Tackling B2B payments friction is a journey, but when corporates take their transactions global, finding a remedy for cross-border B2B payments is a much more complicated process.
The current climate of innovators appears to be up for the challenge, however. FinTechs and banks continue to develop new solutions to address many of the biggest pain points of global business payments, from speed to foreign exchange. Even so, noted Jim McCarthy, president of i2c, no single player has quite cracked the code of cross-border B2B payments just yet – a testament to the complexity of this market.
"It's an area that's ripe for disruption," he told Karen Webster in a recent discussion. "There's just so much inefficiency."
Tackling B2B payments on a global scale calls for collaboration, McCarthy explained. Whether innovators develop new payment rails or create solutions that wield existing ones, they must take an ecosystem approach to easing friction.
Accelerating Ecosystem Innovation
One of the biggest challenges FinTechs face in disrupting this area is in achieving the necessary scale. According to McCarthy, this is one of the biggest areas of technological innovation in today’s cross-border B2B payments space, as players look to develop the groundwork of improved global payments infrastructure by taking an ecosystem approach to disruption.
Yet in today's fast-paced world, which is continually moving toward real-time payments, innovators are struggling to develop this ecosystem quickly enough.
"A lot of FinTechs are coming into the space at scale, building the pipes, building the connections, applying technology to lower costs for end users," McCarthy said. "But building an ecosystem takes time, even with the tools they bring to it. So how do you accelerate that?"
Partnerships and industry collaboration are key, he added.
As one of the latest industry players to embrace collaboration, i2c recently expanded into the cross-border B2B payments market through its own partnership with Airwallex. In that initiative, i2c processes multi-currency payments on the FinTech's new B2B Airwallex Borderless Card, which uses the Visa rails to bring the solution to scale.
"Leveraging the Visa acceptance network will create more stickiness," McCarthy noted.
He added that each partner brings something unique to the solution, allowing a single tool to tackle multiple challenges of cross-border payments. McCarthy pointed to i2c's technology, which will enable business users to set spend controls, access competitive FX rates and make seamless payments via physical and virtual cards, combined with distribution developed by Airwallex – along with the scale, security and efficiency of the Visa card rails. The product rollout is set to begin at the end of the first quarter and extend into the second quarter of this year.
More Hurdles Ahead
Even with the scale and technological prowess resulting from collaboration, McCarthy said there are many more pain points of cross-border B2B payments for which solutions are needed. While the global card solution can find a comfortable use case in corporate travel, using a supplier payment method in accounts payable (AP) remains a challenge for cards.
It's why continued innovation and cooperation between industry participants remains an important strategy. There are certain markets and payment scenarios that present more difficult hurdles than others. In some cases, existing payment rails may fall short at solving for these cases, particularly with cross-border transactions.
That's where initiatives to develop entirely new rails from players like Ripple and other networks come into play.
"There is an aspect of commercial payments that is just not going to run on the one network’s rails," said McCarthy. "That's the hard work going on around the world, whether it be RippleNet or Visa B2B Connect. The work is to create new networks."
While the Airwallex Borderless Card will first launch in Australia and will later move to the U.K. and Hong Kong, McCarthy highlighted Latin America as another greenfield opportunity for cross-border B2B payments disruptors, including banks and FinTechs. The middle market, too, is a unique opportunity for banks to capture through FinTech partnerships, with financial service providers having historically geared their solutions toward small businesses or larger corporate enterprises. "No one's really cracked the code" of the middle market and their global payment needs, said McCarthy.
But the more challenges that exist, the more opportunities exist for financial service providers and technology innovators to solve them. As businesses explore their partnership opportunities, they must identify geographic markets, specific points of friction and the collaborators that can bring the payment networks and value-added services required, at scale, to make meaningful progress in cross-border B2B payments.
"Whatever the rail is, you've got to solve for the inefficiency of banking on large global supply chains," McCarthy said. "It's just so inefficient. Someone out there is going to figure it out, I don't know who, but it's an area that's got to change."