New solutions and alternatives are challenging the traditional banking approach to cross-border payments. Professional services firm Ernst & Young, in this report, noted that “based on analysis of data from 45 major banks over the last three years, institutions remain principally focused on applications of FinTech in payments”.
Some 80% of cross-border payments are B2B related, with banks dominating 95% of this market. Maintaining their 95%+ share of this market will be challenging, but is providing faster cross-border payments really the way to go in the race to stay at the top?
PYMNTS.com, a site specialising in payments news and trends, last month featured an article that discussed how “corporate payments still don’t have a clear role in driving the adoption of faster payment technologies in the United States”. And, it added, “there is an assumption that faster payments are not only unnecessary in the B2B landscape, but unwanted, as corporates don’t necessarily need to move money immediately”.
You can read more in the article, but here are two key takeaways. First, as the world gears towards a future of accelerated payment processes, there will be new challenges, such as investment and deployment costs for faster systems. Second, this paradigm shift will affect you and your business, regardless of “actual adoption of real-time and faster payment capabilities”, as long as you are in the same ecosystem.
It is important to take note of the second point in particular. What it basically means is that as the payment industry shifts, it will take you along the journey against your wish. You can either prepare for it or risk being left behind.
The article further talks about how faster payment processes affect security and fraud mitigation efforts. It said since more and more “transactions are irrevocable, pre-transaction authorisation and KYC checks are even more essential” to mitigate risks.
This begs the question: If you have finite resources and you are trying to push your payments through as fast as possible, is it worth doing so at the cost of reduced security? Balancing security and speed is a real challenge faced by many cross-border payment hubs. Perhaps this explains the next point.
According to Bill Schoch, president and CEO of WesPay, a US-based payments association that pushes sound payment practices and requirements, “adoption of faster payments is likely to occur in a segmented way: there may be a need for companies to embrace real-time payment capabilities in the business-to-consumer (B2C) segment and, internally, payroll”. In other words, dividing the evolution leap into segments (read: stages) makes it easier for companies to adapt after going down the fintech rabbit hole.
As the world drives towards a speedier payments environment, whether necessary or otherwise, businesses and service providers must be ready to embrace change.
3 reasons why fintech adoption among small and medium-sized businesses are poised to rise
Why making inward and outward remittances more accessible is important
Why understanding international payment processing is important for e-commerce firms
Mobile payments for everyone
Airtime top-up is still relevant