In the not too distant past, the only way to send money overseas was to wire it, a lengthy process that was fraught with the potential for fraud. Now, it’s become much easier to send money abroad, no matter if you’re a business or an individual.
But innovation in the international payment space is really only beginning. It’s likely in the future, it will be possible to send money overseas in real time, through extraordinarily safe channels, to even the most remote locations in the world.
American Express is at the forefront of this. One of its recent innovations is a solution for the many businesses that don’t accept credit card payments.
AccessLine is powerful payment tool through which American Express deposits funds into the supplier’s account directly, with only the cardholder knowing a card was used in the transaction process.
American Express is not the only financial services business introducing innovations into payments. There is innovation happening at every point in the payment cycle. In the future, the tools that facilitate payments will be completely transformed, as emerging technologies such as blockchain revolutionise the way money is exchanged internationally. Blockchain is a new, transparent way of verifying transactions that will make it safer to make payments, which will also be more easily verifiable.
Moreover, the devices we use to make payments are likely to change as smart phones, tablets and other equipment emerge that have advanced payments functionality.
Many new entrants are likely to enter the payment space and we will increasingly see start-ups collaborate with established players to offer a smooth payment experience. And the challenge for incumbents and regulators will be keeping up with the pace of change.
So how will international payments be transformed in the future for businesses? Graham Rothwell is Accenture Australia’s payments lead. He says one of the biggest changes for businesses will be the access to real time international transfers, accompanied by synchronous real time confirmation.
“This may be provided by new schemes such as the interconnection of national real time automated clearing houses (ACHs), new versions of established networks such as Swift or new networks exploiting blockchain or message-based technologies. Direct access to these networks for large businesses, encouraged by several regulators, would see a further step towards frictionless international transfers,” he advises.
PwC’s head of innovation Kate Erikkson says transformation of international payments must be centred on the customer experience.
“It's all about the customer and transparency. Technology is enabling lower cost, wider scale and better experience. But it’s essential for payment businesses to offer something that resonates with society and offers value to stakeholders,” says Erikkson.
When it comes to technology, she says solutions must be open and offered across a flat marketplace ecosystem, for instance through blockchain solutions that facilitate a peer-to-peer, low-cost open market.
“Businesses will need to look at how they connect to a range of different players as international payments will be contextually driven. Right now I have a bank account and I have cash and I've got to pay somebody. Moving forward, you won't think of payment as a core function. It will just be something you do while you're messaging with somebody, when you walk out of a place.”
The role of fintechs
Emerging financial technology companies – fintechs – are likely to play a role in the transformation of the international payments space.
Rothwell says fintechs such as Ripple and Earthport are adapting some of the new transactional technologies including blockchain and distributed consensus ledgers to reduce friction, time, cost and risk at the core of international payments.
Ripple allows banks to transact with each other without an intermediary and Earthport allows banks to make complex international payments simply.
“Others are looking to introduce robotics into some of the more complex areas such as exceptions and at the user level. There is a growing trend of fintechs looking to integrate pre- and post-transaction services into finance and wealth management tools,” he explains.
It’s likely fintechs and established financial services businesses will need to work together to improve the international payments system. Says Rothwell: “There are already early signs of banks and other established financial service providers collaborating with fintechs to combine the industrial-grade reliability, scalability, security and compliance of the former with the agile, innovative approach to connectivity and customer experience from the fintechs.
“The international payments industry benefits from innovation but not at the risk of reduced performance or security. The fintechs also benefit from the huge customer base of the established players for user testing and rapid upscaling.”
As for the consequences for CFOs, Erikkson says the way to look at international payments is firstly to ensure the strategy is customer led. “Then you can look at the emerging technology and say, who can I bring in to work with? There's a lot going on in blockchain – there are around 43 pilots that we know of, working in the experimental phase.”
She says in some cases it will be appropriate for CFOs to form joint ventures with partners that have technology they could leverage, or invest in a fintech whose technology could help transform the payments aspect of the business.
“Regardless of trends, if you are a CFO looking out into the future it's almost like a baseball game. You want to stand out front and if you see something occurring in the changing fintech landscape you want to pass it to people in the business who are responsible for transforming existing processes.”
- Payments are changing as devices change.
- Start-ups increasingly entering this space.
- Blockchain technology likely to revolutionise payments in the future.