Brexit A Potential Catalyst For Global B2B Payments Shakeup

While some analysts had predicted apocalyptic-like fallouts from Brexit, the actual impact from the U.K.’s departure from the European Union has been more subtle. In the world of corporate payments, however, the impact is a bit more profound.

That’s according to Saxo Payments CEO and founder Anders la Cour, who recently spoke at the European Payment Summit. Brexit, the executive insisted, means major changes for corporates’ FX and global practices, as well as an overhaul in the company-bank relationship.

In a survey conducted by Saxo ahead of the event, a third of businesses said they plan to move operations out of the U.K., and half said they plan to switch financial partners, following Brexit. And while more than a third of companies said they would prefer to have a single banking relationship, about a third said they have five or more of these partnerships.

“Clearly the U.K.’s exit from the EU is taking considerable thinking time for businesses right across the Union,” la Cour said. “And one area that needs to be addressed is stability in the processes that businesses use for cross-border payments. Whatever else might happen, they want to have certainty about cash flow and costs.”

The executive said the research reflects businesses’ desire to have a streamlined banking experience.

“Indeed, our piece of focused research amongst payment professionals suggested that there is an appetite for businesses to find a third-party, one-stop-shop to provide the platform for their cross-border payments, with nearly 60 percent advocating this approach, driven by a desire to reduce external costs and improve cash flow,” he stated.

His remarks and Saxo’s latest survey results follow a separate report released by the company that found financial institutions are missing major opportunities by missing cross-border and FX payment needs among their corporate clients. Forty percent of businesses said their current financial service provider cannot help in their international expansion, while nearly half said their current provider does not offer FX tools like analytics and risk mitigation.

Further, 44 percent of companies cited payment settlement times as their largest challenge with regards to cross-border payments.

La Cour’s remarks aren’t the first time analysts and industry players have warned of a shakeup in the corporate financial services space post-Brexit.

Earlier this year at the World Economic Forum, top bankers acknowledged that it was time for some operations to exit from the U.K.

According to UBS chair Axel Weber, about 1,000 jobs — a fifth of the bank’s workforce in London — are likely to be relocated as a result of Brexit. JPMC similarly noted that as much as a quarter of its U.K. may be relocated.

How that will have an impact on the corporates these FI service, however, remains unclear.

Amid this banking shakeup in the U.K., analysts are simultaneously warning that the corporate banking space in general is due for its own overhaul. A report released last month from Boston Consulting Group found that traditional banks need a massive dose of FinTech and innovation to provide the digital services their corporates demand.

“Corporate banking divisions have emerged from the financial crisis only to be hit by massive digital disruption,” said BCG’s corporate banking segment global leader, Carsten Baumgärtner, in a statement. “To stay viable, they need to understand the client journeys that matter most, invest in continual client-centric innovation, adopt agile ways of working, and create more effective and collaborative sales cultures.”

The cross-border payments space appears to be one of the areas in which banks are falling short with their business customers — and an area in which FinTech startups can provide that injection of technology banks need.

Just last week, venture capitalists provided nearly $50 million in funding to two cross-border B2B payments companies, Veem and Currencycloud.

“What is clear,” la Cour continued in his introduction to Saxo’s recent report, “is that if the current limitations in cross-border payments are allowed to perpetuate, there could be a real risk of businesses operating in the international marketplace finding themselves underbanked, thereby seriously limiting the growth potential of the global economy as a whole.”

U.K. corporates, thanks to Brexit, are particularly at risk as their financial service providers step back from the market, la Cour suggested. According to Saxo, what’s needed is “a whole new ecosystem which is rapidly emerging to provide the infrastructure for business-to-business cross-border payments without any need for correspondent banks.”