Rising to the challenge of global B2B payments

By Alan Koenigsberg, global head of new payment flows, Visa Business Solutions

International businesses today increasingly expect global access to finance in real-time. They also expect finance to be available to them in a way that works in any country and currency, without the process being stymied by the historical constraints of national boundaries. And they expect the banks and financial institutions they work with to make this a smooth, seamless process for them.

Today, despite rapid progress in areas of payments processing on the consumer side, cross-border B2B payments remain complex, touching many intermediaries and often resulting in unpredictable delays. The traditional correspondent banking network operates on a mainly bilateral relationship structure that is often felt to be clunky and unreliable and offering limited visibility into the status of a transaction.

In addition, the set-up to support clients’ business in a new corridor or currency is often clunky and unwieldy. Receiving banks can’t be certain when payments will arrive and therefore cannot give status updates to their customers/suppliers – and the amount of money involved may change as a result of exchange calculations and various fees.

As consumers, we increasingly have access to payment opportunities that are real-time with complete visibility of our transactions.  But the status quo around cross border B2B payments is now becoming unacceptable, with potentially multiple steps in the payment transaction and uncertain visibility and reach.  Banks and other financial institutions need to sit up and pay attention. It is a logical expectation of fast-scaling companies to be in a position to offer their services or solutions across the world. The need for new models and technological solutions that are able to make this happen in a timely way is therefore increasingly urgent. Financial institutions need to adopt technology platforms that give their business customers a secure, fast and predictable way to process corporate cross-border B2B payments. This imperative is part of a real drive for change we are seeing across the B2B cross-border payments space.

Regulation, especially around Anti-Money laundering (AML) and Know Your Customer (KYC) is also helping to fuel this change. The level of regulatory risk created by money laundering can be significant in some countries but the tightness of controls and regulatory adherence varies per country. Across most of Europe, AML controls are more established. In parts of Africa however, including North Africa in particular, the risks are a lot higher as controls may be less defined or rigorous. This means the chances of money being delayed due to AML problems are higher. It is also key, of course, that any new approach enable banks to reduce the risk of money laundering  happening in the first place.

 Finding a way forward

Looking at the industry holistically, we are seeing a growing number of partnerships between fintechs and financial institutions. This is key because, banks and fintechs can overcome B2B cross border payments challenges by partnering to pool resources, share ideas and work together to develop new technology. We are increasingly seeing new digital technology innovations coming on stream.

Today, for example, it is possible to develop platforms that can reduce the risk and time spent on cross-border corporate transactions by facilitating transactions from the bank of origin directly to the beneficiary bank. Security is being enhanced through digital identity features that tokenise an organisation’s sensitive business information, such as banking details and account numbers, giving them a unique identifier that can be used to facilitate transactions on the network.

Looking ahead

Technology today is significantly disrupting the B2B payments arena – and it is becoming increasingly urgent that it does. Just a short time ago, only the largest multinationals were concerned about how to pay and get paid globally, which meant payment solutions were geared to the large multi-national corporations. In our current, progressively globalised business landscape, every business of every size needs to be able to make global payments quickly, efficiently and securely.

As businesses’ needs continue to grow, we’re going to see a corresponding evolution of digital solutions in all aspects of payments from access to enablement to initiation.. We also expect that the global nature of payments around the world will continue to evolve to address the need for speed, transparency and optionality. In line with all this, we expect to see banks and financial institutions generally moving over to these new and evolving payment solutions as they look to enhance the service they offer business customers.

Technology is evolving fast. Today, there is growing evidence to suggest that the future vision of all B2B cross border transactions happening in a simple and reliable way is no longer an unattainable dream but is instead something that will ultimately become a reality.