Payments Innovation

Smarter Payments Mean More Secure And More Seamless Payments

electronic payments

The rise of global payments has meant the need for smarter payments, according to the new Smarter Payments Playbook.

In the study, PYMNTS discovered that cross-border payments from the U.S. have increased 47 percent since 2017.

This is due in part to retailers simply making cross-border buying easier. For example, last year Amazon launched an “International Shopping” experience within the Amazon Shopping App.

Other initiatives and partnerships have arisen to meet the growing need for smarter cross-border payments.

Mastercard and BMO Bank of Montreal have formed their own partnership, allowing the latter’s clients to use Mastercard Send to securely transfer cross-border payments to bank accounts in more than 75 countries.

In Europe, SWIFT recently announced it has teamed with the European Central Bank to extend cross-border payments further into Europe by enabling gpi on the TIPS platform.

According to SWIFT, 40 percent of SWIFT gpi payments are credited to those receiving it within five minutes. Not exactly real time, but payments can be delayed because they need to be cleared within the recipient’s country.

According to the Smarter Payments Playbook study, 36 billion phishing messages are estimated to be sent to European citizens every year.

As instant payments grow in popularity, the same concerns as always plague financial institutions (FIs): fraud and identification. Security can be tougher when payments are sent, received and verified within seconds.

“In an instant payment, the money can obviously move faster. That is something new, but [as for] the risks of the system being hacked, it’s the same for any payment system,” Erwin Kulk, head of services development and management at EBA Clearing, told PYMNTS in an interview.

Automation is thought to be a solution to reducing friction, and automation has a lot of interest among FIs. In the PYMNTS B2B Payments Tipping Point Playbook, 33 percent of companies surveyed said they planned to roll out real-time payment capabilities, while 32 percent intended to release innovations enabling automated payables.

Blockchain is playing a role in payments too. JPMorgan Chase is reportedly planning to add new features to its Interbank Information Network (IIN), a solution aimed at allowing interbank information sharing, including reducing existing cross-border payment frictions and streamlining transactions, and includes more than 220 global member banks.

JPMorgan Chase also recently announced the launch of JPM Coin, further indicating that it’s stepping up its blockchain investments.

If it seems like new developments in cross-border payments are being owned by banks, that’s because they are. According to the study, nearly all (95 percent) cross-border payments are currently dominated by banks.

That’s likely because sending an international payment through established banking channels is a complex, multi-step process that involves several intermediaries.

Cross-border eCommerce activity is expected to rise 20 percent by 2022 and the projected value of the global payment security market is forecast to reach $27.01B by 2023.

This is also where blockchain can come into play. When records are kept by one central authority, like a bank, they are vulnerable to interference. If that authority is hacked, damaged or taken offline, users could have their data compromised.

With blockchain, to tamper with data, a hacker would have to alter all earlier transactions in the ledger — making blockchain nearly impenetrable.

It’s early stages, but blockchain could be the key to enabling more seamless cross-border payments. For businesses, this will be invaluable as they take their operations to the global arena.

While banks dominate cross-border payments, FinTech players may actually accelerate the adoption of B2B payments innovations. Partnerships with FinTech providers is also becoming an increased area of focus for global companies, thanks to regulatory factors such as Europe’s PSD2 and GDPR.


New PYMNTS Report: The CFO’s Guide To Digitizing B2B Payments – August 2020 

The CFO’s Guide To Digitizing B2B Payments, a PYMNTS and Comdata collaboration, examines how companies are updating their AP approaches to protect their cash flows, support their vendors and enable their financial departments to operate remotely.