role in supporting the people and economies of many countries around the world. However, there is still much to be done to optimise cross border payments.

Traditional methods have remained largely unchanged, despite the remittance economy growing by billions in the past two years alone. In most circumstances, a remittance transaction takes five days, but in today’s digital economy this simply isn’t good enough – nobody should have to endure a long wait to receive money from overseas, particularly when that money often funds crucial goods such as food and fuel.

It’s clear that the remittance process needs a revamp – what are other faults with the current system?

Remittances have various points of friction, including a lack of transparency, slow settlement, and high costs due to regulatory complexities and, in some cases, a lack of competition. According to the World Bank, the global average transaction cost for sending $200 to another country is 7%. With remittances being a lifeline for many families during times of crisis, regulators and payment innovators must come together to provide seamless cross-border solutions that are both accessible and affordable.

What’s next for cross border remittances?

I predict that the payments industry will see widespread adoption of blockchain technology. Blockchain has a promising future in the remittance space as it uses encrypted distributed ledgers to enable reliable and real-time transaction verification without the use of intermediaries such as correspondent banks. This means that both the sender and the receiver have complete transparency with minimal fees. Additionally, those on the receiving end will be able to access funds almost instantly.

As blockchain adoption within the BFSI sector becomes more widespread, the only intermediaries needed will be a mobile wallet or banking app and the blockchain network. Service providers can then use blockchain-based payment systems to transmit and receive money between two people, at any point in the world.

The ability to eliminate unnecessary third parties will reduce transaction costs and speed up the completion of remittance transactions. In this case, it can take just minutes or even seconds for a remittance transaction to reach its destination.

How does blockchain ensure secure transactions?

Blockchain remittance uses cryptography for verification and security. While businesses can have private blockchain networks whereby a single organisation has authority over the network, most blockchain transactions will be recorded on a public ledger. Blockchain organises data into blocks, which are chained together and are almost impossible to manipulate. A public ledger therefore ensures the highest level of privacy while being open for anyone to participate. In short, blockchain remittance transactions will be secure, private, and verifiable.

Can blockchain help to improve accessibility to lending solutions?

Yes. Blockchain eliminates the need for middlemen, providing lenders with competitive loan offers and secure transactions. Smart contracts based on blockchain ensure that both loan seekers and lenders agree to feasible terms for things like proof-of-funds and payment planning.

These real-time contracts validate and record transactions without requiring the use of expensive lawyers and banks – the decentralised nature of alternative lending allows borrowers to access a larger pool of competitive financing offers. This is particularly useful for consumers like migrant labour-workers, as a means to send money back home in a way that is safe and affordable. For this reason, blockchain technology is increasingly being adopted for lending services and this remittance data can be used by lenders in respective home countries as a means of income proof.

What is needed for blockchain to be widely adopted?

There is a lack of regulatory clarity when it comes to blockchain technology, and this acts as a crucial roadblock for mass adoption. When it comes to keeping pace with rapid advances in technology, regulatory bodies have always struggled to keep up.

The scepticism with which policymakers in the world’s leading economies have approached blockchain has hampered innovation and progress. This viewpoint is gradually changing however, and governments and other public bodies are beginning to recognise the benefits of this technology. I expect that in the coming years, we will see regulatory systems in place that promote innovation but always keep consumer protection front of mind.

The future of blockchain remittances

Experts have argued that global remittances can help fuel and develop a domestic financial system, but it is important to acknowledge that blockchain is not a silver bullet for reducing a country’s reliance on foreign finance. In the current macroeconomic climate, however, it does have a significant impact on peoples’ cash flow, spending and purchasing power, and even their ability to save.

In the near future, blockchain will eliminate the constraints of traditional remittance systems. Many countries, especially during times of crisis, rely on remittances. It has never been more critical for these economies, as well as the families on the receiving end, to receive their payments during times of economic volatility.

The post Innovating Global Remittances: The Potential of Blockchain appeared first on PaymentsJournal.

This posting is found in The Economic Times and discusses the difficulties surrounding forex operations in conducting cross-border commerce. The author references the acronym MSME (used in India to summarize Micro, Small and Medium Enterprises) as the most vulnerable entities in this area of concern. The specific issue is of course the value fluctuations found on forex markets, which can cause a fair amount of day-to-day risks for a company heavily involved in x-border commerce.

‘A fall in the Indian rupee — which also means a stronger dollar — helps exporters earn comparatively more for their exports, making Indian exports more competitive. But a decline in the currency also means that imported inputs become expensive for domestic industries, affecting MSMEs the most. Lots of MSMEs do exports as well as raw material imports. Therefore, any steep depreciation in the rupees cuts them both ways. Industry estimates have revealed that imported inputs form about half of India. The Federation of Indian Export Organisations recently flagged that while rupee depreciation would help spur exports, it would also raise input costs for the downstream manufacturing sector. Given this situation, exporters would prefer that there is no drastic volatility and fluctuation in the currency of the trade. Such stability will also help small businesses in better financial planning.’

The piece goes on to discuss other issues around forex compliance and remedies or solutions available to offset risks. Such things include hedging methods and letters of credit. Of course, one of the main impediments, especially for smaller companies, is simply the lack of knowledge and prevalence of analog processes, which remain fairly common even to this day in cross-border trade, although many digital alternative solutions have become available in recent years. Readers interested may want to browse the piece for some ideas on overcoming forex knowledge deficiencies.

‘Pratik Sharma, the COO at Automaxis, a platform connecting freight, documents and payment in cross-border trade, vouches for tech adoption to ensure deals go through smoothly. Exporters sit on a major currency fluctuation risk as they ship goods and get the payment only after a certain period. They may end up at a loss in case the currency rate changes. “Exporters can know the current forex rates through 3rd party API services that can be integrated into the legacy systems or apps. They can also get predictions about future prices. Exporters can also select the duration and decide whether to go for forwards contracts or options in order to hedge the currency arbitrations,” adds Sharma...

To resolve documentation issues in cross-border trade, his firm has come up with a blockchain platform for secure and speedy transfer of ownership of bills of lading in real time. In usual course, this paper passes through at least 3 courier services and takes 7-10 days to reach the destination, claims the firm, adding that technology can be a great saviour for exporters in tackling various forex requirements.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post The Difficulties in Foreign Exchange for Enterprises appeared first on PaymentsJournal.

This posting is in VentureBeat and written by a senior at a blockchain payments network. The piece essentially contrasts the globally dominant SWIFT network for financial transaction messaging with the rising interest in and use of blockchain networks for similar purposes. We have been covering this general topic on these pages and in member research now for some time, therefore many readers will be familiar with the innovations that have been happening and will continue to occur in x-border transactions. Some readers will also have viewed a recent webinar conducted by Mercator as it relates to Russia sanctions, which includes denial of access to SWIFT for various Russian banks, which included discussion around alternative networks and CBDCs.

‘SWIFT has made it much easier to dispatch cross-border payments and has established itself as a dominant player in global financial transactions. But only recently has it gained mainstream attention, when the United States and European Union removed key Russian banks from the cooperative, including Bank Otkritie, Novikombank, Promsvyazbank and more, to further economic sanctions that started in February 2022…

As the financial industry homes in on SWIFT, it begs the question, is there a better and faster way to accomplish cross-border payments? Many are now seeing blockchain technologies become the mechanism for driving the next generation of global finance solutions.’

The author goes on to review some of the inherent benefits associated with blockchain-based transactions, including speed, cost and security. The blockchain route as an alternative to SWIFT has been brewing since around 2016 when Ripple publicly challenged SWIFT at events around SIBOS in Switzerland that year. Other networks have since grown up as well and then CBDCs also began to take root over the past several years. So the alternative(s) remain active and growing, and it is a matter of time as to how large a role they play in the future. As pointed out in the previously mentioned webinar, one of the downsides to weaponizing financial transaction systems (justifications aside) is that a greater focus will be placed on alternatives to the status quo, which was already underway anyhow.

‘With blockchain’s elimination of reliance on intermediaries, international banks can connect directly to one another on the same network, cutting down time and resulting in minimal fees. While current cross-border transactions are costly and can take several days, blockchain technology enables them to take place in a matter of seconds. These transactions can also be better tracked, as the blockchain keeps a record of all transfers of data, which are stored and timestamped in the master ledger…

Banks that invest in decentralized systems and adopt blockchain technology will soon realize its many benefits. With regulations in place for commercial banks, there will first need to be standards and guidance established. Once these standards are established, financial institutions will have the opportunity to redefine the entire industry and prove blockchain’s transformative use cases for global finance.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post SWIFT vs. Blockchain appeared first on PaymentsJournal.

This posting is in The Banker and discusses the topic of cross-border payments, which is an area of global financial transactions that has become a hot point of both scrutiny and innovation during the past five years. We have covered this through member research and numerous tracking posts on these pages as well. In this piece, the author focuses on recent releases from BIS’ Committee on Payments and Market Infrastructures (CPMI) on the cross-border topic. Many readers will know that there is an innovation hub at BIS that is in process of testing improved cross-border capabilities as well.

On May 12, the CPMI released two reports that suggest that the answer to the long-standing challenges inherent in cross-border transactions identified by the G20, including high costs, low speed, limited access and opaqueness, is two-pronged: extend the operating hours of real-time gross settlement (RTGS) systems; and expand access to RTGS systems to non-bank payment service providers (PSPs), foreign banks and financial market infrastructures (FMIs)…

According to the report, ‘Extending and aligning payment system operating hours for cross-border payments’, the benefits to extending RTGS operating hours across jurisdictions include faster payments and settlement, improving liquidity management and reducing settlement risk…

Providing greater access, on the other hand, could foster competition and innovation by levelling the playing field and reducing barriers to entry; improve efficiency through shorter transaction chains; and promote financial inclusion and improved remittance services through lower costs, increased innovation and improved processing speed, according to the other report, ‘Improving access to payment systems for cross-border payments: best practices for self-assessments’.

Indeed, many readers may already know that extended operating hours have occurred at Fedwire and CHIPS, with further movement towards operating extensions aligned with the migration to ISO 20022, now expected to start in late 2023. The other ‘prong’ of granting greater access to non-bank members is also on the table. Obviously this opens up further risk related concerns, but momentum is building for sure. Worth a quick read on the pros and cons.

‘Expanding access to new participants, such as non-bank PSPs, FMIs and foreign banks, also throws up risks and barriers, including changes to legal and regulatory frameworks, as well as increased reputational, operational and financial stability risks for payment system operators and central banks…

And despite the apparent simplicity of the two solutions, the majority of the 82 jurisdictions surveyed by the CPMI are far from making them a reality. For example, 40 jurisdictions are open less than the average 11 operating hours on working days, with 21 featuring eight operating hours or fewer per day. Only four jurisdictions – India, Mexico, South Africa and Switzerland – have operating hours of 24 hours or nearly 24 hours per day on working days, only eight having any weekend hours and only five operating seven days per week.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Research and Innovation from BIS for Cross-Border Capabilities appeared first on PaymentsJournal.

This piece is found in Finextra and reviews a new offering from Rapyd, the London, UK-based fintech that provides platform services to fintechs. In this case, the firm is announcing the move into cross-border commerce via the use of virtual accounts. We had written a member research piece last year on the rise of virtual accounts as a treasury management tool, supporting the use of POBO/ROBO models for internal banks and simplifying payments reconciliation across multiple business units. So, Rapyd is offering this concept as a way to improve the management of payouts across various international markets without the burden of managing a local physical bank account. The virtual account trend has been most prevalent in Europe but is spreading into other markets now.

‘Rapyd… today announced the launch of Virtual Accounts, a vital product empowering businesses to expand globally while supporting local payments. This new offering allows organizations anywhere in the world to securely and reliably accept local bank transfers across over 40 countries in more than 25 currencies, including the US, UK, EU, and APAC regions…

The launch of Virtual Accounts comes at a crucial time for businesses searching for payment support to allow them to tap into the global marketplace. While 93 percent of businesses report cross-border commerce is a high priority for their organizations in 2022, nearly 1 in 4 say supporting local payment methods is their biggest operational challenge holding them back1.’

The posting goes on to discuss several Rapyd partners and business use cases (including e-commerce payments acceptance and BNPL) as ways to utilize the virtual account concept, supported by several features of the firm’s platform. So as the PaaS/BaaS trend continues to expand globally, the addition of virtual accounts as a tool just follows that logical progression of digital platform services now at the disposal of fintechs.

‘Virtual Accounts can be set up to match the needs of businesses as they grow, with as many Virtual Accounts as required to collect and organize funds across countries, currencies, and customer needs. Using Rapyd’s single API, Virtual Accounts can be used with Rapyd Collect, Rapyd Disburse and Rapyd Wallet to empower local and cross-border payment acceptance and distribution…

Businesses can have as many Virtual Accounts as needed and allocate them by country, currency or customer, but still only use a single Rapyd Wallet.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Rapyd Launches Virtual Accounts for Cross-Border Payout Management appeared first on PaymentsJournal.

Real-time payments (RTP) is a type of electronic payment that allows for the immediate transfer of funds between two parties. Unlike traditional payments, which can take days or even weeks to process, RTP payments are typically processed within seconds or minutes. This makes them ideal for situations where time is of the essence, such as emergency situations or online shopping. RTP is made possible by cross-border cooperation between global card networks, which allows for the instantaneous exchange of funds between banks in different countries. As a result, RTP has the potential to revolutionize the way we make cross-border payments.

One of the most exciting use cases for real-time payments, in my opinion, is really beginning to take shape. As Finextra reported in this article, EBA Clearing, SWIFT, and The Clearing House have been working together for some time on their IXB initiative and they are now ready to pilot with a market-ready solution expected in 2023. There have been other examples of real-time cross-border products in Asia and the Nordics, and let’s not forget that the global card networks have been offering fast cross-border transaction options for years now. But this represents the opportunity for the U.S. real-time payment rails to connect with Europe, with interesting opportunities for both consumer remittance and corporate activity. Here’s an excerpt from the article:

The IXB project follows proof-of-concept trials conducted in October with the support of seven financial institutions. The PoC [Proof of concept] demonstrated the ability to synchronize settlement in one instant payment system with settlement in the other and to convert real-time messages between both systems.

