Major companies rely on a web of worldwide suppliers to keep them in operation, and the entire puzzle can fall apart if just one piece is missing.
Chinese telecoms giant ZTE has been struggling to survive since it was cut off from its supply of U.S.-made components. Meanwhile, American beer brewers are importing European aluminum for beer cans, and supermarkets are bringing in Chilean grapes, Columbian avocados and more to stock their shelves. No matter the product, these companies must find ways to quickly, cost-effectively and repeatedly pay their suppliers — or suffer the same consequences as ZTE.
As the world continues to shrink and companies do more business beyond their borders, quick and efficient fund transfers and reconciliations have become crucial to keeping everything organized and everyone happy. For companies with multinational supply chains, that often means finding quicker ways to move money to suppliers while avoiding significant foreign exchange (FX) costs. Those operating in multiple counties must also manage cross-border money transfers between their far-flung offices’ accounts.
To manage frictions like these, FIs, FinTechs and other providers are working to develop new methods of smoothly and cost-effectively moving money, both domestically and abroad. Among these is the FinTech Centtrip, which provides global payments, treasury and FX services to business clients. PYMNTS recently caught up with Brian Jamieson, the company’s co-founder and CEO, to discuss its new service enabling clients to make real-time, in-network payments.
Centtrip works to identify an industry’s most painful payment problems, including high payment fees, issues with multiple accounts and reconciliation and more. Jamieson shared his take on the future of the payments space.
Supply Chains, Multi-Office Companies and International Performers
The need for faster payment and reconciliation affects a variety of businesses. These can range from managers of yacht fleets, who need to pay staff and maintain the vessels, to private equity fund distributors who must pay clients and musicians who travel globally. The latter often need to receive and spend funds in a local currency.
“For example, as artists tour the world they require local currency and must be able to pay the crew, as well as make all the other payments that go into the day-to-day running of a large worldwide tour,” Jamieson said. “Because of the multi-currency aspect of our account, it also meant the artist could receive their revenue in the currency of the area they were in.”
FinTechs and FIs can provide better currency access and organization of a company’s offices by offering clients sub-accounts held within a single master account, Jamieson said, as Centtrip does. These clients can then make individual or batch payments from each sub-account.
A musician might decide to store a different currency in each of her sub-accounts, making it easier to handle payments when touring abroad. Similarly, a company with multiple offices might decide to give each its own sub-account, rather than setting up a new master account for every location, easing report reconciliation.
“They can manage multiple accounts to one interface,” Jamieson said. “From an administrative perspective, it’s very efficient. It offers great reporting and reconciliation tools, [and] also gives clients huge control and the ability to move money very, very quickly across their own network.”
Centtrip can move eMoney quickly across its network, enabling corporate clients to make real-time payments to any other in-network company. Payment recipients must be part of this same FinTech network, though, making the solution better suited to corporations that regularly pay the same suppliers, which may be more likely to join a network for quick payment receipt. Centtrip offers this service for free, because it makes its revenue from several other services offered to its clients.
“We can move money instantly between the various accounts we hold for the client,” Jamieson explained. “If you’re a Centtrip customer and I’m a Centtrip customer, we’re both within that same eMoney network, which means if you deposit money with us, you can move it to me instantly, because it’s effectively a ledger movement. The money hasn’t actually moved because it’s within an eMoney environment. What’s happening is they’re making an instruction to transfer money from their eMoney wallet into the other party’s eMoney wallet. Therefore, it’s an instant movement.”
Not all of a client’s payment recipients will be willing to join that particular network, though, even with the benefit of added speed. As such, the FinTech turns to schemes such as single-euro payment areas (SEPA), SWIFT and Faster Payments to process these external transfers.
Safely Speeding On
Despite concerns to the contrary, Jamieson claimed there’s little reason to believe bad actors will more quickly and readily make off with funds as payments speed up. After all, the bulk of payments security checks occur before any money starts moving, including measures such as multifactor authentication and reauthorization procedures.
“Whether it is an instant payment or not, security checks should be undertaken before the money leaves.” he said. “Once it has left, it doesn’t matter if it’s gone over three days, two days, one day or within an hour.”
Jamieson has seen plenty of progress around the faster payments space, which makes him optimistic that the recent revised Payment Services Directive (PSD2) will open the doors to greater collaboration between FinTechs and major banks. He doesn’t expect significant changes to the corporate side of faster payments in the near future, but noted that its players have common goals and several key pieces in place, such as security.
Figuring out optimal messaging and settlement, especially for physical currency, are still challenges, however.
“Everybody knows what the problem is, and everybody knows where we want to get, but I don’t think anybody’s got the ultimate solution yet,” Jamieson said.
All that’s left is for someone to find that final missing puzzle piece.