Why Payments Are Only A Piece Of SMBs’ Global Finance Puzzle

Widespread disruption throughout the world’s supply chains earlier this year had businesses’ continuity plans threatened and, for some, even forced operations to grind to a screeching halt. There are signs that the wheels are beginning to churn once again, however, and though not every industry will recover at the same pace, there is evidence that global trade is once again on the rise.

Yet as cross border trade picks back up, the foreign exchange and global payments needs of businesses will intensify. According to Jason Conibear, CEO of FXPress, trade volume recovery is being driven by consumers’ rising shopping needs, resulting in an elevated import-export activity.

“As the year has progressed, we are starting to see the shoots of recovery, and growing interest in forward-currency contracts acts as a leading indicator of the level of international trade on the horizon,” he recently told PYMNTS.

With businesses pressured to streamline their supply chains, managing the financial flows from one business to another will play an even more important role than ever before to fueling trading and economic growth in a post-pandemic market. For the financial services world to address businesses’ global payments needs, Conibear said they must take a holistic approach that goes beyond facilitating cross-border payments or improving upon legacy payment rails.

Beyond Payments Initiation

FXPress entered the market with a focus on cross-border payments and foreign exchange services. Indeed, making payments across borders remains one of the biggest pain points for small- and medium-sized businesses, as well as one of the biggest opportunities for FinTechs and other FinServ providers, thanks to the continued lack of transparency and speed in traditional global payment methods that rely on the correspondent banking system.

“But payments is just one side of the equation,” noted Conibear.

As such, FXPress recently announced the acquisition of Avila House, which now enables the FinTech to offer multi-currency accounts to its SMB customers. As Conibear explained, this means not only supporting the initiation of global transactions, but also the receipt of payments in multiple currencies.

“Most companies operating in international markets also receive funds from overseas, often in currencies in which they don’t hold a banking facility,” he said. “This forces them to convert the currency on receipt, even if they are going to have a future need for the incoming currency.”

Multi-currency accounts mean SMBs can hold funds in foreign currencies without having to open individual bank accounts in multiple markets, while also allowing them to then initiate payments in various currencies from that single account, too.

A Holistic Approach

The addition of banking services with payments is part of a broader holistic approach to SMBs’ FX and global finance needs, but there’s yet another piece of the puzzle: integration.

Open banking and PSD2 initiatives in the U.K. and Europe have enabled application programming interfaces (API) integrations between bank accounts and back-office systems to help businesses not only send and receive foreign payments, as well as hold foreign currencies, but actually understand financial positions thanks to connectivity with accounting and other portals. As Conibear noted, open banking’s payment initiation service also means enhanced automation in transactions from SMBs’ bank accounts for further value.

The interconnectivity of payments, banking and data integration in a global paradigm will be paramount to readying businesses of all industries for the future.

Yet FinTechs aren’t the only ones anticipating the rising complexities of businesses’ FX needs. In addition to open banking initiatives, efforts from both the private and public sector to improve existing payment rails, develop new ones and promote payments messaging standardization (though standards like ISO 20022) have also heightened the FinServ industry’s focus on combatting cross-border payments friction.

While these efforts are certainly positive developments, Conibear said that, once again, standardization and payment rail innovation is only one portion of the journey to improving the overall global B2B FinServ ecosystem. These payment improvements must also be joined by advances in banking and accounting, too.

“We welcome any and all initiatives that ensure that international payments become more secure, faster and cheaper for customers, and it’s clear that the advances made over the last few years go a long way to making this the case,” he said. “However, layered beneath this is a need for transformational change in the operational efficiency within accounting departments, which can only be provided by technology-led automation.”

As Conibear noted, the pandemic is likely to further accelerate the shift in the ways businesses manage their businesses — and finances — on a global scale. Financial service providers have the opportunity to tackle friction on multiple fronts, including payments and beyond, to support economic recovery.

“One thing is for certain,” said Conibear. “International trade will remain an important part of the economy, and multi-currency payments an essential component of it.”