When it comes to expanding operations, it pays to think globally. As more companies take their operations to the world stage, a growing group of international players will need to find fast and secure ways to pay their business partners in other countries.
Because no matter which side of a transaction they may be on, cross-border trading partners expect to be able to complete transactions conveniently, simply and quickly – and in their local currency. In other words, companies need to be able to make efficient, affordable, convenient and secure payments if they hope to succeed, or even survive, in the modern world.
That’s where payment rails come in. This demand for efficient payments has propelled the emergence of several payment rail networks, each designed to help facilitate and accelerate the delivery of funds, including those offered by the Automated Clearing House (ACH) network, Fedwire and The Clearing House. In the latest Smarter Payments Tracker™, PYMNTS explores the role of payment rails in facilitating commerce and examines how existing payment infrastructures are evolving to meet changing consumer expectations.
Around the Smarter Payments World
While the U.S. has seen an uptick in payment rail activity – such as the rollout of Same-Day ACH over the past three years – many noteworthy developments in the payment rail landscape have recently been observed in Europe.
Cross-border messaging service provider SWIFT, for one, recently made news when the company announced its plans to expand its role in the European economy.
The company was recently certified by the Eurosystem, enabling the company to provide access to the monetary authority’s TARGET Instant Payment Settlement (TIPS) platform and RT1, the instant payment service offered by EBA Clearing. SWIFT also announced plans to launch its SWIFTNet Instant solution later this year, which aims to give financial service customers a single access point to multiple instant payment systems across Europe.
Meanwhile, emerging FinTech players are creating increased competition for SWIFT.
Ripple, for example, is claiming it can facilitate cross-border payments within two minutes, instead of two to three days. And Ripple isn’t alone. Another player, digital currency solution provider Stellar, recently secured $3 million in funding from Stripe to establish its own global payments network.
In pursuit of developing a new payment system, Logos Network also recently secured $3 million in seed funding, which it plans to spend on establishing a blockchain-based network. Logos intends to expand the ecosystem for that platform by creating blockchain explorers and apps enabling P2P transfers.
Besides Logos Networks, many additional players in the financial services industry are looking at what kind of payment rail solutions can be built using blockchain. Because of its transparent nature and its ability to move funds between parties, blockchain’s future role as a payment rail is being monitored closely. In fact, nine out of 10 bank executives say they are exploring possible use cases for blockchain.
But while the financial community appears eager to explore use cases for blockchain, it could be a long time before the technology is actually put to use in the space. Recently released data revealed that 90 percent of blockchain-based experiments never roll out. This month’s Tracker includes a Deep Dive highlighting blockchain’s possible impact on the payment networks.
Citi Calls for Payment Network Standardization
As more companies participate in the global economy, they are often met by a host of challenges, from paying overseas employees to trading with international partners.
These changes to business operations, according to Manish Kohli, global head of payments for Citi’s Treasury and Trade Solutions, require a new perspective on payment rails, one that goes beyond speed. For the August feature story, Kohli spoke with PYMNTS’ Karen Webster about the five pillars that payment rails must offer – speed, transparency, affordability, convenience and security – in order for banks and clearing systems to meet their customers’ heightened expectations for a more efficient payment infrastructure.
About the Tracker™
The Smarter Payments Tracker™, powered by FIS, is a bimonthly report that looks at how payment systems are evolving to be become faster, transmit data, offer interoperability between systems and more to improve the payer and payee experience.