Based on the ISO 20022 message standards, Swift Go and the instant payment systems of EBA Clearing and TCH, the service initially will support instant payments in the US dollar and euro currency corridor.

Russ Waterhouse, EVP for product development and strategy at The Clearing House, says: ”The trans-Atlantic pilot service will provide valuable input for the development of a fully-fledged IXB service to meet customer expectations across the globe.”

It is envisaged that the IXB pilot will be followed by a full service offering in 2023.

Jean-François Mazure, head of cash clearing services at Societe Generale, says: “From a user experience perspective, we believe that the IXB initiative represents a significant step towards a faster trans-Atlantic payment corridor, removing frictions and bringing value to all our customers, both individuals and corporates.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Real-Time Payments: Cross-Border Dollar and Euro Payments Take Shape appeared first on PaymentsJournal.

Not a day goes by without some payments posting that reflects cross-border and/or crypto (often combined) events and trends in some fashion. This piece found in JDSupra discusses the increasing use of digital assets in remittances. Again, for those who do not closely follow the x-border space, remittances are generally associated with person-to-person (P2P) funds transfers, as opposed to other use cases. This particular posting is about that space, with a particular focus on Latin America. 

‘One of the most promising benefits of digital assets is the ability to move value over the global internet nearly instantaneously, in immutably recorded transactions. For many people in warzones or geographies with limited access to banking or payment card infrastructure, this capability is critical and can often be life-saving…

Remittances from individuals with ready access to banking and credit resources to family members or friends in geographies without such access to more traditional payment methods, continue to hit annual records. According to the World Bank, remittances to low- and middle-income countries reached nearly US $600 billion in 2021, with around $100 billion flowing to Latin America. These remittances have typically been saddled with sluggish settlement times, unfavorable exchange rates, and onerous commissions and fees often levied by the issuing bank, the beneficiary bank, and a correspondent or intermediary bank in between. (According to the World Bank, “remittance costs are exorbitant in smaller corridors”). Add to that infrastructure deficiencies, transaction limits, weekend and holiday blackouts, multiple levels of verification in each country, money laundering controls, possible international sanctions, and internal capital controls, and the frictions that those seeking to transfer funds face can be daunting.’

We first started advising members of the coming crypto mainstreaming a couple of years ago in these pages and in member research, which was given a general boost among central banks with the relatively unexpected intro of Libra back in 2018. The consumer use case and somewhat narrow popularity of crypto in certain transactional uses was already underway, but the private crypto intentions of Facebook provided some motivation for serious central bank consideration (or some might say intervention). In any event, the use of cryptos as a means of international funds transfers is one of the innovative ways to bypass the legacy processes and expense associated with x-border. BIS and the World Bank have been pushing the P2P cross-border innovation button for several years now, in part due to the underserved populations in various developing markets. One of the keys to further ubiquity is regulatory scrutiny, so we expect lots more to come on a continuing basis.

‘A critical factor that could accelerate adoption of digital assets will be jurisdictions recognizing that digital assets are here to stay, and providing adequate legal frameworks for developers, exchanges, and custodians to operate in a compliant manner. Some countries have taken the approach of banning digital assets outright, as a threat to their sovereignty; others have adopted them wholeheartedly, including allowing bitcoin the status of legal tender. But the middle way may be the most attractive. Governments would retain the ability to set the regulatory and enforcement parameters, but individuals would enjoy the benefits of transacting in digital assets. That arrangement is a win-win for everyone, especially those who rely on international remittances for their most basic needs.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Using Crypto in LatAm to Circumvent Legacy Cross-Border Remittances appeared first on PaymentsJournal.

This article is posted in The Paypers and penned by a senior at Nium, the Singapore-based fintech specializing in cross-border money movement. The author provides an overview of steps that corporates can take to improve the overall funds transfer experience. Many of these things we have covered in these pages (in various use cases as well) and also in member research, therefore some readers will be familiar with certain ‘best practices’ in this age of multiple cross-border innovations now available for adoption. Until just a couple of years ago, most of these tech advancements in x-border were on the remittance (P2P) side, and to some extent in payroll disbursements (keeping up with gig economy trends). Now these advancements are extending into B2B use cases, which have generally been dominated by traditional correspondent banking models.

‘Over the last ten years, the industry has made great progress in terms of cross-border payments, especially at the B2C and C2C level, yet the B2B segment has lagged behind, due to several issues that regard legacy systems and a struggle to keep up with a changing regulatory environment…

For example, there is still a high reliance on manual processes, a lack of interoperability between platforms, and to complicate matters further, different regulations distract businesses from other projects that could bring a lot of profit. These issues could lead innovation to become a pursuit of minimum viable products and a failure to grasp substantial opportunities.’

The author goes on to point out various things that are contributing to the improvements in cross-border delivery, not the least of which is the ongoing testing of real-time cross-border transfers between sovereign instant payments systems, which has been a trend for the past two years. Certainly one of the hurdles to overcome in adding multiple trading or business relationship counterparts across various foreign markets is the need to comply with local regulatory requirements in terms of accounts, data, and last mile delivery. This is a key issue and one way that savvy fintechs can overcome such concerns on behalf of corporates. A dynamic space that keeps on evolving.

‘Our goal is to overcome inertia in B2B payments. The era of checks and faxing purchase orders has long passed, and one of the best practices would be to actually be aware of the digital evolution and check carefully to see what you’re missing out on a competitive edge, how you can get money faster, how you can ease the payment processes for your customers. For this reason, we bring the embedded finance mindset into play…

It is also important to select the right payment provider, one that focuses on scalability, with an enriched API suite so that your payments can be on the right platform at the right time. Nium has a global presence, enabling payins, payouts, card issuing, and many other services, all at a global scale.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Dynamic Evolution in Cross-Border Payments appeared first on PaymentsJournal.

This posting is found in Outlook and speaks to the cross-border remittance space. We have often commented about x-border in these pages as well as in ongoing member research, given the high profile of such transactions in recent years. Much more innovation has been occurring in the space due to technology enhancements (blockchain, instant payments, etc.) as well as the ongoing commentary from the World Bank and other global entities around the cost of these transactions, particularly as it relates to P2P transfers.

As many will know, remittances are generally defined as P2P transfers, while other use cases are B2C (payroll, insurance payouts, etc.), C2B (bill pay, rent, etc.) and B2B (goods and services). The total of all these use cases is estimated by some to be in the range of $150 trillion annually, although the author seems to ascribe this value to remittances only, which is likely a wording issue. Remittances are a fairly small portion of overall cross-border value transfers, but nonetheless gain lots of attention due to individual consumer cost. In any event, the author makes the point that fintech generally improves the overall throughput and experiences for these transactions, which has been an ongoing trend now for years. The author points out certain corridors of value transfer. As use experiences beyond P2P continue to evolve, we will keep you posted.

‘Fintech companies and cryptocurrencies are revamping the way technology is used. Often, such transactions are high in volume but low in value. “In many cases, the formalities, paperwork etc., required for a ‘transaction type’ are the same irrespective of the amount. Hence, the large-value transactions become lucrative while the lower-value transactions become cumbersome for the bank (to process). Technology helps banks automate many of these processes and converts the ‘dislike’ into ‘like’ for such transactions. Moreover, the ability to transact 24×7 and across time zones is a huge benefit from a customer experience perspective,” says Contractor.’

‘Global cross-border remittance is a growing opportunity, with payments volumes expected to cross the $156 trillion mark in 2022. However, new use cases are emerging every day. For example, a dentist importing a dental chair from Germany is also a cross border transaction. Travel, education and healthcare-related cross border transactions are some segments that are seeing high growth, says Contractor. Banks would require technology to cater to this growth, something that fintech companies provide, he adds.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Innovative Fintech in the Cross-Border Remittance Space appeared first on PaymentsJournal.

No other area of payments has seen more technology focus over the past several years than the cross-border space. Global economies are becoming increasingly interdependent, creating a growing need for consumers and businesses to send cross-border payments in real time. The annual volume of cross-border payments exceeds $150 trillion. Innovation has been fueled by the need to progress from traditional systems and banking models to more modern, fast, and transparent experiences.

Historically, the interoperability required to enable a common payments system between the banked and underbanked has been lacking, limiting market penetration to underserved populations and diminishing the global commerce opportunity pool. Both the G20 and the Bank of International Settlements (BIS) have been publishing their thoughts on the cross-border payments space for several years now. While great strides have been made, there is still more work that needs to be done.

To learn more about how banks and fintechs can differentiate themselves by leveraging polyfunctional cross-border payment rails that facilitate real-time connectivity between legacy payment rails and new alternative channels, PaymentsJournal sat down with Cecilia Tamez, Chief Strategy Officer at Xe Corporation, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The unseen difficulty of cross-border payments

What makes cross-border payments such a different animal from domestic payments? “The simple answer is legacy cross-border payments are slow; they are clunky; they lack transparency and inclusion in the form of where funds are sent to and in terms of payment channels,” explained Tamez. “The fundamental problem is that the value chain is disjointed.” Since nobody owns the cross-border experience end-to-end, there is low transparency, low predictability, and no standardization.

Readers may be familiar with SWIFT, the international payments messaging network that offers a standard rail for payments information. “But it’s just that; it’s a messaging network,” Tamez said. “It’s an exchange of data between two banks, and it doesn’t actually provide the settlement.” SWIFT does not automatically connect a financial institution to every other SWIFT-connected bank; each FI needs to connect to their own correspondent network. “That could translate to thousands of contracts, relationships, and integrations,” noted Tamez.

To minimize effort, many banks connect to intermediary banks that act like hubs. “A cross-border payment could touch up to five banks between the originating bank and the destination bank,” Tamez continued. “That results in these payments that are slow and clunky, and they can take days to arrive, especially if they’re going to emerging markets. And if the payment goes wrong, you don’t know where that payment sits, and you have to initiate a trace, and it can be a real mess.”

Businesses are playing catch-up with consumers

To help FIs overcome these hurdles, Euronet spent over 30 years (with the help of a small army of people) creating the Dandelion network, a polyfunctional cross-border payment rail. Tamez recognized that such a description is a bit of a mouthful: “Essentially, it is a payment rail that can execute end-to-end cross-border payments, and which enables interoperability between a variety of payout channels. So, it can deliver to a bank account, a cash payout, or a [digital] wallet.”

Dandelion sends payments to 171 countries and territories as well as 500,000 cash pickup locations. The Dandelion network is connected to SWIFT, and certain transactions will use that messaging network, but the majority go through an alternate channel built specially by Euronet which offers a direct real-time connection to local banks. While legacy payment rails tend to focus on bank deposits, alternative channels are crucial to reach emerging markets that are more important than ever in an interdependent global economy.

Financial inclusion

According to the U.N., more than 1.7 billion adults are excluded from formal financial systems, mostly in developing countries, and this impedes their ability to earn a living or survive in times of crisis. Moreover, over 200 million SMEs in emerging markets also lack proper financial access. “Some institutions might think, ‘Well, that’s an issue in developing economies. That’s not my problem,’ but the reality is that this financial exclusion hurts everyone because it’s a two-way street,” clarified Tamez.

Potential customers, suppliers, and labor resources may be excluded from accessing opportunities that would be mutually beneficial, but legacy cross-border payment rails are not built to deliver this kind of financial inclusion in the same way as alternative payment channels. “Polyfunctional cross-border payment rails [like Dandelion] are uniquely positioned to enable this financial inclusion and drive those opportunities for growth, both in developed and developing countries,” Tamez added.

Strong customer experiences through cross-border RTP

Consumers and businesses may have very different use cases regarding cross-border payments, but at the end of the day, they value the same things: speed, transparency, and choice. “Real-time payments are incredibly important to businesses because the longer the money is floating in transit, the less money they have in the bank,” said Tamez. “The customer experience is only as good as the payment rails. It may have a beautiful UI [user interface], but if the payment takes days to arrive, or the full amount doesn’t arrive to the beneficiary, the experience is going to be poor.”

Real-time payments bring their own challenge, however. RTP is realized in domestic payment schemes across more than 55 countries, but very few providers support real-time cross-border payments. “The reason is that there’s no governing body to standardize RTP schemes globally,” Tamez explained. “So, at Dandelion, we’ve placed a lot of focus on interconnecting all of those domestic schemes to build a virtual cross-border RTP scheme.” Dandelion enables cross-border RTP across 76 countries, outstripping the number of domestic schemes due to the myriad direct connections with banks, connections which are quickly growing in number.

Benefits of interoperability

Another key challenge to operating on a global level is the need for a platform that can switch between system protocols, technologies, business rules, and compliance regulations, all in real time. ISO 20022 is the payments messaging standard of the future, though plenty of organizations do not adhere to ISO 20022, not because they do not want to, but because it is a complicated process. Even so, ISO 20022 does not solve for alternative payment methods like cash and mobile wallets. “Euronet offers a product called REN Connect Go, which is a digital payments overlay service to help banks in that transition,” Tamez noted. Additionally, polyfunctional cross-border payment rails remove the complexity of having multiple coding languages and different technologies.

Euronet built Dandelion because they knew how important it would be for their customers – both consumers and businesses – to send payments to every corner of the globe without limitations around payment channel or destination. Then, they decided to open up access to everyone. “We are now enabling other financial institutions and fintechs to deliver that same value to their customers,” said Tamez. “All they need is a single contract and one easy API integration.”

