As you might expect, B2B payment options are often cited as a critical factor for companies and people choosing their bank. Indeed, according to the 2017 B2B Payments & Working Capital Management Survey, 45 per cent of those asked said that it was the clincher. However, the fact that 20 per cent of respondents also said that they use alternative methods for dealing with cross-border B2B payments proves that banks are failing to keep up with the needs of international businesses.
In an increasingly digital and globalised world, the thought of handing over a paper cheque to finalise a business deal now seems curiously quaint and old-fashioned, not to mention hugely inefficient. By contrast, electronic payment methods are simpler, quicker and cheaper, yet businesses are finding that those methods offered by banks are severely limited in one important area — sending money internationally.
Companies want the same simplicity and efficiency they are finding available for domestic payments, especially since international business is already complicated enough with ever-changing compliance and regulatory requirements. Yet, as illustrated by the aforementioned survey, at least a fifth of respondents are having to search for non-banking financial institutions to meet their needs.
Counting to cost
For many businesses, the expense of making international payments is a real stumbling block. A further survey, this time by Saxo Payments, found that 48 per cent of respondents were dissatisfied with the cost of making cross-border B2B payments, with 80 per cent saying that they would consider changing provider if there was a chance that it would reduce that cost.
Of course, there were other issues sited in the survey, with a perceived lack of transparency, foreign exchange rate variations and slow transactions all also ranking among the frustrations. While none of these ranked anything like as important a factor as cost did, they all contribute to a landscape of overwhelming discontent with how banks handle cross-border payments.
Fintech to the rescue
Wherever there is a niche, there is inevitably innovation, especially in the tech world. Sure enough, this frustration among businesses has bred a significant growth in fintech firms seeking to solve the problem of expensive, obscure, inconsistent and slow international transactions. The result is range of innovative solutions to this issue.
Said innovation comes in the form of leveraging new technologies — artificial intelligence (AI) and platforms, for example. Such developments have already found their way into the business world and are acting to deliver better value propositions, streamline processes and change the nature of business models.
An example of this technology in action comes in the form of automated systems that can check that all the required payment protocols are in place before starting the payment process. This reduces the amount of time and money wasted when payments fail to go through because one or more protocols were not adequately satisfied before the process began.
Fintech in the future
Research by Frost & Sullivan entitled 'The Global PayTech Market: Driving Transaction Transformation' noted a opportunity for significant advancement in the not-too-distant future in the form of instant or real-time international payments. While this is currently entirely achievable domestically, international payments and transfers have long suffered from delays ranging from hours to days. As with instant domestic money transfers, the widespread adoption of mobile devices is expected to be the basis of this trend.
Among the contenders in this development are UK firm Previse, which has received £2 million in seed funding to enable them to develop their proprietary AI solution. American firm Ripplealready offers a means of allowing banks and financial institutions to send money around the world in real time using Blockchain technology and may extend that service to the world of B2B payments.
While the value propositions and business models of the various paytech companies working towards solving this issue vary, they are all still working towards the same ultimate goal — a seamless and easy-to-use system of making cross-border payments. Different paytech companies are offering different benefits, such as integration with existing systems, FX conversion automation, marketplaces, notifications, payment gateways and more.
Dynamic currency conversion (DCC) and multi-currency pricing (MCP) are important features for businesses operating internationally, and are being offered by some fintech firms. They enable banks and merchants to price goods and services in the currency of their customers while receiving payment in whatever currency they (the vendor) chooses or requires. This massively simplifies international sales, ensuring that both the customer and the company are getting a fair deal in spite of constant currency fluctuations.
Of course, it’s difficult for a single solution to offer all of these services. Corporate cross-border payments are complex and it is challenging enough to disrupt one or two parts of the value chain in order to improve the customer experience. However, even relatively small changes and increased amounts of automation can offer companies an opportunity to dramatically simplify the process, reducing overheads. The fact that fintech firms can make use of streamlined processes and online models — especially cloud-based solutions — means they can minimise the cost for their customers, giving businesses their all-important savings.
Reinventing the cross-border payment ecosystem
It is worth noting that, while remarkable solutions are emerging, further work is required to develop them and optimise them. The current options are undoubtedly innovative and encouraging, with banks often collaborating with or investing in the firms behind them to enhance their own services. AIB, for example, acquired a minority stake in TransferMate as a strategic partnership to provide business customers with a convenient and cost-effective way to send and collect funds globally. ING have entered into a similar partnership with the same fintech firm for the same reason.
As these firms continue to develop their technology and banks continue to take advantage of their innovative services, businesses will be able to benefit from the trend towards instant payments, even in cross-border payments. Technology-based platforms enabling business to conduct such business instantaneously should reduce the cost and complications that have been an inherent risk of overseas sales. While some business will inevitably still require banking entities to be involved at some point in the process, paytech firms will likely become the go-to option for those seeking to bypass the complexity of ensuring optimum customer service and minimum cost.
This article is provided to you by DeeMoney. Thailand's money transfer solutions provider licensed by the Bank of Thailand. Interested in transferring money from Thailand to the world? Download the app from the Google PlayStore or the Appstore to get started.