Open source development has joined blockchain technology in a bid to take a bite out of banks' long-standing control over the international payments market.
In particular, Currencycloud uses an application programming interface and scale to offer discounted transactions, a strategy that has attracted investors and has spurred international growth with a recent focus on Asia.
The London-based Currencycloud's Asian expansion targets business payments in local currencies in Hong Kong, Singapore, Thailand, China, Australia and India, following its earlier expansion to the U.S. The company connects directly to local clearing systems, hosts much of its technology, and uses APIs to allow businesses to connect to its system to set up cross-border payments.
"We're a large volume player … so we get a good rate from banks," said Nadeel Siddiqui, head of North America for Currencycloud. The company processed $5 billion in the first half of 2016, and handles about 100,000 transfers per month, Siddiqui said.
Currencycloud charges 0.25% plus added fees that depend on the method of payment and destination. Fees for cross-border transactions can vary, but there's a growing concern in the payment industry that the fees for such transactions are too high and involve too many third parties. Ripple, a company that uses distributed ledger technology to help banks and startups remove overhead from international payments, estimates cross-border payments can carry fees of up to 12%.
The API sheds overhead and gives Currencycloud the ability to manage much of the processing tasks on behalf of the businesses, so they are not paying different fees to different parties or correspondent banks, Siddiqui said.
Whether the companies are using APIs or distributed ledgers, the goal is to cut these fees by simplifying currency conversion and risk for transactions that are executed by increasingly diverse businesses, Siddiqui said.
Currencycloud, which has worked with TransferWise, Moni Technologies, Payoneer and Kantox, Zippcard and Sofort, is in a crowded market. For example, Stripe and WePay have also expanded their APIs to accommodate e-commerce merchants that wish to accept international payments.
"Digital products can transcend borders far more efficiently than their physical counterparts, and the existence of global digital marketing platforms such as Facebook, Google, Twitter and others means that digital products and services can be sold world-wide fairly readily," said Rick Oglesby, president of AZ Payments Group. "That obviously creates some difficulties related to achieving compliance with local laws, managing sales in multiple currencies, and managing multiple cross-border banking relationships. The marketing for simplifying these things on behalf of global merchants is robust."
In Asia, the market is seeing fast growth and relatively little external technology disruptors thus far.
There is room for the market to maintain this momentum because the need is also growing, according to Siddiqui.
"Cross-border payments is expanding because of the Internet," Siddiqui said. "There are a lot of young intelligent developers out there with coding capabilities that see this as an opportunity to disrupt markets traditionally controlled by banks. But they are finding difficulties when it comes to establishing bank relationships in these new markets and overcoming regulatory regimes."