Cross-border payment services as a marketplace differentiator

The expectation of the modern world, particularly among young people, is that things move instantaneously, and money transfers are no exception. Financial institutions have an advantage in delivering on that expectation since they already have established account relationships. They just do not have the right product yet. “If FIs don’t adapt,” warned Tamez, “they risk losing their customers, especially as these fintechs continue to encroach on other bank services.” Dandelion is an easy way to augment financial services with low effort on the part of the institution, and a better chance of building and retaining customer trust.

Above all else, adaptation for FIs means reconceiving themselves within the financial ecosystem. “Historically, banks have gotten a really bad rap,” admitted Tamez. “They have really smart people that are where they are because they are really good at what they do.” What the most forward-thinking banks are realizing is that fintechs are not the enemy – everybody can work together to build better services. “There’s been this immense push for better collaboration between banks and fintechs such as [Euronet] to be able to create those products that customers need,” Tamez concluded.

The post Real-Time Success with Polyfunctional Cross-Border Payment Rails appeared first on PaymentsJournal.

With projections that cross-border payment flows will reach $156 trillion in 2022, the market is being disrupted by entrants promising to solve historical pain points like long settlement periods, high transaction costs, and limited accessibility. And business-to-business (B2B) transactions are expected to comprise $150 trillion of this anticipated growth.

Through traditional banking routes, cross-border payments usually journey through a network of banks, racking up fees and taking time along the way. This procedure often lacks transparency for the company making the payment, so it often doesn’t know where the payment is or how much each step costs. Further, the process often requires complicated know-your-customer (KYC) procedures and significant documentation.

Let’s take a look at the current B2B cross-border payments landscape and how financial technology companies (fintechs) are taking a larger share of the pie.

Improving the cros-border payments process through digital innovation

The World Bank estimates the cost of transmitting $200 globally averaged 6.5% during the fourth quarter of 2020. And while banks have historically dominated the cross-border payments market, that’s changing since delays and fees are often associated with legacy cross-border money transfer methods.

In recent years, fintech organizations have embedded themselves deeper into the growing cross-border payments market with digital innovations that make these payments cheaper, faster, more transparent and more secure.

Fintechs often have a level of agility and technology capabilities that allow them to move faster than many financial institutions, providing a more modern and robust user interface and platform.

This includes using APIs, which integrate seamlessly into existing treasury infrastructure and interfaces, providing real-time visibility into foreign exchange (FX) rates and allowing fintechs to better mitigate risks. APIs also allow them to lock in FX rates on their customers’ behalf.

Helping mitigate risk

By locking in rates, fintechs like Corpay help companies better manage risk because they avoid betting on which way currencies are going to move – up or down – which helps them better predict revenue or costs. These automated trade execution mechanisms are especially useful for organizations conducting business in more than one country since currency rates fluctuate depending on factors such as inflation, the labor market, political climate and events like the global pandemic, thus simplifying what can be a complicated netting process

Further, fintechs can help organizations by giving them an options contract, which provides buyers the right to buy or sell an asset at a determined price during the life of the contract. Similarly, by hedging current investments, fintechs lock in customers’ revenue or cost of the FX exposure and can even provide some flexibility in the event that the market moves favorably.

Say, for example, a U.S. company has revenue of $100 and $50 in cost, but the cost is sourced in Germany. If the euro appreciates and the cost increases from $50 to $70, profit plummets, which is why companies often rely upon fintechs for revenue management and cost management related to FX conversions.

Decreasing cross-border payments fraud through vendor data management

Many businesses rely on fintechs to get their cross-border payments to the final destination safely on time, while also managing all of their vendors’ bank account data – enabling the company to focus on other tasks.

Managing vendor data, including changes in bank account information, is crucial since this is an area where payments fraud occurs. When a vendor changes its bank account routing information, for example, a fintech providing B2B payments verifies the account information through by leveraging bank validation capabilities that ensure payments are being routed correctly and in a manner that minimizes correspondent fees.

According to the 2020 AFP Payments Fraud and Control Survey, 81% of companies responding were targets of attempted or actual payments fraud attacks in 2019. The report suggests scammers are becoming increasingly innovative as they continue to find success circumventing controls and infiltrating companies’ payment systems.

Increasing speed and visibility

By using SWIFT global payments initiative (GPI), fintechs (and banks and other payments processors) enhance speed and transparency of cross-border transactions. This enables payments to be settled within a day – and sometimes quicker – while providing transparency as to where a payment is in the process, along with the associated fees that might be deducted along the delivery channel, at all times.

SWIFT GPI enables organizations to track their cross-border payments like they would track a package using UPS. Its increased transparency helps companies route cross-border payments better and often faster.

Continuing to disrupt the cross-border payments landscape

Fintech payment solution providers will continue to disrupt the cross-border payments industry by generally making payments cheaper, faster, more transparent and more secure than traditional financial institutions. Employing a robust user interface and transparent platform, they excel at mitigating FX-related customer risk and reducing fraud by managing vendors’ bank account data – where fraud often occurs.

As we head into 2022, it will be interesting to see how this disruption will unfold and whether fintechs will continue taking a larger share of the cross-border payments market. I’m banking on, yes, they will.

The post How Fintechs Help Keep Cross-Border Payments Transparent, Safe and Secure appeared first on PaymentsJournal.

This release in Daily Journal announces an acquisition by Papaya Global of Azimo. Papaya is a New York-based 2016 fintech startup that provides a cloud-based HR and payroll platform for global workforce management. Azimo is a London-based fintech specializing in online money transfers, a low-cost alternative to legacy bank remittance services. So one can easily connect the dots and see how this deal can expand the reach of both organizations.

‘Papaya Global, the global people management platform for the remote working era, announced today that it has agreed to acquire Azimo, the global digital cross-border payments service, making it possible to pay employees almost instantly regardless of geography and typical payroll limitations…

The acquisition of Azimo will significantly expand Papaya’s capabilities in payroll payments and strengthen its promise to help companies smoothly manage their remote workforce from onboarding to payments…

“Payroll payments made easy regardless of geography are what set us apart from other technology vendors, and this acquisition will make it possible for companies to make instant payments to their global teams,” said Eynat Guez, Papaya Global CEO and co-founder. “Azimo’s global digital payment network, multiple payment licences, and deep fintech expertise will also enable us to build new payroll-related services for our business customers and their employees.”‘

So, if you are a global remote workforce management software solution, one of the things that you might want to do is reduce cross-border money transfer costs for clients by gaining greater payment network access to various countries as well as acquiring money transfer licenses in many originating markets. This is what the deal accomplishes at the highest level. There is no disclosure as to the terms of the agreement since both firms are privately held. Just another indication of the ever-present and growing global workforce environment and need to manage costs in cross-border payments.

‘”Combining Azimo’s assets and expertise with an emerging global leader in remote working enablement like Papaya will allow them to deliver even more value for their business customers, especially those increasingly paying and managing remote employees,” said Azimo chairman and founder Michael Kent…

The acquisition is subject to standard closing conditions, including regulatory approval. The two companies will continue to operate independently until closing. All Azimo employees will join Papaya.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Papaya Global Acquires Azimo for Instant Cross-Border Payroll appeared first on PaymentsJournal.

Yes, another posting about CBDCs, this one at the Block, so we will keep everyone posted, although much of this is repetitive for those following the space and certainly for members of our advisory service, for whom we wrote a report a few months back that included commentary about a similar BIS initiative. This effort is called Project Dunbar and explores prototypes for instant cross-border payments using CBDCs.

‘The Bank for International Settlements (BIS) Innovation Hub partnered with central banks in Australia, Malaysia, Singapore and South Africa to create two prototypes for an international settlement platform using multiple central bank digital currencies (CBDCs)…

“This initial phase of the project successfully developed working prototypes and demonstrated practicable solutions, achieving its aim of proving that the concept of multi-CBDCs was technically viable,” the executive summary of the project report states…

The collaboration, called Project Dunbar, focuses on how a shared platform incorporating several CBDCs could help make cross-border payments “cheaper, faster and safer” as described in that report.’

This following is excerpted from the Mercator Report of several months back, which was discussing what was then a single entity named Nexus, and this current project seems to be similar in nature with a couple of different central banks:

The BIS Innovation Hub has also jumped into the action with a July 2021 announcement about connecting instant payments systems (IPS) in multiple countries through a single entity, which they have named Nexus. According to the BIS website, they are already transitioning from design to a test phase, involving a proof of concept with the Monetary Authority of Singapore, Bank of Italy, Central Bank of Malaysia, BCS in Singapore, and PayNet in Malaysia, to connect the payment systems of Singapore, Malaysia and the euro area. This standardized way for IPS to connect should enable interoperability between systems at scale.

There are two main elements of the system: the Nexus Scheme and the Gateway. The Scheme defines the rules and obligations for participating users, while the Gateway software component coordinates the foreign exchange (FX), clearing, and sequencing of payments. Settlement remains part of the existing domestic schemes, also introducing destination liquidity providers where necessary. Once compatibility with Nexus is established, the IPS can exchange payments with any other Nexus user across the scheme. Although we could not locate an expected full launch date, typical timeframes would suggest sometime in 2023.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post BIS Partners with Central Banks to Prototype Cross-Border CBDCs appeared first on PaymentsJournal.

Cross-border payments have always been a complex and time-consuming process, but fintech companies are beginning to change that. By harnessing the power of the internet and modern mobile technologies, fintech companies are able to provide fast, efficient, and cost-effective cross-border payment solutions for both businesses and individuals. For businesses, fintech companies offer a variety of b2b payment solutions that can save time and money. For individuals, fintech companies offer p2p payment solutions that make it easy to send money to friends and family abroad.

This posting in Fintech Futures is another in an ongoing trend for cross-border payments developments, this one penned by a senior at Mastercard. The piece references a downloadable report on cross-border payments. Those interested can review the report, which is about consumer (P2P) and small business (C2B, B2B) developments in the space. We typically cover B2B types of use cases for larger market corporates, but one could make the argument that these are all somewhat interrelated use cases using similar rails with differences in data requirements. 

‘During the pandemic, cross-border payment services have provided a lifeline to many and allowed others – including small business owners – to seek out new opportunities. With travel restricted, more people have been sending money overseas electronically, while many businesses moved online, sourced international suppliers, and embraced new ways of reaching customers around the globe…

Whether a small business owner being paid by a customer on a different continent, or a migrant worker sending money to family in their home country, more and more people are making and receiving cross-border payments. And as they do, people have understandably come to expect them to be as quick, easy and reliable as domestic transactions.’

The author goes on to summarize high-level findings from the indicated survey and discuss the various complexities that exist in the legacy x-border models. These complexities are getting chipped away for P2P scenarios with fintech advancement in user interface and transparent data. We are inching towards the same in B2B scenarios, driven by various factors but mostly market pressures to do things faster and easier, highlighted by e-commerce growth and the pandemic’s digitization paradigm shift. Those interested should have a quick look and review the relatively brief study.

‘A priority for the payments industry should be to reduce the complexity of sending and receiving payments across borders and give people reassurance that their transactions will be processed quickly and reliably in all markets. This is why our focus has been on expanding our cross-border services to more than 100 markets, covering over 90% of the world’s population, while providing transparency on upfront costs and greater predictability for fund delivery…

Cutting out complexity and risk from cross-border payments is key to boosting global trade and facilitating economic recovery…

By working with banks, non-banking financial institutions and digital platforms, we can provide a single connection to reach the entire world. We want to break down barriers to cross-border payments so people can focus on what really matters – supporting their loved ones and growing their businesses.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Must Cross-Border Payments Be So Complex? appeared first on PaymentsJournal.

An article in Digital Transactions caught my eye. It combines some of my favorite topics; faster payments, earned wage access (EWA) products and cross currency transactions. CloudPay is a fintech offering global payroll processing service and earned wage access solutions with a reach to over 130 countries. This week they announced the addition of Visa Direct capabilities to their EWA solution, reducing the amount of time that it takes for workers who want their wages on-demand before payday to get access to their pay. Those who use EWA are typically choosing to receive their pay early because they have a specific and immediate need. Visa’s debit push payment can reduce the transaction time from days to seconds. Here’s more from the article:

CloudPay, a provider of employee payment solutions, is partnering with Visa Inc. to enable payroll to be deposited directly to employee debit or credit cards through Visa Direct, Visa Inc.’s real-time payment network The new service is expected to provide employees immediate access to their funds compared to the two to three days it takes for funds to become available after a direct payroll deposit to their checking account. Payments are being processed by Checkout.com, a London-based fintech.

The first company to offer CloudPay NOW, which launched in 2021, reported a 30% uptake by their employees after two months, according to CloudPay. The company, a global luxury retail brand, offers CloudPay NOW as an employee benefit to give on-demand access to wages that have already been earned, which in effect allows employees to choose their own payday, CloudPay says.

“Enabling solutions that help workers access their paychecks faster through earned wage access and payroll solutions is more vital than ever,” Nicky Alexander, head of Visa Direct Europe, says in a prepared statement. “This is why our partnership with CloudPay is so important. We are delighted Visa Direct is now supporting businesses in their efforts to enhance their payroll systems and enable on-demand payouts for their workers.”

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Making Payroll Payments Fast, Cross Borders appeared first on PaymentsJournal.

This piece posted in Bloomberg is somewhat of a reprise of one we saw a couple of weeks ago in another online posting. We commented upon that one, which was focusing on a CBDC as a way to get around sanctions. In today’s article, the focus is on China’s CIPS (Cross-Border Interbank Payment Systems) as the potential vehicle to achieve the same end. The staff author provides some detail on the scope and relevance of CIPS.

‘The Cross-Border Interbank Payment System was set up in October 2015 as a settlement and payment clearing system for transactions that use the yuan, also known as the renminbi, or “people’s currency.” The system is supervised by China’s central bank but is run by CIPS Co. Ltd in Shanghai. Ownership is spread among dozens of shareholders including state-owned Chinese financial institutions, exchanges and Western banks. Its use has steadily increased, with an average daily transaction value of 388.8 billion yuan ($61.3 billion) as of February, about a 50% increase from a year ago, according to data from the company.’

