We take a look at opportunities to improve the consumer experience around cross-border payments, including SWIFT gpi, Ripple and the FinTech payment companies.
Why does cross-border payment technology need bringing into the 21st century?
In a time when we can connect with anyone in the world via a video call or instant messaging, the experience of sending or receiving international business payments can feel very dated. There’s a very good reason for this – much of the technology behind processing payments was created back before the Internet became ubiquitous.
With the global marketplace becoming smaller and more accessible, people expect things to happen in real time, or as close to it as possible. They also expect a seamless customer experience. The ability to send and receive funds globally is an area that’s really lagging with some providers.
Some of the issues with the way cross-border payments work
Not fast enough
Speed is a big factor. Traditional cross-border payment networks can still have 3-5 day payment timescales.
Lack of visibility
Sending and receiving banks may have limited visibility of a payment once it is released or until it is received. In worse-case scenarios, missing payments can take weeks or even months to resolve.
Additional and hidden costs
Cost is also a big consideration. Transaction fees can be high, and intermediary bank charges may mean the end recipient doesn’t always get the full value of the original payment.
Can you avoid sending cross-border payments?
One alternative is to open up in-country bank accounts and leverage local payment networks. There could be some challenges with this approach, however, including liquidity, cash flow, compliance and cost. Additionally, there are a host of regulations when opening a bank account in different jurisdictions – adhering to compliance requirements can take a significant amount of time.
Who’s changing the international business payments landscape right now?
While there are many players, SWIFT gpi and Ripple are playing a major part in creating a brighter future for cross-border payments, with two very different offerings. Let’s take a look:
SWIFT gpi: a brief introduction
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a messaging system that uses codes to send information to enable cross-border payments to be sent and received. SWIFT recently developed a global payments innovation (SWIFT gpi) to address some of the challenges with international business payments.
SWIFT gpi will still use its existing correspondent bank network. It is mandated that members become compliant and follow its roadmap. Because members will need to read and generate gpi-enabled messaging, the onus is on them to use their own resource to make the payments and follow the timeline.
What’s the consumer experience with SWIFT gpi?
Speed: Nearly 50% of gpi payments are credited to end beneficiaries within 30 minutes, and almost 100% within 24 hours¹.
Visibility: Enables payment tracking in real-time along with the transfer of unaltered remittance information. Although the challenge of transparency is addressed, this is negated if the correspondent bank(s) has not adopted SWIFT gpi.
Cost: The new messaging protocol offers more fee transparency, although SWIFT transaction fees are known to be high.
Ripple X-Current: a brief introduction
Ripple’s X-Current product is a private blockchain technology that uses inter-ledger protocol. According to the information provided by Ripple, the enterprise software solution enables entities on the chain to instantly settle cross-border payments. To give payments the greatest chance of success, Ripple uses a two-way messaging format allowing entities to share information in real time such as fees, FX rate and risk and compliance information.
What’s the consumer experience with Ripple?
Speed: Payments are delivered in real time, barring compliance/regulatory issues.
Visibility: Because Ripple happens virtually in real time, payments are either accepted or rejected with no loss of visibility. This is a key advantage over traditional in-market technologies for cross-border payments.
Cost: Usually there are fewer intermediaries/correspondent entities as compared to current payment rails, so costs are kept to a minimum.
More about FinTech payment companies
These new technologies, such as SWIFT gpi and Ripple, are exciting – but we are still at the beginning of a long road. It will take time, resource and expertise to realise the full benefits.
The good news is there’s a selection of FinTech payment companies who are constantly growing their international payment processing capabilities to cope with the needs of modern businesses. Being network agnostic allows them to build their own payment rails and embrace new technologies without the constraints of legacy systems and relationships.
If you’re not totally satisfied with your experience of making cross-border payments, it could be time to explore the FinTech route. It’s a great way for your business to access these technologies when they become available, without the resource and development costs of adopting them directly.
Why choose Cambridge Global Payments as your cross-border payments supplier?
Cambridge Global Payments are at the forefront of the FinTech payment companies, harnessing these new technologies for the benefit of our customers.
The advantages of working with Cambridge for your cross-border payments, at a glance:
Nimble, quick and able to respond to technology advances.
Members of SWIFT, with the gpi component on our development roadmap for 2018.
Long-standing partners of Ripple, we continue to explore ways to leverage the new technologies and provide real value-add for our clients.
Established payment network over 25 years with access to quality, reliable partners.
Not solely reliant on traditional payment rails; can tap into faster local payment networks and help ensure full-value payments reach beneficiaries.
1. Swift speeds up cross-border payments, without blockchain, Global Trade Review, 28.02.2018
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