Bank of Ireland's quest to offer a faster path for cross-border payments has fed the sort of collaboration that's becoming more common as issuers seek to advance their technology.
"It's not so much a focus on the transaction or the product. We found that many of our customers and prospects don't even have a cross-border offering," said Darsh Mariyappa, head of Bank of Ireland Global Markets U.S. "It's about quickly enabling small businesses to take advantage of overseas opportunities."
The bank is collaborating with Worldfirst to launch Bank of Ireland Global payments, which combines foreign exchange and payments without transfer fees for small-to-midsize businesses. Spot contracts, bulk payments, recurring transfers and forward contracts are among the services covered under the collaboration.
The payments technology industry is flush with innovation to tackle cross-border payments. The traditional method of using intermediary or correspondent banks, designed for infrequent large transactions, is considered too expensive and time consuming for smaller, digitally focused businesses.
The lack of access to a dedicated cross-border payments platform, along with a need to serve an international buyer base, had led many of the bank's customers to pay transaction fees for wire transfers, or using options that were not designed with frequent cross-border payments in mind.
Companies such as Ripple Labs are also filling the void in international payments, using blockchain technology to remove correspondent banking from the ecosystem to speed transactions and cut costs.
Given that banks still control most of of the cross-border payments market, Worldfirst has focused on offering its open source technology with banks through application programming interfaces (APIs), as well as expanding use cases such as education, health care, and stock purchases to differentiate itself from remittance and peer transfer companies like Western Union and Xoom; and fintech alternatives that use blockchain to power cross-border supply chains.
Instead of blockchain, Bank of Ireland is relying on Worldfirst's experience in foreign exchange, e-commerce and corporate payments over a network that has a presence in the U.K. Australia, U.S., Hong Kong, Singapore, Tokyo and Amsterdam.
The competitive threat mobile and blockchain innovation brings to traditional processing models is pushing banks to be generally more open to partnering with financial technology companies, which have traditionally been deemed rivals.
"Worldfirst had the digital solution that turned out to be the right fit, that can serve a large customer base," Mariyappa said, adding Bank of Ireland didn't have a cross-border supply chain payments service and Worldfirst enabled a fast evolution away from correspondent banking models. "This is about smaller, more frequent payments, faster payment and skipping steps in the process."
Other options in the space to provide lower cost cross-border payments are Earthport, PayCommerce and TransPay, according to Gareth Lodge, a senior analyst at Celent, adding the perk for banks is avoiding the premium on foreign exchange that other banks would charge for the same service.
"The banks are looking to these players for small, low-value transactions, where cost is an issue," Lodge said. "A Swift fee for a transaction of $50,000 is more viable than for $100."
The flexibility toward working with financial technology companies is more a fiscal play than a nod to innovation easing propriety, according to Lodge.
"They're choosing cheap, rather than choosing fintech," Lodge said. "That may well mean the larger incumbents will be forced to become both more competitive but also more innovative too."