International payments have been neglected for too long
The coronavirus pandemic has highlighted the need for widespread innovation and change within the cross-border payment to support trade, development and global economic growth.
The July 2020 report issued by the Committee on Payments and Market Infrastructure (CPMI) concentrated on the major impediments associated with cross-border transactions obstructing the next-generation of global payments; including pricing issues, regulatory flaws and general availability. These steps, or “building blocks,” will act as a critical guide as fintechs and banks work together to build enhanced payment infrastructure for a post-COVID economy.
Over the past six months, we have witnessed fundamental shifts in buyer activity from offline to online.
At the same time, technology-driven growth has supported the unification of countries into one global market. Now more than ever businesses of every size have the opportunity to compete outside of their geographic limits. Players in the cross-border payment industry must recognize and adapt to these structural and mindset changes to support small enterprises as they explore new markets.
The integration of banks with financial technology institutions will play an essential role in overcoming existing cross-border payment issues.
Through APIs and strategic bank partnerships, payments are routed through different rails including blockchain, card, treasury accounts and the Swift network while balancing cost, speed and security to deliver a fundamentally different payment experience to the end user.
As we move forward open banking, open API and increased collaboration between these two institutions will be increasingly relevant to contribute to the overall growth of our global economy.
Improvements made to cost, speed and reliability through enhanced and standardized “know your customer” and “know your business” verification protocols are critical in the advancement of the cross-border payment experience.
The future of payments is contingent on compliance and regulatory harmonization among international federal bodies. Coordinating common principles and guidelines for security, digital currency, data storage and exchange will further support the next-generation of payment innovation.
It is crucial that financial institutions lean in to and prioritize the transformation of cross-border payments. The enhancements we build today to reduce frustration and friction on behalf of businesses will significantly support global economic growth and trade in the aftermath of COVID-19. Robust integrated processes and the mainstreaming of digital transactions will shape and nurture businesses as they navigate an increasingly connected and competitive market.
The 19 building blocks outlined in the CPMI report are an important and overdue step in the right direction for the industry — but there’s still more work to be done. Cross-border payments — and the businesses that rely on them — do not and should not exist in a vacuum.
To propel the industry forward and continue to support global economic growth, we need to look to further integrate financial tools and services, like lending and financing, to streamline global commerce and empower businesses. Financial institutions that want to be part of this fundamental change must invest time and resources to the restructuring of the payment ecosystem now or risk being left behind.