PayCommerce is a managed, open cross-border payments network enabling both disbursements and collections transfers through a single connectivity platform, and a proud sponsor of the CitiTM Mobile Challenge in Asia Pacific. Here CEO Abdul Naushad tells PaymentEye why cost-effective cross- border payments are more important than ever and how he sees the payments sector developing in 2016.
Can you introduce our readers to PayCommerce?
PayCommerce is a cross border payments network providing payments infrastructures to global institutions. In our network we connect a consortium of global acquiring banks with payment service providers and global corporations in a trusted closed loop network, which provides significant cost savings – up to 80 per cent – compared to traditional channels.
Organisations in our network also get transparency on foreign exchange rates and bank fees, along with robust compliance tools to reduce the risk of transacting across borders and comparatively faster settlements across borders.
How healthy is the Payments Ecosystem in 2016, and how do you see it evolving in the mid-term?
First of all, over the last two years the payment ecosystem has changed more than ever before, particularly with the emergence of faster domestic payments in countries like the UK, Singapore, India, Australia among others.
We’re also seeing initiatives for testing out distributed ledgers from financial institutions — and wallets gaining ground in specific markets. Faster and cheaper payments are the drivers for all of those different trends and initiatives.
These things are changing and impacting the payment ecosystem, and will continue to do so in the coming years – you’ll see significant innovations and changes, especially in the cross-border space.
Why is it so important for organisations to have access to transparent, cost-effective cross border payments?
Let’s take an example. If you take a $5,000 payment going across border using traditional channels, it costs anywhere between $150 -$180 for fulfilment of that transaction, though the person or business moving that money doesn’t see the exact cost they are paying for that service. The only thing visible to the customer is the transaction fee that they are paying; most of the cost is on foreign exchange and there’s no transparency on that. Besides all of the fees, there is a landing cost to the beneficiary.
In a more transparent system, customers will have the opportunity to make a better choice about the best channel to transfer those funds where the FX and all related fees are transparent. I think that’s why it’s important — it’s efficient and cost-effective, reducing the number of intermediaries in the ecosystem. Intermediaries create friction and add to the cost of the financial supply chain because everybody needs to make money in the process.
What are some of the faster payment initiatives you’re working on, and why are they important to the future of commerce?
We have a product for cross-border faster payments planned in Q4 of 2016 that enables instant clearing and same-day settlement between two institutions. In 2017, we plan to launch real-time, cross-border settlements between a few selected institutions facilitated over our network.
These advances are important because the velocity of commerce needs to improve and will be higher than ever before. Paying clients or vendors faster makes businesses more efficient and cost-effective; our vision is to make PayCommerce the infrastructure critical to making that happen.
Distributed ledgers have received a lot of attention lately. What are your thoughts?
Distributed ledgers came with the emergence of Bitcoin. Though I am not sure about Bitcoin’s future, I think distributed ledger technology is interesting and may be worth looking into. Distributed ledger technology is still in its infancy and may have shortcomings for enabling real-time payment models in an open heterogeneous network. We see some challenges when implementing distributed ledgers in a network like ours, where it’s important for a network member to know and trust the other party. Also, simplicity is critical for adoption and the distributed ledger is sophisticated and could be expensive to implement across the ecosystem.
PayCommerce is looking at an approach using what we call a ‘federated ledger’. Essentially, this model of global ledger management enables working with a heterogeneous network. Each member on our network could interact with our network from a centralized or distributed model, and still be able to synchronize the data. In a federated ledger model, certain universal policies will be enforced centrally and certain policies may reside in the distributed or centralized network.
Essentially, the model we are working on creates an ideal model for ledger management across the ecosystem, which would be evolutionary for our member banks and their customers.
What do you see as the major trends that will shape the payments space going forward?
I think in 2016 we’ll see a lot more noise around faster payments. There’s a lot of momentum all over the world, and the customer community is pushing governments to drive it, which probably creates a lot more efficiency in the economy and in how money is exchanged. You are likely to hear more about distributed ledger management as well.
Unfortunately large banks are afraid of cannibalising their existing revenue streams from Fedwire services by replacing them with new faster payment schemes. However, several big banks already have their own initiatives for enabling low-cost faster payments.
How can big banks engage with this transformation in a way that doesn’t threaten them?
We’ll see that happening slowly but surely in 2016 and beyond. Many banks are followers, and will eventually catch-up with the innovative banks leading the way. There are already several FinTech solution providers jumping at this opportunity and creating their own ecosystems for faster payments.
We are already seeing that banks are investing in new technology and trends. They’ve started partnering with innovative tech companies to enable new models. For example, Citibank has selected PayCommerce’s platform APIs, for which they have initiatives for their customers to build innovative and trendy applications. It’s unusual for a bank to act like a technology company to promote digital transformation in the FinTech space. But once the banks like Citi are successful, I am sure others will follow their lead.
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