The piece goes on to explain how often the banks using CIPS are also using SWIFT as the messaging standard, since many non-Chinese institutions have not installed translators for CIPS clearing. In fact, the PBOS and SWIFT have some additional deals for network services and data storage, so in some sense are partnering more than competing, at least at this stage. Then the piece goes on to discuss relative size differences between CIPS and SWIFT (which is a messaging system only for these purposes, although SWIFT offers value-added services as well). So the real question is whether (if desired) CIPS could be used to circumvent sanctions with Russia.

‘It would only work if the transactions are in renminbi — likely only when Russia and China are settling direct trades — and both parties were CIPS members. Such payments remain small: They increased to around 6% of transactions in 2020, compared to 2% in 2013. In reality, even as the two countries have sought to move away from using the dollar in trade, that’s meant largely switching over the euro — which is also now sanctioned. And there are other issues: 

 • It’s unclear to what extent non-Chinese importers or exporters that do business with Russia would be willing to accept payment in renminbi.

 • For CIPS to be of any help to Russia in skirting the U.S. financial system, Russia would have to be part of a renminbi-centric financial system. That seems unlikely given China’s capital controls on its currency, which restrict the flow of funds in and out of the country.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Skirting Russian Sanctions with China’s CIPS? Not So Fast appeared first on PaymentsJournal.

This posting in IBS Intelligence speaks to a partnership between Sila, a 2018 startup fintech out of Portland, Oregon with an API platform that provides banking and payment infrastructure-as-a-service for software teams, and Corpay, the newly branded Fleetcor payments business that combined several other assets including Comdata, Nvoicepay and Cambridge Global Payments. The partnership is about cross-border payments.

“As Sila has continued to grow, they have experienced increased demand from customers for the expanded global payment capabilities that Corpay provides,” said Andrew Howlett, Strategic Partnerships Manager, Corpay Cross-Border Solution. “Our reach in both geographies as well as currency pairs is expansive and will serve Sila’s customers well.”…

“Sila’s main goal has always been to provide entrepreneurs with the tools to realize their vision and build a successful business – more often than not with an international component. Corpay with its depth and reach in facilitating cross-border payments can be the perfect partner for our customers’ needs.” said Shamir Karkal, CEO and co-founder of Sila, Inc. “We see a lot of innovation from companies – particularly the ones focusing on emerging markets – that rely on phones and online apps, rather than bank accounts and ATMs, to enable cross-border transactions. Through partnerships like this one, Sila feels well prepared to help those companies succeed.”

As readers of these pages will know, we have been keeping up with cross-border developments through member research and ongoing commentary now for several years. There is a real innovation trend that has been in place for a while, and it continues as fintech and FIs push forward with reducing costs and improving the speed and visibility of these transactions.

‘While traditionally managed by banks or money transfer operators, innovative FinTech companies are stepping in and can provide cheaper, faster, more transparent alternatives. This is especially true in transactions that involve exotic currencies with limited liquidity. Fueling that development, more and more people use their mobile phones to access banking and e-payment solutions, particularly in emerging markets. These factors point to a vast potential to redistribute market share between incumbents and new entrants in cross-border and remittance payments.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Corpay and Sila Partner on Cross-Border Payments appeared first on PaymentsJournal.

TORONTO–(BUSINESS WIRE)–Corpay, a FLEETCOR (NYSE: FLT) brand that provides integrated cross-border payments and currency risk management solutions, is pleased to market our C.A.S.E. methodology, a way for clients to quantify and capture data that can be used by clients to analyze and mitigate currency exposures without the need for costly technology systems and additional resources.

The C.A.S.E. process is divided into 4 distinct and repeatable steps:

• Capture: FX exposure data on an ongoing basis, increasing awareness and understanding of FX risk.
• Analyze: An analysis of potential FX exposures and risks is presented and reviewed.
• Strategize: Our modelling tool leverages historical data, costs, and cross-currency correlation to help clients to optimize their hedge ratios, trading patterns and instruments.
• Execute: The Corpay team works with businesses to help those businesses to take all this information and implement their flexible, adaptable hedging strategy.

“We’re incredibly excited to provide our clients with a cost-effective tool to help them tailored their FX strategy that will help allow clients to capture, quantify and mitigate FX risk without the need for expensive technology,” said Jim Kessler, Vice President of Currency Risk Analytics at Corpay Cross-Border. “Providing our clients with access to decades’ worth of FX experience and data, along with adaptable technology, can help clients as they seek to protect themselves from potential currency market risks, and can also help them to hone an effective strategy that evolves with their needs.”

“For business that are just starting to trade internationally or expanding to new markets, managing exposure and mitigating risk can be a very cumbersome and involved process,” said Mark Frey, President, Corpay’s Cross-Border Solutions. “We are incredibly proud that we are able to provide businesses with the capabilities and simplified tools to help them as they navigate market complexities, and we look forward to helping more businesses execute strategies tailored to their goals”.

For information about the C.A.S.E. solution and the benefits it can provide, please visit https://payments.corpay.com/cross-border/currency-risk-management/case.

About Corpay
Corpay is a global leader in business payments, helping companies of all sizes better track, manage and pay their expenses. Corpay provides customers with a comprehensive suite of online payment solutions including Bill Payment, AP Automation, Cross-Border Payments, Currency Risk Management, and Commercial Card Programs. As the largest commercial issuer of Mastercard in North America, Corpay handles over a billion transactions each year. Corpay is part of the FLEETCOR (NYSE: FLT) portfolio of brands. To learn more visit www.corpay.com.

The post Corpay Offers Product for Use by Global Companies Looking to Reduce FX Risk appeared first on PaymentsJournal.

This WSJ posting is meant to describe a bit about SWIFT and why it is being discussed as a lever to potentially damage the Russian economy in retaliation for the Ukraine invasion. Most readers of this space will already know what SWIFT is but the authors describe it at a high level. Readers here will know SWIFT as a bank-owned cooperative based in Belgium that delivers global financial messaging services to about 11,000 member banks.

‘Russia’s assault on Ukraine triggered a surge of calls for Western allies to completely sever Russia from the global financial system by disconnecting it from the Swift global financial messaging system. The EU, U.S., U.K. and Canada agreed late Saturday to block some Russian banks from the network, part of an enhanced package of measures that seeks to undermine Russia’s economy and finances.’

The authors go on to discuss how effective such a cutoff would be in deterring Russia’s aggression, given that there are alternatives. These include a Russian payment network which has limited foreign participation, and the Chinese system, which has substantially more cross-border participants and could be used to redirect Russian bank payments. They also discuss the potential for undermining the U.S. dollar as the primary reserve currency in the long run. The main commerce between the west and Russia is energy, which has not been threatened for cutoff anyway, given the European dependence upon natural gas from Russia. A good fast read to get an overview.

‘Besides halting a new natural gas pipeline and hurting Russia’s ability to raise debt, Western sanctions so far have blacklisted many of Russia’s biggest banks, affecting the majority of the country’s banking sectors assets. Those sanctions ban transactions with the targeted institutions, cutting off their access to U.S. dollars and financing. Western nations also announced measures to paralyze Russia’s central bank from using its more than $600 billion in currency reserves.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post SWIFT Cutoff as Potential Deterrent for Russia? appeared first on PaymentsJournal.

This release was posted in IBS intelligence and speaks to the expansion of Airwallex into the U.S. market. For readers not familiar with Airwallex, it is a well-funded 2015 fintech startup (now a Unicorn) out of Australia that offers global financial infrastructure for global payments fintech that enables businesses to operate anywhere, anytime. The company indicates that it built a proprietary global financial infrastructure platform to help businesses transact, collect, and pay in any foreign currency across 130+ countries and 50+ currencies, without the constraints of the traditional global financial system. In the U.S. rollout, the company is focusing on what they call a borderless card. 

‘Airwallex, a leading global FinTech platform, recently introduced the U.S. Airwallex Borderless Card, a virtual Visa card issued by Community Federal Savings Bank (“CFSB”), enabling U.S. businesses to make digital card payments around the world easily…

The Company’s customers domiciled in the United States, can now instantly generate and issue multi-currency virtual payment cards that can be used to promptly pay third parties, such as vendors and other online merchants, wherever Visa cards are accepted.’

The multi-currency aspect of the card product assumes that FX fees are bypassed since the local payment is made in local currency as set up by the paying business. We have not had a briefing but assume that the collaboration with Visa, which began in 2020, is using the Visa Direct capabilities, which utilizes Visa’s global debit network for cross-border payments. We would expect that this is mostly a play in the lower end of the SME space.

‘The ability to pay on time and do away with barriers associated with global money transfers is critical. Using the Company’s Borderless Card, U.S. companies can now transact in more than 140 currencies and expand more easily into new markets with confidence, knowing that payments are secure, transparent, and fast. Single- and multi-use card capability allows for more security, better control, and better visibility with company spending…

Over the coming months, the Company plans to expand the U.S. Airwallex Borderless Card functionality, including the issuance of physical multi-currency payment cards for business owners and their employees’ work expenses, further empowering them to make everyday business purchases decisions.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Airwallex Introduces “Borderless Cards” for U.S. Market appeared first on PaymentsJournal.

My background is in payments not geo-political conflict, but I find it interesting how political payments infrastructure has become. We see this in the EU’s insistence on building an alternative to Mastercard’s and Visa’s global card networks and this topic is now front and center since Russia has decided to wage war against Ukraine and the West contemplates enacting various sanctions. One potential sanction is to bar Russia from the global payments messaging system SWIFT. An article in Finextra suggest that the West will not take this particular step as the U.S. doesn’t want to give Russia a reason to develop their own payment system and in the process, diminish the role of the U.S. dollar as the global reserve currency:

Exclusion from Swift has often been seen as ultimate global sanction for rogue nations, but it has also been the spur behind the build out of competing networks in both Russia and China.

Politicians are well aware of the growing alternatives to Swift, both from Russia and China, as well as from emerging blockchain networks. They fear that a suspension from Swift could cause a domino effect that would ultimately push nation states to other alternatives and do serious damage to the US dollar’s status as a global reserve currency.

I don’t believe that’s the reason. Competing networks and currency exchanges have already been built. That ship has sailed. Of course, building the network and getting others to use it are different topics altogether. Likely what is at stake is the need for European nations to maintain the flow of funds given their reliance on Russian gas to run their countries. And as this Reuters article points out, European banks hold most of the exposure on Russia’s debt and shutting off SWIFT would make getting those payment really tough: 

The foreign ministers of the Baltic states, once ruled from Moscow but now members of NATO and the EU, called on Thursday to stop Russia’s access to SWIFT.

Other EU member states are reluctant to make such a move because, while it would hit Russian banks hard, it would make it tough for European creditors to get their money back and Russia has in any case been building up an alternative payment system.

Data from the Bank of International Settlements (BIS) shows that European lenders hold the lion’s share of the nearly $30 billion in foreign banks’ exposure to Russia.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Of War and Payments appeared first on PaymentsJournal.

Tungsten Corporation plc (AIM: TUNG), a leading provider of digital financial management and software solutions is offering Italian businesses early access to 100 per cent reporting on all cross-border invoicing. Ahead of the upcoming changes being introduced by the Italian Government in July this year, where cross-border invoices need to be reported to the SdI (Sistema die Interscambio), Tungsten Network has made the service, optionally, available from January 2022.

As many governments look to improve their present and future fiscal health and ensure the correct taxes are recorded and collected by their Treasury, mandated reporting and e-invoicing are becoming more commonplace. Italy has led the way in Europe since it introduced the e-invoicing mandate in 2019.

Commenting on the provision of recording all cross-border invoicing, Ruud van Hilten, VP Product Compliance at Tungsten Network said, “Tungsten has been a registered intermediary in Italy since the start of the e-invoicing mandate in 2019. And because we offer a superbly stable solution, many businesses in Italy want to work with us. Now, we can report 100% of sales and purchase invoices to SdI, including domestic, cross-border and intercompany invoices well ahead of the deadline to do so.

He continued, “Talking to suppliers and buyers we hear that they really appreciate having one provider to handle all their Italian invoices and, that we provide pre-validation before invoices are reported to SdI.  This serves to make the process as efficient and as automated as possible. Resulting in fewer errors, improved recording, and a speedier process. Added to that we offer compliant archiving for all invoice types, offering reassurance and peace of mind”. 

PWC is Tungsten Network’s tax compliance advisor. Ellen Cortvriend, Director Indirect Tax at PwC in Belgium and leader of PwC’s Centre of Excellence on e-invoicing & e-reporting explains “In response to the strong push toward mandated e-invoicing and real-time reporting obligations globally, businesses increasingly look for a partner with a comprehensive global solution to support them in all facets of the invoicing process. This trend is set to continue and accelerate in the coming years as regulatory and technological complexities keep growing with new obligations on the way in many countries”.

Tungsten Network also confirmed that Italian businesses can use their service for all cross-border invoices, and they can be reported as soon as the invoices are available with no special reporting cycles required.  

Tungsten Network is committed to being the world’s most trusted businesses transaction network and offering Italian businesses the opportunity to adopt the new cross-border reporting six months ahead of its mandated introduction demonstrates this commitment to its partners, and its pivotal role in ensuring partners fulfil their own key financial outcomes.

About Tungsten Corporation
Tungsten Corporation (AIM: TUNG) is the world’s largest, compliant business transaction network. A leading global electronic invoicing and purchase order transactions network; Tungsten’s mission is centred on enabling a touchless invoice process allowing businesses around the globe to gain maximum value from their invoice process.

Tungsten processes invoices for 74% of the FTSE 100 and 71% of the Fortune 500. It enables suppliers to submit tax compliant e-invoices in 54 countries, and last year processed transactions worth over £220 billion for organisations such as Caesars Entertainment, Computacenter, GlaxoSmithKline, Kraft Foods, Mohawk Industries, Mondelēz International, Procter & Gamble, Shaw Industries, Unilever and the US Federal Government.

