Blog by Alvaro Cuestas, Sales Director, Surecomp
6 November 2020
Cross border payments processing represents an area of change and an opportunity that should be seized in order to support rapidly increasing transaction volumes and business growth. With some entities today still taking many hours to execute payments via email and phone, this clearly needs to be addressed if companies want to take advantage of the growth opportunities and prevent their clients from migrating to other providers.
*According to McKinsey, the annual global revenue generated from international payments transfers is around 200 billion dollars (including the income from foreign exchange operations) and grows on average by 6% every year.
Of course, like any growth area, this market has been attracting the attention of multiple new players in recent years; for example, the new remittance schemes 2.0 that integrate more advanced technologies (e.g. Revolut), as well as players that were previously in other niche markets, such as traditional payment schemes (e.g. Mastercard) and of course SWIFT itself, who has managed to lead the process of transition to the new standards (ISO 20022) with its latest product release (GPI).
The truth is that banks and other financial entities intending to play an active role in this business are still firmly on the front-line; continually required to offer improved services and differentiators to their clients, they must start – if they haven’t already done so – to take strategic, digital steps in this field.
The first step is that – in order to enhance efficiencies and minimize costs for their end customers – back-office operations must be prepared to standardize workflows, approvals, and controls regardless of the “network” or scheme through which they process their payments.
The second step is that their trade platforms must be prepared to respond to the demand generated by an increasing volume of exchange operations required for transfers and that due to its digital nature will require much higher levels of processing and attention than those in other more traditional channels.
The third consideration is to learn from the “great flag debate” and from the ongoing challenge of traditional payment schemes, which have always been aimed at reducing friction in the workflow. Of course, the customer experience of making an international transfer must be as frictionless as possible; it should be simple, intuitive, safe, and transparent. At the front-end – beyond the web interface or mobile channel – there must be an optimized customer experience that is fully integrated with the back-office. There is no question that for banks to remain competitive in the field of cross border payments, the challenge of straight-through-processing must be addressed and significant progress made.
The fourth, and perhaps most important step, is that of open banking; an open API model is the key to success. A model that allows full use of the information and functions of cross border payments to be seamlessly shared with other channels, to integrate with other business applications, to extend collaboration with other companies; a model that allows you to take advantage of multiple networks or schemes, that easily integrates with new technologies such as Blockchain or AI, a model that assures compliance and allays cybersecurity, with easily adopted measures applied at any time.
These recommendations are inspired by the philosophy that we at Surecomp have been in the business of promoting for more than 30 years, and that is of generating platforms and technological standards to foster global exchange. Whether we are talking about complex trade finance, foreign exchange, or cross-border payments operations, the problems within the international ecosystem faced by financial institutions are equally complex and require a specialist solution. Having a clear vision of the opportunity that exists in the market and taking action now is key to achieving success and innovation in this new era of cross-border payments.