The FX payments sector may be the hot topic of innovation among FinTech disruptors today, but according to FairFX, corporations are still stuck in the status quo — despite the recent rush of new solutions entering the market.
FairFX, which recently raised nearly $7.5 million in venture capital earlier this month, uses a peer-to-peer model to facilitate cross-border payments for both consumers and corporates. In announcing the new funding, the firm also revealed plans to capture a larger share of the corporate payments industry.
“We only hold a fraction of the corporate expense market, though this is a very exciting opportunity,” said FairFX CEO Ian Strafford-Taylor in a recent interview with PYMNTS.
Despite the moniker, FairFX is eyeing corporate payments with more than foreign currency in mind, Strafford-Taylor added. According to the CEO, the corporate payments industry is far behind where it should be considering the technology available today.
“Many companies are still using dated methods to manage their company expenses, such as petty cash and claimbacks,” he said, “and these are tracked manually through spreadsheets.”
He added that the cost and time associated with shifting financial and payment processes to a modernized solution are the biggest hurdles for businesses to change their ways.
That goes for any kind of business, large or small, whether conducting cross-border transactions or not, the executive noted.
“Managing travel and expense constitutes a huge spend for businesses of all sizes, whether domestic or international,” explained Strafford-Taylor, adding that FairFX works with corporations from FTSE 100-listed firms to independent traders.
“Corporate customers typically require support to make larger and more frequent payments, and in the expense management space, they require control, as well as flexibility in one system,” he added.
The Prepaid Plan
In addressing the wide variety of payments needs for businesses, Strafford-Taylor said that the prepaid card can be an ideal solution.
“The prepaid system flips the claimback process on its head and allows total control of spend and budgets upfront,” he explained, adding that prepaid cards allow corporations to pre-authorize purchases and proactively enforce policies — as opposed to retroactively handling a purchase that may have been out of corporate spend policies.
Strafford-Taylor said this pre-spend authorization approach can save corporations big time — up to 20 percent on travel and expense management.
The executive isn’t the only one catching on to the value of prepaid cards for corporate use. From paying employees to corporate spend compliance, the prepaid card is having somewhat of a moment in today’s corporate payments industry.
Last year, TD Bank released research highlighting the potential of prepaid cards for SMEs, especially as millennials become small business owners. Analysts at SYNERGISTICS came to similar conclusions last year, with researchers finding an increase in awareness among small business owners about their choices when it comes to prepaid card solutions.
“Prepaid cards are beginning to make their way into the small business market,” SYNERGISTICS COO Genie M. Driskill said in a statement at the time. “While current usage is narrow, particularly when compared to usage of debit and credit cards, there is an opportunity for growing interest in prepaid cards in the small business market.”
Prepaid Financial Services CEO Noel Moran is another backer of the card product for corporate use. In an interview with PYMNTS last year, the executive said that prepaid meets the massive demand of spend management solutions today: “The need for real-time accounting, real-time visibility of transactions and balances and the ability to restrict spending and access to cash.”
Prepaid cards — and the overall commercial card market — is hardly a catch-all solution to friction encountered in the corporate payment space, however.
“Corporate payments must not be viewed as a ‘one-size-fits-all’ issue facing business,” Strafford-Taylor said. “We recognize that commercial cards are not the solution to every challenge, and we certainly aren’t suggesting it is.”
But when it comes to spend control and visibility into purchases — whether traveling abroad or not — Strafford-Taylor said the prepaid card can be “ideal.”
It’s not an easy road getting corporates to change their payment habits, however. Even though the industry, as the executive explained, is “suffering from a lack of customer service and high charges,” businesses tend to stick with what they know — often because of what they don’t know.
“Many businesses use processes that haven’t changed in decades as no one has shown them it can be better,” he noted.
In what he described as an offering to challenge the status quo, Strafford-Taylor said FairFX’s next moves following the new funding round will be to expand not just its prepaid foreign currency payments solution for corporate users but to introduce a holistic tool that includes spend management, expense management and the like in a way companies aren’t used to just yet.
“Our strategy is to challenge the traditional thought process around payments across the board,” the CEO explained. “The question shouldn’t be what businesses are most in need of, but rather, how much can they save with a new approach?”