Cross-Border Payments, Sans Friction

Money that crosses borders usually has an arduous trek.

Consider the fact that payment that originates in one country does so in the “home” currency but gets settled in another currency once received. Along the way, there are foreign exchange fees, documents to manage and sundry regulations to navigate.

In short, there are a lot of speed bumps in place.

But as technology makes inroads into far-flung payments, as paper gives way to new avenues of getting funds where they need to go – across digital options – the speed bumps go by the wayside.

In the latest Topic TBD with PYMNTS’ Karen Webster, Anil Sawrup, chief commercial officer of Cambridge Global Payments, said that the global nature of sending money between businesses and their end users in an efficient way is changing. The main impediment to fund flow is tied mainly to the KYC and AML – and any number of other requirements – that can vary by country.

The number one consequence? Said Sawrup, “delay. Sending an instruction to Brazil is completely different than India … and any missing little detail” he added, can cause a business to wait an extra day, or several, in getting paid, a lapse that can have significant impact on a company’s immediate fortunes.

Thus, in improving speed and dotting the regulator “Is” and crossing the compliance “Ts,” companies such as Cambridge can help facilitate data flow and make sure it is “clean,” making sure the information to onboard everyone, from employees to end customers, can be processed upfront before payments go through. Of Cambridge’s clients, said the executive to Webster, they may not have certain swaths of information residing within their own back-end or ERP systems.

In bridging the gap between what they have – in terms of technology – and what they would like to have in solving cross-border challenges, Sawrup said that with today’s offerings, “especially with the emergence of API technologies,” businesses are using that connectivity to drive their operations toward real-time payments functionality.

Perhaps not surprisingly, the conversation turned to blockchain and distributed ledger technology. “We are seeing emerging requests,” said Sawrup, for such ledger-focused initiatives, adding that the company is working to bring that to market. “You will see more [interest] in this from the consumer space, but businesses are asking about it more and more today,” he said.

But noting the fact that with blockchain, all parties would have to be on the same ledger, he said that in the meantime, “what we have the ability to do is partner up with different rails and jurisdictions around the world.” He noted that his firm can send money to destinations in India and the Philippines in less than an hour. That functionality is being expanded to China and other areas around the world, he said.

Among the verticals in which the company is expanding: international health care, and also payroll – where, in an example of problem solving, the company has “maritime payroll.” In this case, a crew member who works for one of the big ships in America via cruise line is traditionally paid every two weeks, and while they may receive payments onto a card or to their phones, they may also need to send money home, in this illustrative case to the Philippines. The company will make it so that payment can be sent to that home country across the local rail.

Overall, cost savings can be material, as in yet another example, this time in international health care, Sawrup said clients have said they’ve reduced the manual investigative timeframe – the typical back-and-forth of gathering information about beneficiaries – by 40 to 50 percent, helping to ensure that claims get paid on time.

Sawrup said that other benefits accrue as Cambridge and API-driven payments – removing friction from cross-border payments – foster “the ability to pay businesses or individuals overseas in an unbanked market – they want to get paid on a card or a cell phone.” This dovetails well with millennials, who favor a prepaid, eWallet type of app that serves their lifestyles and ensures they “can go spend the money where [they] need to.”