Why are the 19 “building blocks” from the Committee on Payments and Market Infrastructures’ (CPMI’s) comprehensive report a step in the right direction for transforming the way international payments are carried out?
Cross-border payments continue to be plagued by a number of impediments including speed, price, reliability and general availability to and from certain geographies around the world. Improving the speed, reliability and transparency of international payments are absolutely essential to moving the industry forward. The building blocks outlined the Committee on Payments and Market Infrastructures’ (CPMI’s) comprehensive report align closely with what we have built at Veem over the past seven years. Extending our core product values in tandem with an enhanced international vision and guidance from regulatory bodies, and further collaboration between public and private sectors will be critical in enhancing the cross-border payment experience for individuals and businesses alike.
How would improving the cost, speed and reliability of payments remove frictions that prevent many small enterprises from doing business with customers beyond their borders?
Globalization and technology-driven growth in the payments industry have supported the unification of regional economies into one global market. Borderless transactions and improvements to the existing cross-border payment infrastructure have empowered businesses — regardless of size — to enter into the global marketplace. To continue enabling enterprises to do business with customers beyond their own borders and compete in international settings, we need to acknowledge the friction points — including cost, speed and reliability — that still exist today. Financial technology firms provide small enterprises with access to the rates, reliability and speed previously reserved for enterprise-level clients. On the Veem network, we have addressed some of the restrictive measures by removing the burden of intermediary banks to reduce fees, improve speed and increase transparency.
How can the collaboration between banks and Fintechs in the drive to bring cross-border trade and payments into the digital age yield mutual benefits?
Fintechs can work with banks around the world to deliver a fundamentally different cross-border payment experience to the end user using multi-rail technology, like we do at Veem. Multi-rail routing balances speed, security and cost to find the best path for each payment using different rails including the SWIFT network, blockchain, card and treasury. This approach is a concrete example of how banks and fintechs can work together to better serve the user. Banks offer fintechs the necessary infrastructure they need to operate, while fintechs iterate and improve the holistic experience for individuals and businesses transacting internationally. The banking industry often faces challenges with manual processes and red tape, which has negatively impacted digital adoption. The integration of traditional financial services with modern technology is essential to overcome multidimensional barriers including local regulations and technological hurdles. That’s why over the past five years we’ve seen an increase in mergers and acquisitions by big banks to acquire the technology they need to remain competitive.
Why has the advent of open banking been a game changer for the global financial industry and what are the benefits it has provided to the B2B payments industry?
As highlighted in the report, the harmonization of API protocols across payment infrastructures enable efficient payment data and digital identifier exchange. Through API, we can create stronger, simpler and more secure experiences for businesses transacting internationally. Open banking and open API are critical to developing solutions that simplify cross-border transactions for businesses.
What are the challenges impeding open banking adoption for B2B?
The lack of common frameworks for “know your customer” and “know your business” (KYC and KYB) verification is a significant impediment to the adoption of open banking for B2B cross-border transactions. Global payments are complex and verification requirements vary based on geographic location, use cases, purpose of payment, corridor and more. These requirements are constantly evolving and changing across multiple geographies making the process slow, difficult and nearly impossible to scale to accommodate the needs of businesses around the world. To solve this problem, we need to develop a common regulatory standard or set of principles to streamline the verification process to benefit all participants.
Why is improving cross-border payments critical to support global economic growth and trade in the aftermath of COVID-19?
Until recently, digital payments have long been a supporting character to more familiar, traditional and ordinary methods — namely international bank wire. Financial technology firms and technology-driven banks have an opportunity to bring digital finance and banking solutions to the mainstream to support global economic growth and trade in the months ahead. Transparent transactions combined with robust integrated financial processes and the mainstreaming of digital currencies will be major contributing factors to shape B2B payments in a post-COVID economy. The payments industry should laser-focus on creating simple digital-first experiences for businesses to enable continued growth in trade. Spending now starts online and is complemented offline as opposed to the pre-COVID mindset of starting the buying process offline first. This is a long-term, structural change in mindset that we expect to continue across industries well beyond the pandemic. The COVID-19 pandemic created two contrasting worlds that either fueled or destroyed industries. Further enhancements made to reduce frustration and friction in cross-border payments will benefit those businesses and industries that pivoted to or doubled down on online selling channels (i.e. brick-and-mortar retail to e-commerce) as they navigate our increasingly connected global economy.
Marwan Forzley is CEO of global B2B payment network Veem.