Founded in 2000 and headquartered in London, Tungsten has offices in the US, Bulgaria, and Malaysia, employing over 227 people.

The post Tungsten Network Offers Italian Businesses 100 Percent Reporting on All Cross-Border Invoicing Early appeared first on PaymentsJournal.

This was posted in businesswire and speaks to a partnership between Modulr, the UK-based fintech that delivers APIs for a PaaS model, and Ripple, the San Francisco-based blockchain payments network. The partnership seeks to utilize Modulr’s expertise and licenses for UK and EU payments access to expand the reach of Ripple’s cross-border capabilities for real-time alternative payments. The piece also indicates that Trust Payments, the UK-based fintech that provides a payments platform for merchants to better manage their transactions for e-commerce and mobile across multiple markets, will be the first client to take advantage of this new partnership. 

‘Together, the two leading FinTechs will make it easier than ever for businesses, like Trust Payments, to run real-time payments internationally powered by Ripple’s financial technology, RippleNet. With Modulr’s technology, global businesses have an alternative to legacy correspondent banking and can now make payments into the UK and Europe faster, more reliable, and cost-effective…

Since inception, Modulr has focused on building a seamless Payments-as-a-Service solution into the European and UK payment rails – with access to critical payment infrastructure in the UK including Faster Payments and Bacs CHAPS, SWIFT and SEPA in Europe. Its access and deep expertise of the European payments landscape made Modulr an ideal partner for Ripple. Moreover, Modulr is one of few non-banks to be directly connected to the Bank of England, allowing the payments platform to settle funds at the Central Bank.’

So, Ripple continues its ex-USA business expansion while continuing to pursue a favorable result in the ongoing SEC lawsuit, now in the second year of activity, which has hampered the currency and network growth to an extent. This surely seems like a good collaboration, providing further potential speed and transparency into the markets served, as well as another interesting cross-border alternative payment method for merchants.

‘Myles Stephenson, CEO and Founder of Modulr comments, “We’re excited to partner with Ripple – we share the same fundamental goal which is to make it easy to send and control global business payment flows by removing the hidden inefficiencies plaguing international payments today. This partnership lays the groundwork for even bigger things to come. At Modulr, we’re looking forward to working with Ripple on delivering real-time, price competitive and reliable payments into the UK and Europe, and then globally in the coming months.”…

Ripple is the market leader in blockchain and crypto enterprise solutions. In 2021 Ripple had the most successful year to date, more than doubling the number of transactions on RippleNet, with a payment volume run rate of over $10B.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Trust Payments First to Harness New Modulr-Ripple Partnership appeared first on PaymentsJournal.

This posting in Bloomberg announces a new cross-border payments system, this one launched and based in Accra, the capital of Ghana. The system was developed by Afreximbank based in Cairo. According to the release, the Pan-African Payments and Settlement System is a real-time system. It is one of the building blocks towards the full realization of the African Continental Free Trade Area, which was set up and agreed upon in 2018 among African Union nations, and will eventually represent the largest free trade zone in the world.

‘The so-called Pan-African Payment and Settlement System will facilitate intra-regional trade and payments by enabling the real-time transfer of funds from one African country to another, he said. Traders have, until now, had to settle payments via U.S. and European banks and the new system is expected to save the continent about $5 billion in offshore clearance and transaction costs, according to its developer, the African Export-Import Bank.’

Since there are no details about operational scale, it seems that initial transactions will involve Ghana and Nigeria, and then we assume gradually expand infrastructure during the coming decade to include 54 sovereign nations in the scheme. We recently released member research on the growth of immediate payment systems across the globe. One of the key trends we identified was the expectation for the realization of real-time payments across borders, so this is another example of that direction.

‘“This is an African solution to an African problem and it’s the most practical and most important achievement in payment-system integration on the African continent since independence from colonial rule,” Bawumia said. It’s the closest the continent has come to the benefits of a common currency, he said… It’s also one of the key building blocks for the African Continental Free Trade Area, he said. The continent-wide trade zone that’s set to be fully operational in 2030 could be the world’s biggest free trade zone by area, with a potential market of 1.2 billion people and a combined gross domestic product of $2.5 trillion.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post New Africa Cross-Border Payments System to Save $5B, Boost Shipments appeared first on PaymentsJournal.

This article appears in TechTimes and discusses the ongoing innovation in cross-border payments being led by non-bank entities. The traditional cross-border payment flows are bank centric and in terms of P2P and to some extent C2B and B2C uses, these flows have been gradually switching over to fintech-developed interactions, which have improved the access, ease of use, transparency, and expense related to transferring funds between sovereign entities. We have covered the innovation part in B2B scenarios through member research. The predominant use case in cross-border transactions is B2B, which when discussing value transfer of goods and services represents about 84% of all value. The article mentions a much larger number of B2B value transfers than we estimate, but we would expect that is because the source of data is including transfers for liquidity, syndicated loans, capital markets settlement, and so forth.

‘Despite the dominance of financial institutions in the money-transfer market, new Fintechs and MTOs (money transfer operators) attract most of the customers that move smaller amounts of money, as well as SMEs. By implementing cutting-edge technologies and making apps intuitive and user-friendly, they offer better rates, time, and services. Thus, Fintechs finally met all the consumers’ demands. Wise (formerly Transferwise) claims it saves its users $1 billion a year in transaction fees compared to the use of legacy bank cross-border payment methods. To make it happen Fintechs either rely on alternative cross-border payment rails independent from traditional bank networks or allow users to connect to legacy banks more easily…

The market size and its growth is still appealing to the newcomers. With the compound annual growth rate (CAGR) of 5% per year, the global cross-border payment flow is expected to top $156t by 2022. According to our market review, 66.6% of industry experts expect remittances and international payments to be one of the most growing Fintech sectors in the upcoming years. Thus, there is still a place for both the newcomers that are able to occupy the niche and the incumbents willing to modernize and adapt.’

The article goes on to cover the many areas that fintechs and others have been targeting with new technology (blockchain, real-time payment rails, AI, etc.), all of which we have been covering in our member research across various topics. Some readers may enjoy the brief summary recap of what has been happening and will continue to occur in cross-border innovations, so worth a couple of minutes to browse through the piece.

‘Fintech has become a game-changer for the remittance market and redefined the way cross-border payments are made worldwide. This made once costly service available to everyone and gave a boost to sustainable development by bringing the transformative impact to many developing economies: better healthcare, education, and even a better standard of living… In the near future, Fintechs will continue to drive innovation in international payments. And banks can still win in this game if they rethink and transform their services and processes to address modern customer needs.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post How Fintechs Impact Cross-Border Payments and Remittances appeared first on PaymentsJournal.

This piece is posted in IBSintelligence and announces a new cross-border capability as part of an MoU between Western Union and NIPL, the international arm of India’s NPCI. The agreement allows inbound international payments to India from a Western Union initiator to be posted in real-time to an Indian bank account. So, basically this speeds up the local clearing and settlement for Western Union money transfers within India, potentially (or totally) replacing the NEFT payments that are used by the traditional correspondent banking network used by Western Union.

‘“Western Union’s account payout network enables payout into billions of accounts globally – these accounts are not just limited to bank accounts; it’s any consumer account globally, whether it be at a bank or even a mobile wallet or card,” said Sohini Rajola, Head of Middle East and Asia Pacific, Western Union. “Customers want more, and our account payout network capability represents a natural evolution in Western Union’s cross-border platform and omni-channel strategy to reach new digital-savvy, banked and mobile enabled consumers.”…

“We are excited to collaborate with NIPL, expanding and optimizing our account payout footprint and ultimately further strengthening our joint offering. India is a strategic market for Western Union and this collaboration is key to our efforts to expand real time payments solutions, expanding the breadth of our current offerings to ensure customers have all the options available to them to move money the way they prefer,” added Rajola.’

Many readers will know that reducing the expense of cross-border remittance payments (mostly a P2P model) has been a sticking point for organizations like the World Bank and BIS, so many organizations have been striving to improve their structure to enhance speed and reduce costs. As far as we can tell from the posting, there is no B2B component to this agreement, but we would expect that small businesses would be included through a UPI interface, at least at some point.

‘“We are delighted to join hands with Western Union to facilitate instantaneous and interoperable cross border digital payments,” said Ritesh Shukla, CEO, NIPL. “This strategic partnership will benefit millions of Indian citizens to seamlessly receive money from overseas. We at NIPL, constantly strive to create a robust and innovative payment infrastructure to create a superior customer experience. We are confident that this initiative will stand as a testimony to NIPL’s technological capabilities and vision of scaling their unique offerings globally.”’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Western Union and NIPL Boost Real-Time Cross-Border Payments appeared first on PaymentsJournal.

Brussels, 9 December 2021 – SWIFT today announces the availability of its new In-flow Translation service and confirms that it now offers a full ISO 20022 customer testing environment for cross-border payments. In-flow Translation will enable financial institutions to realise the benefits of rich data when they migrate to ISO 20022, even if their counterparts have not yet adopted the standard. The availability of a test environment means that customers can now prepare for ISO 20022 a year before it goes live.

The service translates rich ISO 20022 messages into the existing MT format for banks that are not ready to process ISO 20022 messages immediately – and it ensures both message formats are delivered so customers always have complete data. This ensures that all financial institutions on the SWIFT network can continue to transact as normal during the industry’s migration, which starts in November 2022 and runs to November 2025.

SWIFT has made In-flow Translation available for testing early to help banks familiarise themselves with ISO 20022 and gain experience in the new operational environment. Early adopters will be able to start using the service from August 2022 on an opt-in only basis.  All banks will be automatically enrolled in the service in November 2022 to coincide with the mandatory start of cross-border migration and the go-live of ISO 20022 for high-value payments in the Eurozone.

Stephen Lindsay, Business Lead, SWIFT Platform, said: “One of the guiding principles behind our strategy for instant and frictionless payments is to ensure that nobody is left behind and that institutions are able to migrate in a way that suits them and their customers. We are delivering on this promise through the launch of In-flow Translation and the completion of the customer testing environment for ISO 20022, ensuring our community has plenty of time to prepare for the new standard. The move to ISO 20022 is a key component of our strategy that will unlock significant business benefits for banks. In-flow Translation will be vital to making the transition as smooth as possible by supporting interoperability between messages types.”

By enabling richer, better-structured data to be carried in payments messages, ISO 20022 will provide for an improved end-user experience and forms a key building block on which the future of the financial industry will be built.

Leveraging its unrivalled global network of more than 11,000 institutions and 4 billion accounts in 200 countries, SWIFT is taking action to minimise disruption and ensure that its community is ready for the start of migration, including those banks that will not initially adopt ISO 20022 in the back-office. The completion of the test environment, including In-Flow Translation, means banks will have a full year to familiarise themselves with the mandatory changes that are coming.

The post Swift’s ISO 20022 Services for Cross-Border Payments Ready for Customer Testing with Launch of In-Flow Translation appeared first on PaymentsJournal.

Any international company planning to access the huge and fast-expanding Chinese market needs to think very carefully about its cross-border payments partner. At a time when Chinese regulators are applying regulations ever more strictly, you want a payments provider that is fully compliant but also understands how this fast-changing market is likely to evolve. David Messenger, CEO of China-based cross-border payments company LianLian Global, argues that with the right partner, international companies can successfully tap China’s very obvious opportunities.

E-commerce powers ahead

The boom in e-commerce with China looks set to continue. The volume of cross-border e-commerce sales in China will be approximately 6 trillion yuan (US$ 920 million) in 2021, according to market research firm iResearch, after doubling in the previous five years. The main drivers are China’s fast-growing middle-class, the extraordinary supply chain of goods emanating from China, and the large volume of Chinese e-commerce sellers providing goods to consumers all over the world. As a result there is an amazing opportunity to support sellers with e-commerce services, tap the supply chain opportunities and sell into China.

But while e-commerce with China continues to expand, international players are naturally confused – and concerned – by news about how Chinese regulators are emphasising the need for strict compliance with complex and fast-changing regulations. In particular these relate to data privacy, data security and anti-competitive behaviour.

It is clear that the Chinese regulators are prepared to act decisively in relation to even the largest firms if the latter abuse their market position or fail to comply with regulations. According to Yi Gang, China’s central bank governor, this is part of a wider policy by the government to tighten its grip on the economy. Speaking at a conference organized by the Bank for International Settlements, he said that China would: “continue to co-operate with anti-monopoly authorities to curb monopolies and actively deal with. . .new forms of anti-competition behaviour.”

All this makes it critical for any company expanding its cross-border business into China to pick the right partner. Chinese regulations are complex and fast-changing, and regulators are determined to enforce them, but some payments companies do not even have a Chinese cross-border payments license! That makes it absolutely essential to work with a partner that is both reliable and understands this dynamic situation.

How to meet the compliance challenge

Let’s start with the issue of compliance. If you are a non-Chinese company looking to expand your business in China, you will want to eliminate risk on the compliance side. But that can be hard. KYC checks can be difficult for international investors and businesses trying to operate in China for three key reasons:

• The stringent regulations in the Chinese financial system affecting external transactions and money movement
• A limited volume of accessible information on Chinese businesses
• A dynamic, high-profile and emerging regulatory vision for data security and data privacy within China

In my experience, the best way to overcome these barriers is to partner with an established payments company with local expertise, and mitigate your own business’s exposure to risk.

What to look for in a payments partner

I always recommend new entrants to focus on five key attributes when choosing such a partner:

• A global company, with local (in this case Chinese) staff and local knowledge
• A partner that is fully compliant with complicated Chinese regulations
• A partner that “owns all the rails” and can provide end-to-end control of the process to reduce risk and costs
• A partner that is a well-established, trusted corporation with a proven reputation to maintain and protect
• A partner that has a robust local KYC process and knows how to find the right customers or suppliers

Support beyond payments

The best payments companies are fast expanding their offering beyond their core product and as a result becoming ever more useful to international customers. As a result, new entrants can find additional help in terms of multi-currency accounts, logistics, marketing tools to grow their customer base, and working capital finance.

