Taking Cross-Border Payments From Telegraph To API

Better call Morse. The telegraph, it seems, may deserve recognition for ushering in the current era of FinTechs and cross-border payment tools. For June’s PYMNTS.com B2B API Tracker™, a FI.SPAN collaboration, Rolf Haag of Western Union Business Solutions discusses how the company’s payment network is helping SMEs compete globally and why the company deserves “street cred” as a FinTech. Plus, the latest headlines from the space and a provider directory with over 30 major industry players, inside the Tracker.

According to some recent reports, there are a trillion reasons for smaller merchants to get active in cross-border commerce.

An estimated 94 million online shoppers are expected to spend $1 trillion on cross-border eCommerce by 2020. This rising trend of cross-border consumers has prompted major shipping players, like logistics and delivery company FedEx, to address some of the challenges involved with international shipping and trade for both consumers and merchants.

Despite the potential for profits, very few U.S. SMEs are making the leap and engaging in international trade. According to the U.S. Small Business Administration (SBA), of the roughly 29 million SMEs in the U.S., only 1 percent are currently doing so.

The reason for this low rate of participation is that there are several hurdles that prevent or deter more small U.S. merchants from engaging in cross-border trade. One of the most notable impediments, as the head of the SBA recently pointed out, is that about one-third of SMEs find trade finance difficult to obtain for foreign sales. Research published last year also indicates lack of experience and knowledge of local overseas markets as the top challenge for SMEs looking to participate in overseas trade.

In an effort to help SMEs looking to reinvent themselves as players in the cross-border space, a stalwart money transfer services company is undergoing a reinvention of its own. Western Union, which was founded as a telegraph company in the mid-19th century, has evolved into a global payment services network with a presence in over 200 countries. The company has also recently launched API solutions to help small business merchants navigate the complexities of international commerce.

PYMNTS recently caught up with Rolf Haag, director of global mass payments for Western Union Business Solutions, about how the company is reworking its payment network to address the needs of merchants seeking to take the first steps into cross-border trade. By drawing on its years of experience and its existing payments framework, Haag said, not only is Western Union in a position to help FinTechs improve the flow of cross-border trade, but the company can also establish itself as a player in the FinTech space.

Act like a FinTech, think like a FinTech

Western Union may have started as a telegraph company, but the telegraph ship sailed into obsolescence a long time ago. The company has kept up with the times, and today, Haag says, it taps into a wide array of rails and payment infrastructure to transmit funds across borders.

As many newer FinTechs develop their own API solutions to help facilitate cross-border transactions, Haag said Western Union is in position to help these companies move their innovations forward by leveraging Western Union’s network and providing access to its payment rails.

According to Haag, Western Union deserves more credit for its work in boosting FinTechs. More to the point, he said, it’s time to recognize the company as part of the FinTech community. Doing so, he added, will not only help the company but other FinTechs — and conventional banks — with their own modernization efforts.

“I would say we don’t get enough street cred for being a FinTech because we actually are,” Haag said.

He also says the company’s years of experience in moving funds across borders came in handy in keeping Western Union’s services up-to-date. Western Union’s RESTful API enables users to send up to 10,000 payments in multiple currencies using a single API call and offers users real-time payment tracking to keep tabs on the status of their transactions. It also provides users with access to the company’s wide-reaching global payments network and access to global compliance programs to ensure overseas commerce transactions are in line with existing local legal requirements.

The Western Union API sits on top of a global network of bank accounts, which are monitored by a compliance engine. A separate processing engine takes instructions from the API and distributes the payment across the most appropriate payment pathway.

Haag sees extending access to Western Union’s payment infrastructure to both FinTechs and traditional banks as a way to establish the company’s role in the FinTech community.

“It’s FinTechs that are driving a lot of innovation, and we are in a great position to leverage our network to help either the new FinTechs innovate and build on top of that and also allow more financial institutions and banks to gain access to cheaper rails,” he said.

Keeping merchants, customers happy

With more merchants showing interest in getting into cross-border trade, Haag sees Western Union as uniquely positioned to address some of the common challenges that arise for merchants as they enter overseas markets.

The entry of more merchants into global markets is leading to the creation of additional marketplaces filled with buyers and sellers. However, with new merchants participating in these marketplaces comes the need to help parties exchange funds faster.

According to Haag, as the cross-border market grew, many FinTechs focused their efforts on helping merchants improve their checkout experiences. Those priorities have since shifted, and companies are now more focused on helping merchants and consumers get paid faster.

“What’s coming to the forefront now is these companies are recognizing that marketplaces have a big distribution and disbursement problem because they need to pay their sellers and keep them happy,” Haag said.

With global payments, the disbursement side of the transaction can be challenging, Haag said. That’s because each country and region has its own payment rails and formatting requirements for transactions to move smoothly.

“The biggest challenge is compliantly getting licensed in all of these locations so you can get money there and over the local bank rails,” Haag said. He sees Western Union’s experience and its Mass Payment API services as a way for merchants to clear some of the hurdles involved in cross-border trade.

“Every single country we’re sending money to and their local rail might have their own file format or core format,” Haag said. “We’re abstracting the complexity that you normally would have to go through to access those local payment capabilities.”

Improved payment visibility

In addition to helping merchants navigate the different payment rules and infrastructures, Haag said APIs are helping merchants in cross-border trade with greater “payment visibility” that can offer clients actionable insights into the status of a payment. This insight allows merchants to respond quickly to any potential problem with a payment.

“In the old world, customers sent a payment on Monday, and the payment was either paid or rejected by Wednesday,” Haag said. “In the old world, the beneficiary would contact the customer and say, ‘Where’s my money?’”

APIs help both sides of the transaction stay in the loop by sending real-time notifications about the status of the payments’ progress. If a problem occurs, the sender can be notified about the issue through a specific error code.

“The client is then equipped to provide a better experience for their beneficiary by proactively reaching out to them and solving their problem,” he said.

An API FinTech revolution?

Looking ahead, Haag said, he looks forward to Western Union working with other FinTechs and traditional banks to help expand the network of payment services for cross-border merchants.

Western Union has several partnerships already under way to improve international trade. In one such case, payouts provider Hyperwallet tapped Western Union’s Mass Payments technology this year to help the company address disbursement problems in large and small marketplaces and power its foreign exchange wires.

As more companies seek to enter the cross-border space and help address merchant issues with transferring and disbursing funds, Haag sees Western Union’s network of bank accounts and compliance frameworks as an advantage that competing FinTechs could struggle to match.

“Our network is probably the widest of them all,” he said. “And now that we have the API, we’re ready to play some offense.”

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About the Tracker

The PYMNTS.com B2B API Tracker™, a FI.SPAN collaboration, serves as a monthly framework for the space, providing coverage of the most recent news and trends, along with a provider directory highlighting the key players contributing across the segments that comprise the B2B API ecosystem.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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