FX International Payments
By Karen Lynch
Many businesses are seeking services with more tailored international money transfer alternatives, according to Global Money Transfer: Emerging Trends and Challenges, a 2017 report by Financial Technology Partners, a specialist investment banking firm.1 Businesses want better ways to handle recurring and one-time payments in their import-export trade, foreign currency hedging, commission payments, and regulatory compliance, according to the report. Their demands often include services that bundle international money transfer solutions to a range of these needs, as well as integration of such capabilities into their organization-wide enterprise resource planning (ERP) systems.
A variety of new services are aiming to fill these demands, provided by a growing number of financial technology (fintech) companies as well as established banks and financial services suppliers. Often, fintechs and established financial services companies partner to provide new offerings; in other cases, providers are acquiring new online international money transfer capabilities through mergers and acquisitions. The current activity is part of a transformation of the cross-border B2B money transfer services sector, driven by market forces, technology, and regulation, according to industry reports.2,3
A key driver of change in the international money transfer services sector is Open Banking, which encompasses standards, tools, techniques, processes, and infrastructure that permit customers to securely share their financial data across banks and other financial services companies. Once this data can be routinely shared, advocates say, it will become easier for customers wishing to send money internationally online to get the financial services they want, from whichever providers they prefer.4 Open Banking typically relies on application programming interfaces (APIs) to manage and automate the connections among financial services companies that enable functions like international money transfer services.
Additionally, across the world, "regulators are pushing for more innovation through increased competition and enhanced and open infrastructure," according to the Capgemini 2017 World Payments Report.5 "Payments modernization efforts to enable the infrastructure for real-time payments and to ensure broader market participation are under way across many countries … raising expectations in the consumer, corporate, and merchant market segments."
Established banks and financial services companies are also helping drive the market, as well as participating directly with their own enhanced international money transfer offerings. For example, some major banks have created open API developer portals for third-party developers to create value-added services in B2B transaction banking and cash management. These services can then be integrated with the banks' offerings.6
While transferring money has become easier for consumers and for domestic business transactions, the cross-border B2B sector has lagged behind, with wire transfers, letters of credit, and correspondent banking remaining the dominant model. As a result, the process remains relatively expensive, time-consuming, and inefficient for many businesses, especially smaller ones.
Several trends promise to change that, potentially redefining the international B2B money transfer services sector. For example, some providers now offer menus of integrated money transfer services targeted at import-export traders and cross-border online merchants, according to the Financial Technology Partners report. The offerings include – and often combine – automated international payments, foreign exchange risk management tools, multi-currency pricing, and other products.
In the area of business-to-consumer (B2C) money transfer, "value-added services in areas including customer analytics, fraud management, process optimization, and compliance tracking are expected to supplement payment solutions to improve customer engagement," according to the World Payments Report.7 "Retail merchants are demanding value-added services including wallets, secure payments, and improved analytics."
New B2B and B2C payment processing and management platforms can provide businesses with a range of integrated services providing greater control over payments and cash flow, proponents say. Some offer flexible payment methods, multiple currency support, and the choice of payment methods such as electronic and mobile wallets, prepaid cards, and electronic money transfers for payment or fund receipt.8
Some market entrants also address complex cross-border regulatory, tax, and security concerns surrounding sending money internationally online. For example, some money transfer services include offerings designed to address the Payment Card Industry Data Security Standard (PCI DSS), "Know Your Customer" (KYC) anti-money laundering regulations, and tax obligations.9,10
Benefits from these and other money transfer innovations can include better predictability of cash flow, a boost to collection rates, better anticipation of payment receivables, lower-cost cross-border payments, and improved currency and compliance risk management, according to the Capgemini report.11
The outlines of a modern international money transfer services landscape for B2B are now emerging, driven by market, technology, and policy forces. Fintechs and established financial services companies alike are beginning to help international businesses break through some of the chronic problems in handling transactions with suppliers and customers. The new environment holds the promise of greater efficiencies, lower risk, and other benefits for import-export traders and cross-border online merchants.
Karen Lynch is a journalist who has covered global business, technology and policy in New York, Paris and Washington, DC, for more than 30 years. Karen also is a principal at Content Marketing Partners.
1. Global Money Transfer: Emerging Trends and Challenges, Financial Technology Partners; https://www.dropbox.com/s/xvvrzyj1updxyt3/FTPartnersResearch-GlobalMoneyTransferTrends.pdf?dl=0
3. World Payments Report 2017, Capgemini;https://www.worldpaymentsreport.com/
4. “Open Banking APIs are Not Created Equally,” Bank Innovation; https://bankinnovation.net/2017/09/open-banking-apis-are-not-created-equally/
5. World Payments Report 2017, Capgemini; https://www.worldpaymentsreport.com/
8. “How is FinTech Impacting B2B Payments?” Medici; https://gomedici.com/fintech-impacting-b2b-payments/
9. “About,” Stripe; https://stripe.com/press#about
10. “Compliance,” Stripe; https://stripe.com/connect
11. World Payments Report 2017, Capgemini; https://www.worldpaymentsreport.com/