China's renminbi is quickly climbing the ladder of global acceptance, but many multi-national corporations are not prepared to accept cross-border payments using that currency.

Nearly 85% of North American companies feel they are "unprepared or unsure" of how to engage in renminbi transactions because they lack the expertise and don't have the proper treasury functions or clearing houses in mainland China, said Heath Tarbert, a banking partner and head of U.S. bank regulatory group for London-based law firm Allen and Overy. Globally, 77% of companies say their lack of understanding in how to conduct renminbi transactions is a major challenge.

Allen and Overy, which specializes in law services for global industries, surveyed 150 senior executives — 50 each from the U.S., Europe and Asia-Pacific region — in various business sectors. The surveys took place in January and February, covering topics related to the rapid growth of China's currency.

Renminbi faced years of tight regulatory controls and continues to have complex rules around the currency's use, the report states.

Ultimately, the rapid rise of China's currency presents opportunities for global merchants, and risks to those who are not ready to engage with the world's second largest economy.

SWIFT, the international financial messaging network, reported that renminbi is now in the top five of global payments currency value behind the U.S. dollar, the euro, the British pound sterling and the Japanese yen. Two years ago, China's currency ranked 13th and in 2011 it ranked 20th.

China's desire to open up the country's financial markets has fueled the quick rise of its currency, particularly since restrictions against free exchange across China's borders lifted in 2009.

Multi-national companies that delay or even ignore the currency trend stand to lose ground when investing in Chinese markets or accepting imports from the country, Tarbert said.

"You would stand to lose ground in the same manner as if you were conducting transactions in the European Union and you were not using the euro," Tarbert said.

Companies are aware of what is happening, as 90% of those surveyed said their current exposure to renminbi is either important or very important to their business, according to the report.

Indicating its use in international trade, more than 50% of the non-Chinese companies said they use the currency for payments outside of China. Most of those companies expect cross-border transactions with renminbi to double in the next five years.

Many North American companies are reluctant to complete transactions in the Chinese currency because of political concerns, Tarbert said. In addition, renminbi is not as liquid in a secondary market, meaning it is harder to convert to other currencies.

U.S. companies also have the advantage of the dollar being the home currency as well as a reserve currency globally. "While RMB is growing, the U.S. dollar is still a very accepted form of currency around the world," he added.

In addition to climbing the international currency ladder, renminbi could establish another milestone in October 2015 when the International Monetary Fund will decide whether to include the currency in its "virtual currency" basket, giving it immediate recognition as a reserve currency, the report stated.

Some companies have benefited from the rise of renminbi as a global currency. The research revealed that U.S. companies Ford and General Motors rate renminbi as their No. 2 currency behind the U.S. dollar; Volkswagen and Daimler in Germany also rate it at No. 2, behind the euro.

Aite Group released a similar report last year, citing renminbi's total global trade value rising to 8.7% in October of 2013 from 1.9% in January of 2012.

Celent analyst Arin Ray has also been tracking the renminbi. Ray noted in a 2014 blog post that banks have operational challenges that need to be addressed as well.

"New systems and processes will be required to support clearing and settlement of payments in real time by domestic and international players," Ray wrote. "They also need to support different languages, including Chinese, and accommodate working hours in different time zones to bring about a truly international system of operations."

In addition, China has to strengthen its anti-money laundering framework, something the country has been working on more than 15 years, Ray wrote. 

On the mobile front, white-label wallet provider Mozido LLC acquired the Beijing-based payment processor PayEase Corp. two months ago to handle the task of converting renminbi to merchants' local currencies. PayEase is one of just five companies in China granted a cross-border license.

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