The Many Rails Of China’s X-Border Payments Journey


China’s economy is in flux, and the headlines lately haven’t been good: The value of the yuan has dropped, late B2B payments are becoming an increasing problem in the market and some analysts doubt whether the government-backed China International Payments System — a venture aimed at launching the yuan into the global market — can actually succeed.

But the fact remains that China is a key trading partner for many businesses, especially those in the U.S. and Europe. With the need for B2B payment solutions present, international corporate payments player Align Commerce has targeted China as its next major market to provide cross-border payment solutions for transactions going to, and coming out of, China.

“China is a key cornerstone in overall trade and will continue to be and continue to grow,” explained Align Commerce CEO Marwan Forzley in an interview with PYMNTS. “It’s going to continue to happen like this for a long time, regardless of the current environment and currency fluctuations. This is about world economics.”

According to the company, the value of cross-border trade between U.S. and China has surpassed $555 billion already. In other words, even if China is experiencing some economic setbacks, the market will remain a crucial player in B2B global trade.

That means a big market for cross-border payments service providers. “We believe that [China] might even surpass any other trade partner to the U.S. in the next couple of years,” Forzley added.

China’s own government holds a similar vision for itself. The People’s Bank of China’s own analysis found the yuan to be the fifth most used payment currency in the world and the second most used in B2B trade finance.

The figures shed light on the monstrous size of China’s cross-border B2B economy, and other markets have taken notice. The U.S. Federal Reserve of San Francisco, for example, recently published a blog post singling out the renminbi as a currency whose internationalization is “one of the most significant developments in the global financial system in recent years.”

But China’s efforts to catapult the yuan onto the global stage have been slow and cumbersome. And, in the meantime, Forzley explained, manufacturers and suppliers based in China are doing business in multiple currencies, placing them in a league of their own in terms of payments needs.

“It’s a really interesting environment,” Forzley said. “The needs are more sophisticated than your typical situation. Companies are looking to receive USD as they do a lot of business with the U.S. economy. They’re also a type of business that might require selling in euros, and they also have requirements to have local currency. You really need to be able to deal with multiple currencies when providing solutions to that market.”

For cross-border payments, that doesn’t just mean moving money in the currency needed by both buyer and supplier. According to the executive, Chinese businesses are also unique in that they have complex reporting needs because they deal in multiple currencies.

Invoicing, reconciliation, payments tracking and invoice matching all become far more complicated when these documents and processes involve more than one currency, Forzley explained.

“The Chinese economy and Chinese business requirements are more advanced than the traditional markets you deal with,” he added.

Varying needs mean payment processing requires varying methods, too. Align Commerce uses a combination of methods — working with local payment processors on the ground, banks and an array of payment rails — to get the money where it needs to go, depending on the transaction’s sender, recipient and value.

Most recently, Align Commerce has taken a head-first run into the world of blockchain, making China yet another strategic market for the company.

Last year, the company revealed progress on its blockchain-fueled B2B payments platform aimed at cutting the time and fees associated with wire-only foreign money transfers.

“There is a strong blockchain community in that market as well,” Forzley said. “That also adds to the reasons we wanted to make sure we are servicing that market.”

Market chatter surrounding the blockchain is growing louder. And while Align Commerce is certainly a stakeholder in the concept that this technology has the potential to overhaul the way international corporate payments are done, Forzley explained that the space’s evolution will depend on FinTech’s ability to become flexible and to multitask.

The executive describes this strategy as the “multi-rail” process — using whichever means is most appropriate for a transaction, whether that be blockchain or not. In the end, cross-border payments is all about servicing the corporate customer.

“It’s the idea of having the rail adapt to the needs of the business,” Forzley said, “not the other way around.”