Cross-border e-commerce with China continues to represent a huge opportunity for international companies. But to seize those opportunities successfully – and not fall foul of the Chinese government’s focus on full compliance in a dynamic situation- new entrants need to work with fintech partners who can help them to navigate through the many challenges they will face.

The post Finding the Right Fintech Partner Is Key to Success in the Chinese Market appeared first on PaymentsJournal.

This TechCrunch piece speaks to a funding round for a San Francisco-based 2020 startup fintech named Butter. Butter provides software for subscription, membership, and e-commerce companies to eliminate “accidental churn” in payments, which they estimate costs companies $443 billion in lost revenues each year. So these are situations where payments are dropped due to an error in the message or some local rule in cross-border payments situations.

‘In his subsequent roles at Dropbox and Scribd, Menon realized the problem of accidental payment churn was not exclusive to Microsoft. It was a challenge that plagued all B2B subscription and SaaS businesses… “Every subscription company deals with this black hole,” he said… Payment failure, in fact, is the among the biggest causes of customer churn and represents nearly half of all subscription churn. Even more alarming, Menon came to understand, the companies weren’t even aware of what was happening… False declines are estimated to be a $443 billion problem by the end of this year, according to Cardinal Commerce), resulting in millions of lost subscribers…

The accidental churn is often not just due to problems with renewals, where people get frustrated by failed attempts to charge their credit card, for example. It is also largely a problem at the sign-up process, especially in countries outside the U.S., where charges are often falsely declined due to being attempted in another country. To Menon, it was a massive market severely underserved by traditional payment service providers such as Stripe who are strong domestically, but in his view, were poor at clearing international payments in growing markets like Brazil, India and Mexico. Menon estimates that on average, 4% of subscription customers are lost monthly to legitimate payments failing.’

Given the early success of this relatively new venture, it seems that there is an active demand for this type of service. If the previously stated failed payments value is anywhere near accurate, this is a double whammy, since it costs money to get these customers in the first place, especially B2B versions. To waste that acquisition investment on often unknown revenue leakage is a tough blow to cash health, something that is front and center in times of supply chain woes and inflationary pressures.

‘The San Francisco-based startup has raised $7 million, largely from Atomic, to tackle the problem. In a year’s time, it has also signed on about a dozen consumer subscription companies, including some large names (which he declined to reveal publicly), doing $10 million to $500 million in revenue — many of which have an international user base. It claims that it helps these companies find, on average, $1 million of revenue per year…

Its revenue-sharing model is designed to align incentives with those of its customers. It charges a percentage of what it saves for its customers. For example, Menon estimates that a $100 million ARR company would be able to see $1 to $4 million in ARR lift which is a lot, and a $500 million ARR company, around $2.5 to $5 million… An economy increasingly reliant on subscription models places new challenges on existing payment systems that are typically out of date, complicated, vary by country and constantly changing based on new fraud rules, according to Menon.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Butter Raises $7M to End ‘Accidental’ Customer Churn appeared first on PaymentsJournal.

As global trade, investment and commerce have boomed over recent decades, cross-border payments have become foundational to the world economy. The Economist reports that some $140 trillion moved across borders in the past year and, according to the Bank of England, this is estimated to reach $270 trillion by 2027 as globalisation marches on. Traditionally, financial institutions have used correspondent banking capabilities to facilitate cross-border transactions.

The correspondent banking model emerged in the late 19th century and comprises intermediary ‘correspondent’ banks that facilitate the exchange between banks in different jurisdictions. Payments are then settled using central-bank operated domestic or regional payment systems (such as RTGS for high-value payments and ACH for low value payments). The result is a worldwide network where customers can make a payment in any currency, anywhere in the world.

Yet, despite the ongoing growth in cross-border payments, correspondent banking is in retreat. The World Bank reports that 75% of banks have significantly declined their correspondent relationships. In its place, alternative payment ‘rails’ – the underlying digital infrastructure that enables money to be transferred from one account to another – are emerging as financial institutions look to realise the potential of truly frictionless cross-border payments.

Understanding the limitations of correspondent banking

Over recent years, the development and rollout of real-time domestic and zonal payment systems (such as SEPA) have transformed customer expectations for payments. This has only served to highlight three significant issues with cross-border payments, in that they are expensive, slow and lack transparency.

This is primarily due to the inherent complexity of the cross-border payment and settlement process. The nature of the correspondent banking model means there are multiple entities involved in the execution of a single cross-border transaction. This is coupled with an alphabet soup of compliance headaches, including anti-money laundering (AML), counter-terrorist financing (CTF) and know your customer (KYC) requirements, alongside a patchwork of divergent technical, operational and regulatory standards across different jurisdictions.

The results are predictably bad. Consumers don’t know when a payment will complete or what fee will be imposed. Commercial banks lack visibility and must rely on cumbersome manual operations to process transactions. Central banks are inadvertently creating barriers as only the largest commercial banks have the capacity to join multiple local schemes (such as domestic RTGS) given the differing membership and technical requirements. This creates the need for a number of intermediaries to complete cross-border payments, compounding complexity.

Enhancing legacy infrastructure with ISO 20022

However, attempts to address these challenges are constrained by the outdated legacy infrastructure that underpin the correspondent banking model. In the search for a safe, efficient and inclusive international system for cross-border payments, attention has turned to enhancing the underlying payment rails to support increasing volumes and resolve the complexity associated with correspondent banking.

One significant step forward is the ongoing migration to the ISO 20022 messaging standard. ISO 20022 enables standardised, relevant and enriched datasets that are directly associated with the payment message, supporting the delivery of accurate and complete payments data

This will simplify end-to-end payment flows, and make it easier for banks to port a domestic or geographical zone payment to the most suitable and cheapest cross-border payments rail. More complete and accurate data will also support automation and ease compliance, making cross-border payments faster and more transparent

Alternative rails for cross-border payments

But in parallel to enhancements to these bank owned rails, the emergence of alternative rails that lie outside of the traditional banking infrastructure are facilitating the movement of richer, more integrated transaction data between parties.

For example, products from OFX, PayPal, Remitly and Wise already allow for easier, cheaper and faster transfers than legacy rails. And Visa Debit leverages Visa’s vast networks to connect directly into the ACH systems of the 100-plus countries and territories in which it operates, generating significant cost-savings that can ultimately passed on to end-users.

Elsewhere, Ripple has demonstrated the use of a distributed ledger as a payment rail. This provides a system for the direct transfer of funds that settle in almost real-time, and is cheaper, more transparent and more secure when compared to the current system.

Given the ability of these emerging alternative rails to reduce costs and increase speed and transparency, we anticipate wide adoption from payment service providers and, eventually, that the correspondent banking model for cross-border payments will be replaced. Instead, most cross-border payments will be achieved through a combination of rails including connected central infrastructure like RTGS, card-brand and non-bank solutions, and blockchain-based exchange mechanisms.

But for customers, the actual mechanism used is unimportant. What matters is that banks can provide a range of cross-border payment solutions that allow customers to pick and choose based on specific requirements or demands. They can then, for example, opt for low-cost rails or providers that offer specific services such as real-time FX, with the bank or payment provider using the most appropriate mechanism to fulfil the request. Although this model may fragment the value-chain in the backend, the actual customer experience will be seamless.

Preparing for the next-generation of cross-border payments

With cross-border payments primed for transformation, banks should move quickly to identify the requirements and strategy needed to move to next-generation cross-border payment workflows.

In the immediate short-term, this involves prioritising strategic ISO 20022 migration to reap the benefits of enriched, standardised datasets.

Looking further ahead, the focus must be on building the flexibility and agility to support the rapid and concurrent adoption of multiple alternative payment technologies. Banks should look to increase technology reach by striking partnerships with Payments as a Service (PaaS) providers to deliver a range of value-added options for cross-border payments, meaning that enabling easy connectivity with third-party providers via APIs will be integral. More broadly, the onus will be on developing a flexible, open, data-focused, cloud-based architecture and supporting business operating model.

By taking these steps, banks will be ready to seize the opportunities presented by truly frictionless global commerce.

The post Crossing the Rubicon: Why Cross-Border Payments Are Primed for Transformation appeared first on PaymentsJournal.

This piece is found in Yibada and discusses the intention of Bitso, a Mexico City-based crypto exchange founded in 2014, to utilize Circle’s platform to make cross-border transfers easier between U.S. individuals and businesses and Mexican residents. Circle is a Boston-based fintech that has a blockchain payments platform named Circle Pay. 

‘It was announced that as part of the exchange’s Bitso Shift program, which aims to improve upon present cross-border payment services, Circle will offer the infrastructure to enable these transfers. Bitso Shift will make it possible for businesses and individuals in the United States to make and receive bitcoin, as well as other crypto payments… According to the official data of the World Bank, the United States is the leading trade partner of Mexico. It was noted that only in 2020, Mexico receives as much as $40 billion in remittances from the USA. This information was published by the Central Bank of Mexico.’

The piece goes on to discuss the popularity of cryptos in the U.S. and how more people have been investing in these assets as a value storage and speculative investment tool. The transactional usage is somewhat limited for things like bitcoin, given the lack of wide POS acceptance, but stablecoins have more utility. The piece also points out that the standard wire transfers are a two-day proposition, whereas the crypto exchange can be a matter pf seconds. As readers of these pieces will know, cross-border payments costs have been a subject of interest to BIS and various other sovereign players, so the growth of utility in Latin America using crypto should come as no surprise.

‘Cross-border payments and their further development are very important for many countries around the world, including Mexico. Many of the families in Mexico have their relatives living and working in the US, many of which are sending money back to their families… In most cases, such transactions are associated with a lot of fees and it is creating many problems for these people. The recent announcement of Bitso is believed to help those who have faced such issues to make payments in an easier and more efficient manner… Because of this, many believe that the decision of Bitso is very important for everyday lives of people in Mexico as well as in the US.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Bitso Aims to Simplify Money Transfers between U.S. and Mexico appeared first on PaymentsJournal.

For many merchants, the question of engaging in cross-border e-commerce has only one real answer. It’s no longer something that is nice-to-have but rather a necessity. The opportunity is hard to ignore, even for a small company. Consider that the 2021 ATR report on cross-border e-commerce projects the value of that global market will reach almost $2.25 trillion US dollars by 2026. What seller wouldn’t want a slice of that pie?

The need for cross-border strategies for e-commerce brands

By its very definition, a cross-border strategy expands the reach of any business whose products and services are in demand outside the merchant’s home country. The internet recognizes no borders, which means with the right product and website content it is easy for a significant portion of organic website traffic to come from other countries. Online marketing all but eliminates the needs for expensive, physical ads and mailers across the world. Further, like the web itself, social media platforms—with friends, followers, and influencers, not to mention sophisticated targeted ad capabilities—aren’t limited by physical borders. These outlets have quickly evolved beyond social interactions to efficient platforms for shopping and e-commerce growth.

As important as a boost in sales volume might be, it is only one part of the longer-term opportunity. Having a cross-border strategy provides easier expansion into larger, foreign markets. This diversification reduces reliance on a single market which in turn minimizes the risks that accompany an “all in one basket” approach. In short, cross-border can help future-proof your post-pandemic business, insulating you from inevitable, sometimes wild      fluctuations in the local economy.

The challenges holding many merchants back from cross-border e-commerce

Despite the short and long-term benefits of pursuing a cross-border strategy, e-commerce merchants face a few headaches in implementing a successful approach. Consider the follow examples:

• Local currency and pricing. According to a PayPal survey of international shoppers, 76% of cross-border shoppers insist on the option of being able to shop and pay in their local currency—no surprises at checkout. This underlines the importance of an e-commerce site being not only location-savvy but also enabling consumers in different markets to settle their transaction in the currency of their choosing.
• Duties and taxes calculations. Every country has its own customs, duties, and taxes on items shipped into its borders, some based on type of item, others on value, size, dimensions, or other characteristics. All these fees must be remitted to the taxing authorities at point of entry—which means they must be accurately calculated up front and accounted for in the total price the customer pays. If the customer cannot pay duties and taxes upfront for their order, they risk receiving a bill later when the item arrives at their door. Or worse, they might need to go to their local customs office to pay the additional fees and pick up their product, which makes for a poor experience.
• Offering local payments. Aside from seeing prices in their local currency, customers in different countries have their own expectations of how they should be able to pay for online purchases. Visa or Mastercard are not accepted (or widely used) everywhere, which means a cross-border strategy should be customized per market to include other options such as alternative payment methods—Google and Apple Pay, PayPal, Afterpay, WeChat, Alipay, or whatever is customary—deferred payment plans, or even cryptocurrency. Providing all these options and more can be complex and complicated to build into your e-commerce site.
• Shipping and logistics. Most e-commerce merchants are accustomed to shipping physical items domestically via the postal service or premium carriers. Cross-border shipments add a whole other dimension to these logistics, not only for the merchant but for the shopper as well. According to a 2021 cross-border e-commerce report, two of the top barriers to cross-border purchasing were expensive shipping (45% of surveyed consumers) and slow product delivery (36%). That is why it is critical that cross-border merchants offer multiple options of shipping that are optimized for speed and cost.
• Overall customer experience through end-to-end localization. Addressing the above nuances of cross-border e-commerce is essential for merchants to expand outside their existing domestic markets and satisfy their global customers’ desire for an exceptional experience. This means that not only does a cross-border e-commerce solution have to support a localized experience, but it must minimize friction at every step—from ordering to payment and from shipping to receipt—without increasing resources to support every possible market.

The importance of solutions to augment, enable, and simplify cross-border e-commerce

No merchant can expect to expand from domestic to cross-border e-commerce overnight without help managing the numerous factors that impact a customer’s journey, all the way from website experience to product delivery. Even well-established merchants with large IT budgets and staff rely on solution partners to handle many of these challenges. So, when a company is ready for its piece of that $2+ trillion pie, it is critical to select its cross-border platform and service provider with utmost care.

