FX International Payments
By Megan Doyle
The new Business Payments Directory Association (BPDA), working with NACHA, an association that develops e-payment rules and standards, plans to release a proof of concept by the end of 2018 and to launch the blockchain-based directory in early 20191
More than 60 percent of respondents to a 2016 study by the Association for Financial Professionals (AFP) said that faster B2B payment technologies will improve business transactions, especially compared with conventional checks, which are less efficient and secure.2,3 Yet the same AFP survey found that 51 percent of all B2B payments were still being made by check.
One of the biggest barriers to e-payments has been the difficulty in finding a payee’s electronic banking information, such as preferred payment types, the BPDA says. The directory will allow payees to store their detailed and up-to-date electronic payment identity (EPI) information. This way, payers can quickly search for accurate EPI information.4
Currently, payment service providers and financial institutions securely store information. But the lack of interoperability between the institutions’ trusted information sources can limit data access to those businesses that are customers of the same B2B payment solutions provider or institution.5
Instead, the BPDA’s directory will comprise a federated network of credentialed service provider (CSP) subdirectories that securely store validated payee EPI information.6 These CSP subdirectories – including payment service providers and financial institutions – will be interconnected and managed using blockchain technology.7
These CSPs will verify the information uploaded to the directory using Know Your Customer (KYC) methods to ensure account legitimacy.8 In short, the BPDA’s directory will allow access to all validated EPIs provided by CSPs, thus promoting interoperability and more efficient payments.9,10 The directory will also leverage open source technology, application programming interfaces (APIs), and have standardized operating rules governed by the BPDA.11
According to the BPDA, the primary benefits of the directory are centered around speed and security. The directory’s comprehensive and interconnected platform is expected to enhance processing speed, saving time, resources, and costs. The directory is also expected to eliminate the need for routine payment account verification (since accounts will be pre-verified).12,13
It’s worth noting that the BPDA’s directory is not itself a payment system and, therefore, will not send or receive payments.14 Payees can structure their EPIs according to their preferred payment channels, such as SWIFT, automated clearing houses, or Fedwire, to name a few.15 The directory will also display preferred routing instructions, remittance details, delivery preferences, and more. Payees are responsible for managing and publishing information about the types of electronic payments they accept, and updates will be reflected in real-time to ensure accuracy.16 Payers can then search the directory to find the information they need to efficiently make electronic payments.17
Despite concerns about blockchain, a relatively new and unproven technology, BPDA maintains that its directory will be scalable, trustworthy, and secure.18 Because a public blockchain would provide too much visible information, the directory will use a private blockchain to ensure security, according to BPDA Chairman Lawrence Buettner, quoted on PYMNTS.com.19 Once it releases the proof of concept, the BPDA is expected to reveal more specific technical details.20
Other B2B directory initiatives are more “single-focused,” Buettner told PYMNTS.com, meaning they do not contain a wide enough breadth of information to support the variety of B2B payments and preferences used by organizations.21
Instead, the BPDA’s directory is expected be a comprehensive database containing far more granular information about payee preferences, including whether or not they prefer different payment methods for different payment sizes.22 A business may prefer a small payment made by check and a large payment made by SWIFT, for example. Thus, the BPDA says it hopes its directory will become the industry source for retrieving electronic payment information.
Many businesses recognize the benefits of B2B payment solutions incorporating e-payments, but the transition from paper to digital has been a challenge. With its secure, universal, and searchable directory, the BPDA aims to remove barriers to use, making e-payments easier for both payers and payees.
Megan Doyle is a business technology writer and researcher based in Wantagh, NY, whose work focuses primarily on financial services technology.
1. “Ticking Off The Boxes On The Fed’s Checklist Of B2B Payments Priorities,” PYMNTS.com; https://www.pymnts.com/news/b2b-payments/2018/bpda-lawrence-buettner-federal-reserve-discover-financial/
2. 2016 AFP Electronic Payments Survey, Association for Financial Professionals; https://www.afponline.org/docs/default-source/default-document-library/pub/highlights_2016electronicpayments-final.pdf
3. The B2B Directory Overview, Business Payments Directory Association; https://b2bdirectoryassociation.files.wordpress.com/2017/03/b2bdirectory_overview_final1.pdf
6. Press Release, Business Payments Directory Association; https://b2bdirectoryassociation.files.wordpress.com/2018/08/bpda-pr_final.pdf
7. “Ticking Off The Boxes On The Fed’s Checklist Of B2B Payments Priorities,” PYMNTS.com; https://www.pymnts.com/news/b2b-payments/2018/bpda-lawrence-buettner-federal-reserve-discover-financial/
9. The B2B Directory Overview, Business Payments Directory Association; https://b2bdirectoryassociation.files.wordpress.com/2017/03/b2bdirectory_overview_final1.pdf
10. Press Release, Business Payments Directory Association; https://b2bdirectoryassociation.files.wordpress.com/2018/08/bpda-pr_final.pdf
13. Press Release, Business Payments Directory Association; https://b2bdirectoryassociation.files.wordpress.com/2018/08/bpda-pr_final.pdf
15. “Ticking Off The Boxes On The Fed’s Checklist Of B2B Payments Priorities,” PYMNTS.com; https://www.pymnts.com/news/b2b-payments/2018/bpda-lawrence-buettner-federal-reserve-discover-financial/
16. Press Release, Business Payments Directory Association; https://b2bdirectoryassociation.files.wordpress.com/2018/08/bpda-pr_final.pdf
17. The B2B Directory Overview, Business Payments Directory Association; https://b2bdirectoryassociation.files.wordpress.com/2017/03/b2bdirectory_overview_final1.pdf
18. “B2B Payments Directory Association,” B2B Payments Directory Association; https://b2bdirectoryassociation.com
19. “Ticking Off The Boxes On The Fed’s Checklist Of B2B Payments Priorities,” PYMNTS.com; https://www.pymnts.com/news/b2b-payments/2018/bpda-lawrence-buettner-federal-reserve-discover-financial/