Banks To Open Up To FinTechs For X-Border B2B Payments Improvements

The cross-border B2B payments space hit an $18.5 trillion valuation last year, and researchers at BI Intelligence expect that value to grow as 2020 approaches. This year, the industry saw some of its largest players make progress in disrupting global B2B payments, with a focus on making those payments faster, more affordable and more transparent.

Visa, for instance, announced the creation of Visa B2B Connect earlier this year, a cross-border B2B payments solution the company tested in Singapore. In 2018, the company will continue to scale the solution as it aims to address safe, reliable and compliant movement of funds around the world using its network of 15,000 financial institutions.

Newcomers in the cross-border B2B payments space made their mark too. Venture capitalists backed Veem and Currencycloud, for instance, while blockchain innovators began to launch real-world, working solutions to ease friction in cross-border corporate payments. Blockchain company Ripple announced its service with Axis Bank in India was now up and running to facilitate corporate payments between India and Singapore.

Another player in this industry, TransferMate, recently announced it secured more than $35 million from Allied Irish Banks. The investment not only signaled support for cross-border B2B payments innovation, but also highlighted another massive trend of 2017: FinTechs partnering with traditional financial institutions (FIs).

PYMNTS recently asked TransferMate CEO Terry Clune what the cross-border B2B payments industry will be watching closely in 2018. At the center of his predictions: addressing traditional banks’ challenges using alternative technologies.

“Banks are extremely challenged when it comes to making the existing cross-border payments system better, given that the existing system is extremely antiquated, clunky and all of the hundreds of correspondent banks need to reach agreement to make changes,” he said. “Cost pressures following the global financial crisis do not suggest the correspondent banking network will be reformed any time soon. Alternatives to the correspondent banking network are the only way to improve speed, efficiency and transparency for cross-border payments.”

It’s not going to be an easy or fast task, though. According to Clune, developing and maintaining a network across the world that remains compliant with the complexities of regulations across markets is “complicated and burdensome,” he said, but it must be done.

TransferMate’s partnership with Allied Irish Banks is also part of a trend Clune said will continue in 2018 to achieve these lofty goals.

“In 2018, banks will look to partner with the genuine disruptors that offer a meaningful alternative to the traditional B2B transfer system,” he stated.

“I believe 2018 will be the year of collaboration by banks as they continue to reduce costly correspondent banking chains or seek parallel alternative rails,” he added. “API-driven interfaces particularly, with their B2B customer banking network, will feature within the collaborations to provide an ecosystem platform assisting their customer base with all aspects of cross-border activity when importing or exporting.”

That means solutions won’t be designed just to move money across borders, but may address other pain points linked to cross-border payments, like supplier management and the movement of trade documents across borders.

As banks open up their systems (and their data) to play more like the FinTechs, FinTechs will have to play more like the banks and ensure they remain compliant as they expand across markets.

“FinTechs with wider regulatory reach and plug-and-play payments technology stack will be key as banks hunt for solid partners to allow them to unlock the full ecosystem platform while connecting to source software, such as accounting software platforms,” Clune said.

Finally, the executive noted, the cross-border payments space is likely to see consolidation in 2018 and beyond, stemming from the brewing collaborative environment of today.

“I think the FinTech payments industry will see further consolidation activity within the coming years as FinTechs themselves will collaborate more together, and we will see trends such as the merger of strong customer acquisition models with strong operational models in an effort to address and accelerate improvements for cross-border payments,” stated Clune.