Of course, there are a lot of moving parts when going cross-border. Different departments in your organization will have different goals when selecting the organization’s partner and platform. Regardless, it’s important to select one that enables you to start going global quickly and easily while providing a frictionless, localized end-to-end customer experience. But once you’re international, it’s equally as crucial that your platform-of-choice allows you to scale your expanded operations to the sky as you refine and optimize your new cross-border strategy.

The post How Small & Large Brands Alike Can Compete in the $2.25 Trillion Cross-Border E-Commerce Market appeared first on PaymentsJournal.

In this posting at TGSL we see that Ripple is launching a cross-border payments platform called On-Demand Liquidity (ODL) in partnership with the Dubai-based Pyypl. Most readers will know of Ripple, the San Francisco-based fintech, which is one of the trailblazers for blockchain payments. Pyypl is a developer of a blockchain-based financial technology platform designed to offer non-bank digital financial services by mobile phone. The release does not explain why the launch is limited to MENA and excludes sub-Saharan Africa, but that is likely more an issue of scale, timing and licensing, which we would expect to change over time. 

‘The region is considered one of the largest payment centers in the world… Blockchain company Ripple has announced the launch of On-Demand Liquidity (ODL) payment service in the Middle East and North Africa (MENA). The blockchain company Pyypl will be the partner for the platform deployment…

The Middle East is home to two of the three largest remittance corridors in the world, according to consultancy McKinsey. The volume of transactions between the UAE and Saudi Arabia in 2020 reached $ 78 billion and amounted to 7% of the total GDP of the two countries. The region has experienced a rapid digitalization in the past year. The Aber project was launched – a common digital currency between Saudi Arabia and the UAE; Buna payment platform and AFAQ system, connecting real-time settlements of six Gulf countries.’

Since we have not had a briefing on the new platform, some of the details mentioned are not especially clear. These points include the lack of a pre-funding requirement and the use of Ripple’s cryptocurrency XRP as a bridge between fiat and digital currencies, with an exception of UAE itself. So, perhaps we will get some additional clarity at some future point during an industry event (such as the upcoming AFP). The article mentions companies as well as low-income individuals across the region, so it seems to be solving for several use cases. This would be especially good for SMEs given liquidity as an ongoing business challenge in these segments.

‘In traditional cross-border payments in the region, organizations must keep “pre-financing” in a bank account. These funds do not participate in the transaction, but are blocked in the company’s account. ODL service eliminates the need for pre-financing, which will increase the liquidity of companies, according to a press release… Pyypl’s goal is to bring digital payments to billions of low-income smartphone users across the Middle East and Africa. The ODL platform will help Pyypl reduce international transaction fees for the company’s customers.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Ripple Launches Cross-Border Payments Platform in the MENA Region appeared first on PaymentsJournal.

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 NewPaymentFlows@mastercard.com. For more information on Previse’s InstantPay contact info@previ.se.

The post Working Capital & Cross-Border Services Q&A: “Reducing Friction in B2B Payments” appeared first on PaymentsJournal.

Another foray into cross-border payments, this one dropped in ASEAN Business and stays pretty much with APAC and that sub-region’s advancements in the space, starting with domestic real-time payments both existing and almost ready for deployment. Readers familiar with the ASEAN acronym will know it is an economic development association comprised of ten southeast Asian nations. So, we have been covering these various articles about efforts there to conduct cross-border real-time payments between several of the countries. The author discusses these and what more needs to be done.

‘The APAC region has traditionally been a pioneer in terms of fast payments technology, with Japan launching its Zengin payment system over 40 years ago. Eleven countries in APAC now have active real-time payment networks – including Singapore’s FAST network, which was launched in 2014 – whilst five other countries are getting their own networks ready for launch. APAC has also taught the world how to harness mobile apps, QR codes and contactless technology to make instant payments a simple and convenient process, establishing them as the preferred payment methods for many consumers and businesses…

However, whilst simple, fast and free domestic payments have become the norm across APAC, the same cannot be said for international payments. Sending money between countries has typically meant long processing times and high transaction fees, with fees in ASEAN often being well above the UN’s Sustainable Development Goal of 3 per cent, according to the Asian Development Bank. This is far from ideal in a region where an estimated 320 million people rely on money sent from abroad by family members, and at a time where SMEs are seeking to trade more internationally.’

The author then goes on to discuss whether or not banks are in position to capitalize on the new rails and capabilities in this space. Since most non-P2P x-border transactions are still initiated through FIs, we don’t see why not. We are not sure about the article’s claim that ISO 20022 messaging will play a role in 80% of all payments transactions by 2025 but it will certainly be a much larger percentage than now, since domestic wire systems are converting over, as is SWIFT, so B2B and other high value flows will be moving under that messaging standard. The point is that banks will be modernizing their infrastructure to adapt, so should also be able to play a large role in real-time cross border.

‘There is also another huge opportunity for banks to collaborate with corporates that want to offer cross border payments services under Banking as a Service (BaaS), a new model which enables non-banks to build banking offerings on top of an established bank’s regulated infrastructure. To avoid being left behind, banks must collaborate with these fintechs, technology and service providers to take advantage of new cross-border payment rails and develop innovative new services that provide added value to the customer…

Through a combination of central bank-driven agreements, standardisation and technological innovation, real-time cross border payments are a reality. The benefits are many, both for consumers and businesses, and the potential for non-bank players to find new revenue streams means the proliferation of new agreements and services will continue at a pace. With more opportunities to deepen, expand and monetise transactional relationships, it’s a no-brainer that this will be the way forward for banks, with fast movers gaining from the first mover advantage.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post The Rise of Instant Cross-Border Payments: Boon or Bane for Banks? appeared first on PaymentsJournal.

As those who have been following these pages and various member research for the past several years will know, the topic of cross-border payments has been high on the priority list for innovative approaches. We have also been pointing out in our various faster payments research that the domestic real-time rails that have been rolling during the past 5-10 years would eventually start to connect across borders. This piece in American Banker shows that this eventuality is perhaps closer than previously thought.

‘The successful instant transfer of funds from the U.S. to Europe took place in recent weeks as part of the new Immediate Cross-Border Payments (IXB) initiative orchestrated by Swift, The Clearing House and EBA Clearing, the organizations said Tuesday…

The Society for Worldwide Interbank Financial Telecommunications, TCH and EBA Clearing said in a press release that they had collaborated to prove the feasibility of instant cross-border payments in a test involving 11 banks…

Bank of America, BBVA Group, Citigroup, HSBC Holdings, Intesa Sanpaolo Bank, JPMorgan Chase and PNC Financial Services Group directly participated in the proof of concept, in which banks exchanged messages to synchronize the transmission of test transactions sent between domestic instant payment networks on each side of the Atlantic, the release said…

The effort underscores rising pressure on incumbent payment networks to modernize the cross-border payments experience as fintechs and blockchain innovators like Ripple introduce faster and cheaper ways to send funds globally.’

Starting with the DLT networks a few years ago, we saw how instant settlement could take place across borders. This spurred on the Swift gpi (Global Payments Innovation) development to speed up settlement and improve the transparency of cross border remittances as well. We have seen the initiatives underway in southeast Asia as well as in Scandinavia. So, bringing together dominant wire transfer rail owners from the U.S. and Europe would seem a good way to reach a lot of banks with a new approach.

‘IXB’s next move will be to test its instant solution for cross-border payments in other key remittance corridors, the release said… Observers say IXB could prove valuable for certain types of payments as consumer and cross-border payments continue to expand with the rise of the international gig economy and growing global e-commerce payment volume between commercial buyers and suppliers.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Banks Take Cross-Border Payment Test to Next Level appeared first on PaymentsJournal.

Many readers will already know that SWIFT is sort of the default bank standard for financial messaging in cross-border payments.  A few years back, it launched its gpi  initiative for improving the speed and transparency of cross-border transactions, with close to half of their network banks having adopted the new messaging rail.  In this announcement at the Banking & Finance channel, we see that the Development Bank of Singapore (DBS) and SWIFT are now linking up to offer a new cross-border service using gpi, that allows real-time tracking of inbound payments to DBS business clients.

‘In its official communique, the bank stated that it is the first lender in India and Asia-Pacific to provide this facility to its clients, which is likely to offer benefit to close to 4,000 corporate and small business clients in India, with numbers expected to grow further….It said that the corporates can get the visibility over incoming payments now, helping with working capital management by planning back-to-back payments, thereby improving receivables forecasting and overall cash position. It also says that the facility will help improve the accuracy for intraday credit line needs and provides further benefits in supporting credit control.’

We have been tracking a series of connected things over the past few years, including cross-border, real-time payments and modernization of the cash cycle.  This type of service spreads across all three since it is designed to assist in the collections cycle for international payments settlement.  DBS is one of the more forward-thinking financial institutions in the Asia Pacific region and so innovative approaches to reducing friction for business clients is a priority. 

‘Divyesh Dalal, Head, global transaction services, DBS Bank India, said, its incoming payment tracking capability, supported by SWIFT gpi, offers transparency and visibility to corporate treasuries and SME businesses alike….“It makes FX and working capital management more predictable, thus reducing costs and optimizing cash flow. Coupled with our digital solutions for cross-border payments, regulatory documentation management and FX, we strive to deliver the best platform for cross-border transactions to our customers. These solutions make banking simpler and effortless, giving customers more time to focus on their business,” said Dalal…..Kiran Shetty, head of India and South Asia at SWIFT said, “Driven by SWIFT gpi, the new inbound tracking service by DBS Bank allows corporates to see when a payment is on its way and when it is arriving at the beneficiary, which in turn reduces operational costs and frictions,” said Shetty.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post SWIFT Partners with DBS for Real-Time Cross-Border Payments Tracking in India appeared first on PaymentsJournal.

The cross-border payments market is seeing an influx of new players that are bringing with them both new payment options and cross-border value-added services. To make the most of the partnerships these new companies offer, banks must rethink their own cross-border operating models.

To learn more about the state of the cross-border payment market and what banks need to know, PaymentsJournal sat down with Anders Olofsson, Head of Payments at Finastra, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The new narrative around cross-border payments

In the 18 months since the pandemic emerged, there has been a tremendous increase in trade and international business. This includes a higher number of global transactions. The combination of this increase, rapid digitization, and new market entrants is creating what Olofsson refers to as the “perfect storm” in the cross-border payments space.

“In essence, we see a really big growth in the number of transactions and also in new currency corridors. Historically, [cross-border payments] have been dominated by Chinese, Japanese, European, and American trade; now we see as well that new currency corridors are opening up… These [are] providing new challenges for the traditional correspondent banking network, but also providing opportunity for new market entrants,” explained Olofsson.

While cross-border payments were once largely reserved for B2B use cases, that is slowly changing. “We’ve heard calls for better cross-border experiences from the Bank of International Settlements, working groups, and central bank figures and so forth, [and] that’s mostly on the consumer remittance side as well as our C2B use cases,” said Murphy.

There are also rising expectations that the seamless, integrated, and real-time experience of conducting payments in a commerce environment will become available on a corporate level. “We see the merger of the expectations and experience between retail and corporate payments, where [the expectations] are being shared across users,” said Olofsson.

Additionally, new players are entering the market with different fee structures than traditional correspondent bank networks, putting pressure on banks’ fee income. Combined with the decline of the global interest rate, this is compressing the profit margins for banks. As a result, banks today are looking into new ways to conduct cross-border transactions on behalf of their customers outside of SWIFT and traditional bank networks.

“There are so many factors playing into how banks need to be addressing the cost base to meet the compressed profit margins and fees in cross-border payments,” noted Olofsson.

Cross-border payments are conquering hurdles—and facing new ones

Historically, one of the key hurdles in cross-border payments was the lack of global standardization and harmonization within domestic payment systems. Now, systems such as SWIFT and NACHA in the United States and the ECB and EPA in Europe are consolidating into a standard format. This is good news, as the harmonization of a multitude of options makes processing international payments simpler.

“From a compatibility point of view, that has dramatically helped banks make their processing more efficient. We also see that the regulation globally for those networks is getting harmonized, and that is around everything from terrorist financing and prevention all the way to Know Your Customer,” said Olofsson.

Another hurdle has been around liquidity management, as it can be a processing challenge for banks to efficiently manage liquidity across many different settlement accounts in an increasingly real-time world. “The complexity and the challenges around managing your liquidity as a bank is a hurdle. That challenge also replicates back to the corporates, which also increasingly need to pay attention to their liquidity management in a speedier and speedier world,” he added.

Part of the hurdle here is the fact that a growing number of currencies are being used to facilitate cross-border payments. “The yen, the euro, and the U.S. dollar corridors [are] obviously being less of a problem, but there still remains close to 200 other currencies that need to be facilitated, and I think that’s where the complexity is with rising trade to the Southern Hemisphere of the globe,” noted Olofsson.

What the influx of new players means for bank operating models

Between increased digitization spawned by COVID-19, new market entrants and currency corridors, and the emergence of new technology, there is a lot going on in the cross-border payments space. But what does this mean for banks? “I think that, first and foremost, what should be driving the bank’s operating model is what business model they want to apply [to] their payment business,” said Olofsson.

More specifically, banks need to decide whether they are going to focus on conducting sales and distribution or manufacturing. By letting go of certain parts of the value chain, they can successfully achieve scale and efficiency in cross-border payments.

“Banks need to make that decision on how they are actually going to shape their business model. And when they decide upon that, they need to make the decision [of] whether they’re going to take an operation model where they focus on manufacturing [and] all that it comes with—achieving scale, efficiency, and really having a lean and mean back-office operation—or being able to serve clients more like a tech company,” concluded Olofsson.  

The post Why Banks Need to Rethink Their Cross-Border Payment Operating Models appeared first on PaymentsJournal.

