PayCommerce's B-to-B 'members only' network is about to get larger
Business-to-business cross-border payments is a hot fintech area, but the range of services and what’s included varies widely, creating opportunities for startups catering to corporate customers’ specific needs.
PayCommerce has spent the last decade methodically building a members-only network for cross-border corporate payments to guarantee specific features, and after years of development, it’s ready for significant expansion.
From its original narrower market of just India and China, PayCommerce within the next year aims to reach as many as 10 major markets for B-to-B cross-border payments, starting with Mexico, the Middle East and the U.K. this year, followed by Singapore, Canada and the Philippines next year, according to Abdul Naushad, PayCommerce’s chairman, who founded the company in 2007.
A key differentiator for PayCommerce in the increasingly competitive arena for cross-border B-to-B payments is its reliance on a network it’s built with a consortium of about 100 banks and other members that agree to uphold specific standards as a requirement for participation.
“Members of the consortium must adhere to a set of common policies and guidelines PayCommerce defines, so users know exactly what to expect,” Naushad said.
Seven of the world’s top 25 banks are already participating—including the State Bank of India and the Bank of China—with several others coming on board later this year. PayCommerce processed $400 billion last year on its network.
PayCommerce aims to conquer three key pain points in cross-border payments: Cost, speed of settlement and lack of transparency over foreign-exchange rates, according to Naushad.
Many competitors also are working to solve similar issues, according to analysts.
"Cost for initiating wire transfers and additional fees that banks charge to manage the transaction in transit, plus widely varying foreign-exchange fees and lack of detailed remittance information are all challenges within the B-to-B cross-border payments arena," said Linda Coven, a senior analyst with Aite Group.
PayCommerce's consortium model proposes to iron out many of these issues.
“Because our members all stick to the same standards, we can guarantee a consistent experience that’s tough to find from other services, where everything from the cost to the number of days it takes for a payment to settle vary widely,” Naushad said.
Once they are part of the PayCommerce network, members of the consortium who originate transactions (corporations and banks) may send funds to other linked members of the network without building direct integrations between the parties, enabling a single point of connectivity to all players.
This feature is separates PayCommerce from many other cross-border payments platforms and services that require more back-office work, according to Naushad.
PayCommerce also offers the ability to collect payments across borders directly from payers’ bank accounts, which is less common among cross-border B-to-B payment providers, Naushad said.
“We can enable a U.S.-based company to collect payment in another country and bring the payment back in U.S. dollars through direct debit, and we do that through our network of bank partners in key markets,” Naushad said.
In contrast to many other providers who temporarily take ownership of funds in transit via a prepaid account, PayCommerce also doesn’t book the funds.
“We never actually take custody of the funds, which makes a huge difference in terms of transaction costs, lack of transparency and speed,” Naushad said.
That streamlined funds-transfer path helps PayCommerce keeps costs low, and funds are guaranteed to settle within one day of the original transfer, he said.
“Every market varies, but cross-border payments typically take 2 to 5 days, and our network members receive payments no later than one day after initiating the payment,” Naushad said.
PayCommerce also goes to extra lengths in providing details to its clients about foreign-exchange fees, which can vary widely among other cross-border services.
“Most services merely publish the currency rate they’re using, but we go a step further by showing what the originating bank is charging, which gives users the opportunity to shop around for better rates. Banks rarely disclose the actual cost of the transaction, opting instead of throw it in with the currency rate,” Naushad said.
PayCommerce says it's gaining momentum steadily through its consortium model, and there is plenty of room for growth.