With an estimated $175 trillion moving across borders each year — and growing about five percent annually — there is a lot at stake for the so-called “winners” and “losers” of the movement to digitize and standardize these cross-border transactions.
Yet while shifts in technology and regulation can alter the trajectory of this macrotrend, businesses must still prioritize customers above all else.
So what lies ahead and, most importantly, who is positioned to succeed amid this fast-changing landscape? A recent Converge panel examined the latest developments in fintech and regtech (regulatory technology) to find out. Moderator David Birch, Director of Consult Hyperion, is joined by Jody Visser, COO of Convera; Rich Clow, SVP of Emerging Payments for Bank of America; Pankaj Sharma, Executive Vice President, Global Remittance Business Management at Remitly; and Tom Dye, Managing Director and Partner for Payments, Boston Consulting Group.
Cross-border complexity
Much progress is being made to standardize platforms, automate currency exchanges, and move toward real-time digital payments. However, Visser notes that “it’s going to be a while” before everything runs seamlessly.
“When you’re working in cross-border and there are 40 or 50 jurisdictions, you have to customize for each regulator, and that just adds complexity into your systems, your people management, and your processes — that’s where it’s really, really hard,” she says.
In some respects, the big banks have an edge because they can integrate all their different divisions and applications under a standardized, multinational platform, Clow notes.
When disruptive innovations like AI and embedded finance tools come along, the biggest companies are usually the most equipped and capitalized to acquire and adopt the new technology. Sharma says this creates new opportunities for smaller fintech developers to sell their solutions to larger financial institutions.
Putting customer use cases first
The sheer size of the cross-border transaction space creates enormous potential for all models, the panel describes, but the key differentiator comes from providing an excellent customer experience.
“It’s not just about size, although that does play into it,” Visser says. “You still have midsize and larger businesses that are used to the handholding and more consultative [partnerships], especially when you look at risk management.”
She says the B2B payments space is full of use cases within an array of verticals that need fintech and regtech solutions to avoid pain points.
“Moving more into cloud-based as a non-bank, we can go deeper into customer needs and pick off use cases, specific product features, and functionality where banks are more constrained around core banking architecture,” Visser says. “They’re managing massive portfolios of spend and where to put it against [their] broad product offering … whereas we get to go [deeper] and be a little bit more nimble in the way we invest our dollars and develop the technology to do this.”
According to Clow, much of an organization’s success will also come down to pricing, which could favor institutions that do not rely as much on outside partnerships.
“If we keep it in-house, it lowers the cost to service,” Clow says, adding that Bank of America has lost a sizeable amount of deposits due to customers finding better pricing on wire fees from newer, innovative platforms.
“It’s so much more convenient and it’s just as compliant. It’s regulated exactly the way we are,” Clow says. “So those are things we have to invest in and hear from our clients.”
Want more insights on the topics shaping the future of cross-border payments? Tune in to Converge, with new episodes every Wednesday.
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*The information shared on this blog is for informational purposes only and should not be considered financial advice. Please note that the opinions expressed on Converge are solely the opinions of the host and the guests, not Convera’s.
