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Incentivizing Innovation Is Crucial for Transforming X-Border B2B Payments

Firms Eye Ways to Optimize X-Border Payments

The ability to expand internationally is commonly viewed as a sign of a company’s strength.

Doing business compliantly and profitably across borders takes a lot of resources — particularly if organizations are using locally-based point solutions to handle their cross-border transactions, which can result in communication delays along the payment chain and foreign exchange snarls, as well as trap much-needed liquidity and working capital in far-flung correspondent accounts.

But facilitating cross-border B2B payments that don’t get hung up on historical bottlenecks around banking-hour disconnects, manually driven clerical work, and other longstanding reconciliation frustrations shouldn’t be too much to ask, not in the year 2024.

Yet it is.

Cross-border payments systems have been around for centuries, which is ironically part of the problem.

Achieving frictionless cross-border B2B payments involves addressing various structural challenges related to currency conversion, regulatory compliance and the speed of transactions.

While digital transformations including application programming interface integrations, multicurrency platforms, and even new international settlement rails offer attractive cross-border payments solutions rooted in a better, more efficient data exchange and automated regulatory control frameworks, firms looking to deploy modern payment processes can find themselves running into decades-old monolithic technical architectures that are simply incompatible.

Still, as the incentive dynamics around facilitating cross-border payments continue to evolve, many industry observers believe change is on the horizon.

Read also: Three-Day Weekends Are Relaxing — Three-Plus Days for Sending Cross-Border Payments Is Anything But

Solving for the Cross-Border B2B Payments Occasion

Macro challenges including inflationary pressures, rising interest rates, tighter monetary policies and geopolitical tensions are all creating FX volatility while at the same time putting a spotlight on firms’ working capital management strategies.

Frequently, companies are finding that the money they’ve parked in disparate correspondent banks is money that they could be using.

In the past decade, the volume and value of cross-border payments have increased by 61% and 37%, respectively, putting an exclamation point on the need for modernization initiatives that can help streamline global payments.

“With the higher cost of funds, higher interest rates, capital flows tied up in various areas, payments are becoming more expensive,” Keith Vander Leest, head of payments at Cross River, told PYMNTS in an interview posted in October. “If you can move money through the flow faster, that lowers costs … all of our FinTech [partners] are trying to figure out how some of these newer, faster payment rails can help them in their offering to their customers.”

The promise of embedding payments in cross-border commerce is a multitrillion-dollar opportunity, Amit Agarwal, global co-head of payments and receivables, treasury and trade solutions at Citi, told PYMNTS in an interview posted in November.

And now, more than ever, chief financial officers and treasury leaders looking for firmer control of their cross-border transactions need a central repository of data and centralized systems.

“The cross-border B2B market is growing massively,” Neil Drennan, chief technology officer at Visa Cross-Border Solutions told PYMNTS in an interview posted in November. And that means there are more businesses than ever looking to move money around the world “quickly and transparently, with complete clarity around costs.”

See also: Interoperability and Transparency Are Key Challenges as Cross-Border Payments Modernize

How Making Payments Invisible Could Transform Global Growth

PYMNTS Intelligence revealed that 23% of small businesses said they are very or extremely happy with current cross-border payment solutions.

But the marketplace, including traditional financial institutions and upstart FinTechs, is responding to the whitespace opportunity to transform cross-border payments. Additional PYMNTS Intelligence showed that nearly two-thirds of financial institutions are either very or extremely willing to invest in new technology to solve cross-border pain points. The percentage increases for financial institutions serving the cross-border payments needs of larger companies, as 88% of them said they are very or extremely willing to embrace new tech to carry out B2B payments.

Form3 U.S. CEO Dave Scola told PYMNTS in an interview posted in October that “we’ll start to see a movement away from traditional correspondent banking,” as real-time payments schemes and distributed ledger technologies and tokens increasingly play a role in reducing the complexities of cross-border payments.

As for the future of cross-border payments, automated and invisible international money movement is the goal of many modern solutions.

Anu Somani, senior vice president and head of global payables and embedded payments at U.S. Bank Global Treasury Management, told PYMNTS in an interview posted in October that she envisions “a world where payments are completely transparent … Where they completely move to the background and you are so focused on the experience you don’t have to think about them at all.”

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