Another posting about the ongoing theme of connecting two or more domestic faster payments systems into a potential real-time cross-border scenario.  This piece appears in The Hindu and discusses collaboration between the central banks of India (RBI) and Singapore (MAS) to link their respective fast payments systems, UPI and PayNow. We have been commenting on the various initiatives for accomplishing connections between sovereign payments systems to facilitate easier, faster and less expensive cross-border payments, which has seen a particularly active set of efforts in south Asia.

‘The linkage is targeted to be operationalised by July 2022….“The UPI-PayNow linkage will enable users of each of the two fast payment systems to make instant, low-cost fund transfers on a reciprocal basis without a need to get onboarded onto the other payment system,” the RBI said in a statement.…“The UPI-PayNow linkage is a significant milestone in the development of infrastructure for cross-border payments between India and Singapore, and closely aligns with the G20’s financial inclusion priorities of driving faster, cheaper and more transparent cross-border payments,” the RBI said.’

In this case the targeted transactions are P2P and C2B, allowing for instant transfers between customers of participating banks without having to share bank account numbers.  Both systems have been in operation for roughly 4-5 years now so this initiative will be another step in the modernization of cross-border payment efforts, at east for a portion of the population and use cases.

“This initiative is also in line with RBI’s vision of reviewing corridors and charges for inbound cross-border remittances outlined in the Payment Systems Vision Document 2019-21,” it added….UPI is India’s mobile based, ‘fast payment’ system that facilitates customers to make round the clock payments instantly using a Virtual Payment Address (VPA) created by the customer….This eliminates the risk of sharing bank account details by the remitter. UPI supports both Person to Person (P2P) and Person to Merchant (P2M) payments as also it enables a user to send or receive money….PayNow is the fast payment system of Singapore which enables peer-to-peer funds transfer service, available to retail customers through participating banks and Non-Bank Financial Institutions (NFIs) in Singapore….It enables users to send and receive instant funds from one bank or e-wallet account to another in Singapore by using just their mobile number, Singapore NRIC/FIN, or VPA.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post India and Singapore Central Banks to Link Their Faster Payment Systems appeared first on PaymentsJournal.

This brief piece in Vietnam+ is a follow-on to several other previous announcements about citizens across the ASEAN region having the ability to make cross-border payments more easily.  In this case, Indonesia and Thailand are launching a cross-border pilot that allows the use of a QR code to have a real-time payment made between a merchant in Thailand and a consumer in Indonesia, and vice versa.

There have been several of these categorical initiatives over the past year or two, which are part of a planned effort to improve commerce between ASEAN nations.

‘In a statement released on August 17, the BI said under this linkage, consumers and merchants in both countries will be able to make and accept instant cross-border QR payments for goods and services.…It highlighted that this connection is the first that links the retail payment system operators in both countries, and also marks a key milestone in the ASEAN Payment Connectivity initiative, aiming to promote financial integration in the region.’

The use of mobile devices for payments and QR codes has really been pioneered in the Asia Pacific region, most specifically in China but also spreading across ASEAN as well (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam). 

We have written about this in member reports and continue to track developments, which are generally tepid in North America.

‘At this stage, users from Indonesia are now able to use their mobile payment applications to scan Thai QR Codes to make payments to merchants all over Thailand. Likewise, users from Thailand are now able to use their mobile payment applications to scan QRIS (Quick Response Code Indonesian Standard) to pay for goods and services at merchants in Indonesia and also use this service for their cross-border e-commerce transactions….The full commercial phase will be launched in the first quarter of 2022.  During this phase, more participating banks/non-banks are expected to join.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Indonesia, Thailand Introduce QR Codes for Cross-Border Payments appeared first on PaymentsJournal.

Central Bank Digital Currency (CBDC) is gaining momentum in the world of finance. As a new form of digital money, decoupled from the traditional banking system, CBDC offers an alternate way to experience and interact within the economy. Many experts consider it a possible precursor to a cashless society and it could potentially revolutionize global finance, as data analytics and automated processes would become even more integrated with payment systems.

The CBDC efforts in southeast Asia continue with the latest announcement at Ledger Insights, whereby the National Bank of Cambodia and Malaysia’s Maybank launched a mobile cross-border remittance service. It seems that Cambodian users of Bakong, which the article refers to as the Cambodian payment system that uses a ‘quasi-central bank digital currency’ (we don’t know what that means exactly) can receive up to USD 2,500 in real-time from a Maybank MAE app. 

We have been pointing out all the CBDC and cross-border activity over in Asia Pacific, particularly among ASEAN nations. It is interesting that the Fed (or certain parties within it) remains a major skeptic of CBDC activity, but we assume we’ll get a better picture with the expected Fed report in September around the subject.

‘When it comes to researching CBDCs, improving cross-border transactions is a key motivation for many central banks. This is because a large proportion of international remittances is made from people sending money back home….In 2020, the total value of remittances across the world totaled $702 billion, of which $540 billion was to low and middle-income countries, according to figures from the World Bank….Yet despite the high demand, remittances are typically slow, expensive and subject to variable fees, depending on the region, provider or corridor.’

So the cross-border utility of these digital currencies remains a large appeal, and we’ll see where it goes from here. This is just remittance, not a B2B use case.  Readers keeping up with the subject may want to dig in a bit more.

“One of the main reasons for Bakong is to make usage of the local currency easier for the people, more convenient. And so ultimately what we want to see is direct conversion from (Malaysia’s) Ringgit to (Cambodia’s) Riel,” said Dr. Chea Serey, Assistant Governor of the National Bank of Cambodia (NBC)….Strictly speaking, Bakong is a blockchain-based central bank payment system that uses digital currency. Some label it as a ‘quasi-CBDC’. It’s not a conventional CBDC because many payments are not in local Riel and the wallets are linked to bank accounts….Meanwhile, this week, it was revealed that the Bank of Korea will also be advancing its cross-border CBDC trials with participation from Samsung, which will research cross-border payments to other mobile phones or connected bank accounts.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Cambodia’s Central Bank Unveils Cross-Border Digital Currency (CBDC) Payments From Malaysia appeared first on PaymentsJournal.

One of the things you hear about in the x-border payments space is the need to improve the speed, transparency, and cost of these transactions, which on the consumer side (P2P remittance, and C2B) has actually gotten better due to some of the customer experience work done by fintechs.  Most of the x-border transaction volume and value, however, is on the B2B side of things, and a huge challenge faced by banks and other service providers in this space are regulatory hurdles around AML.

In this release found at AITHORITY, we see the collaboration between a couple of fintechs to make that challenge easier to handle.  ONEPIP, a Hong Kong-based fintech that specializes in comprehensive solutions for money transfer, currency exchange and FX rate services, is adopting a solution from Napier, a 2015 UK-based regtech startup that develops an intelligent compliance platform for AML and trade compliance. 

‘RegTech company, Napier, provider of advanced anti-financial crime compliance solutions, has announced that cross-border payment specialist ONEPIP will be using its technology as part of ONEPIP’s upgraded anti-money laundering (AML) controls….Napier’s AI-led Transaction Monitoring, Client Activity Review and Risk-Based Scorecard Review will give ONEPIP a systematic, intelligent review of all its transactions and customer profile data to help identify suspicious activity quickly and easily, creating a robust compliance solution.’

So while we cover the challenges in x-border experiences, with >80% of transaction value in B2B uses, and AML/CTF one of the great regulatory hurdles, Those with interest in the space should be aware of the developments in compliance tech.

Dagian Cheong, Head of Risk Management, said “With over 25,000 transactions worth over USD4.5bn in value since 2016, licensed operations in Hong Kong and Singapore, and planned expansion in the region, automated transaction monitoring has become imperative for the management of the risks in our business….“As one of the fastest-growing FinTechs in the region, ONEPIP is on a continual quest to collaborate with best-in-class technology innovators, to integrate with our proprietary FX management platform, to meet the exacting standards of all our stakeholders, which include regulators and partner banks. We are particularly grateful to the Monetary Authority of Singapore for awarding us with the Digital Acceleration Grant which helped fund this project.”…..Robin Lee, Head of APAC at Napier, said: “Financial services organizations continue to face mounting pressures to ensure that their regulatory compliance measures are constantly up to date and robust enough to identify any potential criminal activity, or face huge fines. With Napier’s advanced and intelligent technology, this can move from being a mandatory duty to a competitive edge. ONEPIP’s new solution enhances its regulatory compliance regime to further strengthen its position as the trusted cross-border payment specialist in the region and beyond.”

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Cross-Border Payments Specialist ONEPIP Gains Competitive Edge With New Compliance Solutions From Napier appeared first on PaymentsJournal.

• New service enables businesses and consumers to send payments in seconds with full transparency and strong security
• SWIFT Go is a key building block in the co-operative’s strategy to enable instant and frictionless cross-border transactions
• Seven leading global banks already live with the service

Brussels, 27 July 2021 – SWIFT today announces the launch of SWIFT Go, a transformative new service that enables small businesses and consumers to send fast, predictable, highly secure, and competitively priced low-value cross-border payments anywhere in the world, direct from their bank accounts. Seven global banks, which collectively handle 33 million low-value cross-border payments per year, are already live with the service.

SWIFT Go enables financial institutions to offer a seamless payments experience for low-value transactions often initiated by small- and medium-sized enterprises (SMEs) to pay suppliers overseas and by consumers sending money to friends and family internationally. Using tighter service level agreements between institutions and pre-validation of data, SWIFT Go enables banks to provide their end customers a fast and predictable payments experience with upfront visibility on processing times and costs.

The SWIFT Go service builds on the high-speed rails of SWIFT gpi, which have transformed the speed and predictability of high-value payments. The service marks another milestone in SWIFT’s strategy to enable instant and frictionless transactions from one account to another, across SWIFT’s network that connects more than 11,000 institutions, and 4 billion accounts across 200 countries worldwide. It will further strengthen the capabilities of banks to serve their customers in the high-growth small business and consumer payments segments.

Stephen Gilderdale, Chief Product Officer, at SWIFT said: “SWIFT Go is a further step towards achieving our vision of enabling anybody, anywhere, to send money instantly and securely around the world. The new service is a direct response to the needs of small businesses and consumers for fast, easy, predictable, secure and competitively priced cross-border payments. Our new service will allow banks to compete effectively in one of the fastest growing segments of the payments market, delivering a seamless experience for their customers.”

SWIFT Go was developed in close collaboration with the global SWIFT community and is underpinned by several key pillars:

• Speed: Tighter service levels between banks increase speed. A single payment format increases straight-through processing, while services such as pre-validation remove frictions that cause delays.
• Predictability: The amount, time, fees and FX rate of a payment are known in advance. The sender and receiver of a payment can track the status in real-time.
• Easy to use: The user experience is simple and streamlined, with data requirements known upfront. Strict network validation provides for easy initiation and processing of SWIFT Go payments
• Competitive prices: Processing fees are agreed between financial institutions upfront so they can provide their customers with full transparency; increased straight-through processing further reduces processing costs.
• Security: Senders and receivers have peace of mind that payments are underpinned by the strong security of the SWIFT network.

Seven leading global banks are now using SWIFT Go live: BBVA; Bank of New York Mellon; DNB; MYBank; Sberbank; Société Générale, and UniCredit.

Raouf Soussi, Head of Enterprise Payments Strategy of Client Solutions, BBVA said: “BBVA is very excited to be one of the first banks to sign up to SWIFT Go and we recognise the potential of this solution to revolutionise the way SMEs and consumers move money around the world. We have listened closely to our customers and we know how much they value a secure service that ensures payments reach their destination quickly and seamlessly.”

Isabel Schmidt, Head of Direct Clearing and Asset Account Services Products, Bank of New York Mellon said:  “It’s no secret that for many years consumers and small businesses have been running into varying pain points when transacting international payments. These challenges have included opaque costs and lack of certainty on how quickly funds are delivered to the final beneficiary. This is why BNY Mellon is pleased to be the first US bank to go live with SWIFT Go, a new service that overcomes all of these challenges and assists financial institutions in delivering a competitive, seamless, fast and predictable payments experience to their customers.”

Feng Liang, Deputy CEO, MYBank said: “SWIFT gpi has become the benchmark for high-value cross-border transactions and we are confident that SWIFT Go will be equally as transformative for SME payments. By providing for instant, seamless transactions within one of the highest growth areas of our industry, we expect that adoption of SWIFT Go will be widespread and that it will quickly be established as the industry standard for lower value transactions.”

Jean-François Mazure, Head of Cash Clearing and Correspondent Banking, Société Générale said: “As customer expectations for faster payments evolve, the correspondent banking industry requires a solution to more competitively process SME and consumer payments. SWIFT Go fits perfectly with it, allowing us to provide an outstanding experience to our customers with predictable, seamless, and frictionless low-value cross-border transactions reaching beneficiaries accounts quicker than ever.”

Raphael Barisaac, Global Head of Cash Management, Global Co-Head of Trade, UniCredit said: “UniCredit has long been a keen supporter of innovations within payments that deliver excellent outcomes for end-customers, and as such we are very proud of our involvement in SWIFT Go. This is a service that will lead to real benefits for SMEs and consumers, allowing them to enjoy the speed, predictability and transparency that SWIFT gpi has brought to high-value transactions.”

The post SWIFT Launches SWIFT Go, a Fast, Cost-Effective Service for Low-Value Cross-Border Payments appeared first on PaymentsJournal.

This announcement posted at Finextra is yet another sign of the change in times as Swift continues to adapt to the technology challenges put forth by fintechs in alternative networks and methods for the cross-border space, as the bank cooperative evolves into delivering broader services. We first saw this with the Swift gpi initiative, which will eventually retire the legacy network, sometime after the transition to ISO 20022. We then saw the pivot to transaction banking support services in 2020, and although we have no data as to the success of this initiative, we assume reasonable take-up given the thousands of institutions in the Swift ecosphere.