If you think innovation in consumer cross border payments has been big, just wait for the business-to-business (B2B) side of the equation. The complexity, cost and the nature of how companies manage their payment flows mean this sector has lagged behind consumer solutions, but that’s changing fast. Currency Cloud is one of the players quietly building up an empire in the space, now processing $15bn in payments across 30 currencies for over 150 platform clients. Speaking at Money 20/20 Europe as part of The Bancorp’s Finetics™ Studio interview series, CEO Mike Laven talks about what’s next for cross-border payments.
How is demand for cross-border payments evolving?
First off, the degree of interconnectivity within the world, whether it’s migrant populations, cross-border commerce or supply chains, magnitudes bigger than it was a couple of years ago. And you feel it every day, when you open something up and it’s been made somewhere else.
Meanwhile, if you look at supply chains from a payment perspective, where a retailer might have been paying once or twice a year for seasonal shipments, now they might be paying a hundred times in the same season. But while the volume of interconnectivity has gone up on the commercial side and on the personal side, many of the systems that service them are still in the dark ages.
Why has innovation in B2B payments lagged behind consumer?
B2B trails for a number of reasons: one is that a company may do a check run of 500 payments at one time as opposed to paying as they spend. They might batch the payments and pay all of June’s invoices at the beginning of August. We have a lot of payments on the first and last days of the months and more on Monday than the rest of the week. The nature of consumer payments is that they tend to be more consistent, while business payments are lumpier.
B2B is actually bigger than consumer to consumer (C2C), but it is harder because business transactions are more complex.
Will we look back at growth in cross border payments as a giant shift?
There are a whole series of financial flows in commerce that are not based on the traditional model. The question for the future is if the ways money moves will require different providers altogether. As global economies grow as consumers interact across marketplaces, what kind of structures and payment structures and financial firms do we need to be able to do that? Right now we are very centralized in our approach.
You’re thinking of a more conceptual transfer of value?
It won’t all be bitcoin or blockchain but the concept is right. So if financial flows are not all centralised how do we organize commerce to handle that?
In the world of the internet of things (IOT) there will soon be 50 billion devices connected. Each will be an e-commerce device but no one has a clue how we’ll make that work. If it’s paying per click, per word, kilowatt, or mile on the road, and all those are being collected by sensors and taken back to some place and monitored – the magnitude of complexity and magnitude of low value payments on a machine-to-machine basis is about to increase astronomically.
Some of these things could happen faster than traditional infrastructure can deal with. We need to have some future thinkers thinking further ahead than getting the next batch processed – though that is important too.
Read the full interview and more insights from some of the sharpest minds in payments and financial technologies on The Bancorp’s Finetics™ blog.
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