Voice of the Industry

Bridging borders with payments

Monday 16 March 2020 08:16 CET | Editor: Oana Ifrim | Voice of the industry

Anders la Cour, Banking Circle: With many PSPs and other providers already delivering innovative ‘point’ solutions, and many ambitious SMEs currently underserved by their existing bank, the opportunity to build bridges and connect solutions is ready and waiting
Cross-Border Payments and Commerce Report 2019 - 2020

Anders la Cour, Co-founder and Chief Executive Officer of Banking Circle, looks at the role PSPs can play in breaking down trading borders by offering fast, affordable cross-border payments.  

There are more than 24 million SMEs in Europe, making up more than 99% of the region’s businesses and accounting for two thirds of all employment.  

Since 1990, the global production of goods has increased, roughly by a factor of three. In the same period, worldwide exports and foreign direct investment (FDI) have increased by a factor of five (according to United Nations Conference on Trade and Development (UNCTAD)). This increasing internationalisation of the global economy has also been felt by Europe’s SMEs. However, despite SMEs exporting goods worth EUR 1,757 billion – 12% of EU GDP – in 2018 (according to Source: Eurostat database Trade by Enterprise Characteristics (TEC), 2018), cross-border payments remain a challenge, especially for online retailers.  

As reported in the latest Banking Circle insight paper, ‘Pay, Set Match! Payment services for SMEs – Jump-starting a virtuous digital payment circle’, much of the problem lies in the fragmented nature of the European SME market. SMEs may dominate the landscape, but they are vastly different from each other and there is no single banking solution to meet all their diverse needs.

For providers who have sought to deliver solutions for SMEs, economies of scale have been hard to achieve. In turn, this has reduced affordability and, therefore, the viability of many SME-focused solutions.  

Dedicated solutions  

Other providers have tried to attract SMEs with consumer products or enterprise services, but as Kent Vorland, CEO of SmartTrade App, a platform for micro-businesses and sole traders, confirms, this hasn’t worked. ‘[Consumer products] are not agile enough and providers have little knowledge of small businesses’, Kent points out, ‘equally, the big boys have complicated functionalities, but nothing optimised for small merchants’.  

On top of this, SMEs face difficulties with late payments, restricted credit lines and limited access to efficient transaction services. Payments are processed too slowly and cost too much. David Selves, an entrepreneur and owner of the Selves Group of Companies explains why this can be such a big problem: ‘Three to five banking days for card payments is still the norm, which causes considerable issues for many small businesses. SMEs have bills to pay, the funds are guaranteed, and banks settle between each other in real time electronically, but customers have to wait days for value’.

Michael Ault, COO of Universal Transaction Processing, agrees: ‘[SMEs] have already been through an arduous process to get a merchant services account, and then it takes days to get their funds’. Significantly, these delays occur with local payments, and are even worse in the case of cross-border payments.  

Payments without borders  

While many barriers to international trade are coming down, through the rise in online commerce, cross-border payments are far from straightforward for SMEs. However, there are many PSPs looking to fill this gap in provision.  

Phil McGriskin, Vitesse’s CEO, explains: ‘The idea behind Vitesse was to avoid the problem faced by many – often online – retailers who receive payments from customers in another country. Due to bank fees, the amounts actually received vary from the amount expected. If you’re paying an invoice, it’s difficult to know how much you need to add for transaction fees’. 

Daniel Mayhew, UK country Manager for Payoneer, the online money transfer and digital payment service, says the Payoneer goal is to ‘remove the barriers to cross border trade, either by helping them access new markets or providing new technologies that enable frictionless connections between buyers and sellers globally’.

With many PSPs and other providers already delivering innovative ‘point’ solutions, and many ambitious SMEs currently underserved by their existing bank, the opportunity to build bridges and connect solutions is ready and waiting. Each provider has a role to play, and value to add, if they build relationships across the board – and across borders. 

Dialogues must be kept open, and innovation must continue, in order to find and develop successful, effective, affordable solutions which will work for SMEs of all types in all geographies, increasing financial inclusion and benefiting the global economy.  

For copies of the latest research from Banking Circle, visit www. bankingcircle.com/whitepapers

Cross-Border Payments and Commerce Report 2019 - 2020

The editorial was first published in the Cross-Border Payments and Commerce Report 2019 – 2020, which depicts the major trends driving growth in cross-border payments, cross-border commerce, and marketplaces.

About Anders la Cour 

Co-founder and Chief Executive Officer of Banking Circle, Anders la Cour is a hands-on leader driving innovation to facilitate more efficient, cost-effective banking solutions. He was instrumental in arranging the acquisition of Banking Circle by EQT VIII and EQT Ventures.

About Banking Circle

Banking Circle is a next-generation provider of financial services infrastructure that is leading the rise of a super-correspondent banking network and increasing financial inclusion. 

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Keywords: Anders la Cour, Banking Circle, SMEs, payments , financial inclusion, PSPs, small businesses
Categories: Banking & Fintech
Countries: World
This article is part of category

Banking & Fintech