In a world where millions of products and services are delivered across borders every day, it is critical for businesses to be able to make and receive global payments efficiently and securely, in a way that is cost effective and frictionless throughout the entire process.
However, in reality, the majority of businesses are still lagging behind when it comes to B2B international payments. Due to the challenges of operating across multiple countries, currencies and payment methods, businesses often opt to build on existing banking relationships in new territories, unaware that there are easier and cheaper ways to process payments globally.
As businesses scale, more and more banking relationships need to be established. This adds to the cost of expansion, and is also incredibly time-consuming, which takes resources and focus away from growing the business.
Adding to the issue further, the traditional providers’ appetite for offering international B2B payment processing services is waning for all but their most profitable clients. Regulation, competition, and even terrorism are all resulting in the incumbents finding that offering these basic business banking services is becoming less attractive.
Fortunately, there is a way to eliminate the need to maintain multiple banking relationships, and it offers better FX rates and faster payment processing times that take minutes to complete instead of days. Payments businesses now have the ability to act as a transaction bank for its customers by outsourcing their payments to a FinTech that can act as a ‘utility’.
These ‘utilities’ can offer banking services, such as issuing IBAN accounts, which provide access to virtual multicurrency IBANs, thus optimising payments between PSPs and their customers. By managing this part of the relationship, which is usually looked after by banks as part of a much wider offering, payments acceptance, settlement times and reconciliation are all improved because payments are made in the name of the virtual IBAN account holder in real-time. Additionally, this solution offers reduced AML and KYC risk as a result of end to end transparency and clear segregation of funds.
The rise of the utility
The rise of ‘utilities’ in banking is expected to continue, particularly as open banking shapes financial services, driven by regulations that promote consumer choice and competition.
There are benefits for banks too. Knowing that a part of the business has been optimised by a FinTech means that it makes no sense to build the utilities that underpin their service themselves. By employing a ‘utility’, tier two and three banks and established payment service providers could become more digitalised, relationship-driven and focused on the customer relationship by outsourcing non-core functions to third parties. The result will be a more fragmented financial industry, but one that is capable of delivering ‘banking services’ in a much more dynamic way than we see today – and that includes streamlining international B2B payments.
Banking Circle is one such utility, revolutionising the cross border payments industry by streamlining the process as much as possible, while providing its members and their clients with the tools they need to succeed in a global marketplace.