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Experience Matters as FinTech Becomes the Global Payment Norm

Mark Frey October 13, 2017

As Canada’s economy is heavily weighted in international trade, it makes perfect sense for a global payments company to be born and grown in this country. Twenty-five years ago, when Canadians Jacques Feldman and Bernard Heitner started Cambridge Global Payments, cross-border payments was an analog process, where batch-based systems meant end-to-end money transfers took days. Payment technology was nascent and focused simply on transaction capture, while domestic client-facing systems were rudimentary, and were not well integrated with the processing and trading engines that connected to the outside world. Even then, the industry was ripe for disruption as there was a need for real-time global payments, while meeting various specifications and protocol requirements.

Since then, financial technology has evolved with the needs among both businesses and consumers alike. While “fintech” has become a buzzword synonymous with financial services, moving from face-to-face to exclusively online banking and payments services, it has been an active part of the evolution of global payments for the last quarter of a century.

The payments industry has experienced rapid change as businesses move toward the acceptance of new technologies, slowly dislodging incumbent business models and traditional FX trading desks that prevented many companies from adapting. While these legacy systems and business models were reliable and got the job done, due to the nature of their permanently-changing landscape, they are now quickly becoming obsolete, posing operational risks for companies that held off on replacing them. In order for companies, including financial institutions, that offered cross-border payments to remain competitive, they had to modernize their technology, replacing outdated systems that prevented them from offering innovative services, while remaining flexible to varying payments processes globally.   Non-banks and financial institutions that offered global payment services, such as Cambridge, increased technological capabilities by replacing legacy systems.

Over time, the desire for efficiency and delivering what businesses wanted led many of these organizations to become very focused on technology solutions, both in their customer-facing platforms and back-end processing systems. While many non-banks and financial institutions were becoming less client-focused, applying a more generic approach to their customer service, there was still a need for integrated global payments to proactively evolve service offerings by building customized solutions that still provided high-touch services, while remaining ahead of the curve on financial technology adoption.

Naturally, through continual investment and a focus on enhancing the cross-border payments process for businesses, payments services in Canada took shape through an evolutionary process, delivering progressive, yet practical solutions, to meet unique business requirements. Payments firms, like Cambridge, began to invest heavily in systems that would allow individuals with payments expertise to scale their reach and service to increase the number of businesses they deal with. While many non-banks switched gears and focused on improving technology to develop a one-size fits all approach, we identified and focused on delivering a rich online experience to customers, coupled with a high touch, personalized level of expert service, while remaining efficient with straight-through-processing.

For instance, payment rails—the core banking systems that enable cross-border account payments and transfers—have been widely adopted by companies like ours as they have simplified global payouts. That is why the bank-owned Society for Worldwide Interbank Financial Telecommunication (SWIFT), continues to sell software and services to financial institutions to handle international financial transactions for use on the SWIFT network.

While these systems have provided businesses with greater capability to service their customers, an increasing share of their existing payments are migrating from using SWIFT to in-country payment channels such as distributed ledger or blockchain-type technologies, that allow for digital information to be issued, but not copied, to make payments and share information across financial intermediaries.

As blockchain and distributed ledger technologies are quickly emerging in the market, replacing legacy systems for exchanging financial information and conducting transactions, there will be a continued focus on adapting user experiences from the world of consumer financial transactions to the more complex, international business transactions. This means the pace of technological adoption in the enterprise market is now keeping pace with that in the consumer market after years of lagging behind.

However, SWIFT technology will not be replaced entirely. For instance, Cambridge operates on both SWIFT and alternative payment rails, which allows us to position ourselves as a partner for new technologies and firms.

Moreover, as the evolution of the industry moves toward in-country payments, international wire transfers, correspondent banking with associated lifting fees, and outdated technologies are losing out to more dynamic, efficient and timely clearing systems. That is why the international payments market is now following other financial sectors in terms of transparency to the end-user, utilizing speed of execution and efficiency in terms of cost as the best way to deliver through new technologies.

While Canada’s financial institutions and non-bank services have made strides in adopting technology to improve global payments, domestic regulatory bodies still lag behind in providing favourable guidance and regulation in the fintech space. In the U.S. alone, nine states have regulations that are favourable towards fintech as many states, such as Tennessee, Illinois and New Hampshire, are aiming to attract new corporate business.

Meanwhile, Switzerland has become a haven for fintech companies to experiment with cryptocurrencies in a controlled environment. Switzerland’s head of the Federal Department of Finance, Ueli Maurer, made a promise to re-evaluate banking legislation to exempt smaller companies from rules that larger banks must follow in an effort aimed at spurring innovation.

As global payments companies, like Cambridge, look to the future, changing technology and regulations will constantly be reviewed for consideration to ensure global payments offerings continue to stay ahead of business needs. One such example is Cambridge’s acquisition by FLEETCOR Technologies Inc., which brought together FLEETCOR’s payments strength and know-how in the U.S., with Cambridge’s global reach and expertise.  Through this combined business, we are now able to provide our capabilities in cross-border payments, while leveraging in-country clearing networks and global reach to meet FLEETCOR’s domestic expertise.

The future of global payments is an exciting place. As technologies such as blockchain and SWIFT continue to evolve, and global regulatory bodies adapt to the changing payments space, cross-border payments will become more seamless, and safer from potential fraudulent activity. Cambridge will be right there, ahead of this change.

Read the original article in Payments Business Magazine

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