Voice of the Industry

Frictionless cross-border payments – no longer a pipe dream

Monday 10 May 2021 08:41 CET | Editor: Oana Ifrim | Voice of the industry

Most banks still see cross-border payments as a core solution. But how can they compete with more agile FinTechs? Banking Circle’s Anders la Cour examines the challenges and possible solutions. 

I can’t imagine a single person reading this who is unaware of the challenges of cross-border payments through banks. They are slow, they are expensive, they are difficult to reconcile. They are simply too complicated to successfully facilitate frictionless global trade. However, that does not mean banks should give up and let FinTechs dominate the cross-border payment space.

While FinTechs are indeed more able to develop seamless, fast and inexpensive alternatives, they do not have the security or the customer relationships and trust that incumbent banks have built up over generations. Banks may be held back by regulation and inflexible legacy infrastructure, but their compliance with strict regulations gives customers assurance and peace of mind in their banking.

Despite the infamous challenges, 70% of the C-suite banking executives we recently polled from across Europe consider cross-border payment provision to be a core banking service. Our research was carried out in November 2020 in the lead-up to the UK leaving the EU. The continuing uncertainty regarding trade deals may be part of the reason 90% of UK respondents considered cross-border payments to be a core banking service – significantly more than their European peers.

It seems that UK banks also support more customers in their cross-border payments. 40% of UK banks support incoming international payments for at least half of their business customers, compared with just 11% of Benelux banks and 4% in the DACH region. In terms of outgoing cross-border payments, UK banks are the front runners again, with almost 30% supporting such payments for more than half of their business customers, whereas 11% of Benelux and 6% of DACH banks do so.

Payment options

We asked how the banks taking part in our research currently handle cross-border payments and found a wide range of solutions being utilised. Around 60% use direct clearing through central banks, and 58% use the slowest and most expensive way for banks to move money for their clients: the traditional correspondent banking network. It was interesting to see that less than 40% use SWIFT.

A single currency across the Eurozone may make it easier to trade across borders, but it does not produce an entirely frictionless experience. They may share a common currency, but each country still has its own payment system and not all of these are interoperable. As a result, payments still incur delays and even fees when moving between countries and banking systems. 

On top of that, of course, is the issue of trade outside of the Eurozone. Some of the biggest players in global trade are the US and China, so businesses within the Euro area must either absorb the delays and fees of trading with these markets or make the choice to limit their international customer base by not trading within these regions. Smaller businesses are not necessarily able to absorb the additional cost or remain competitive if their cash flow experiences lengthy delays. So they are often forced to take the second option and limit their ambitions and their business potential.

Recognising a solution

With banks recognising the value of continuing to provide cross-border payments for corporate customers, and businesses keen to expand into new geographies, it is clear something needs to change. Small businesses have faced enough hurdles; it is time the industry removed the payments challenges that hold back so many new and small companies.

In order to hold on to their corporate clients, banks are now recognising the value of partnering with cloud native banks and FinTechs to utilise the existing financial infrastructure of these new entrants to enable them to provide clients with faster, lower cost, more accessible international payment options. Partnering with these innovative and agile businesses allows banks to gain the benefit of speed to market, helping them to remain competitive. 

Working with other providers in the financial ecosystem allows banks to handle payments directly, avoiding the slow, expensive and outdated correspondent banking network.  As a fully clouded licenced bank focused on payments, Banking Circle brings together a suite of solutions to serve FinTechs and banks alike. 

Traditionally, the process of international payments has cost EUR 50 and taken five days or more. However, through our cloud-based infrastructure and purpose-built platform, we are working towards delivering cross-border payments that cost 50 cents and take under five minutes. We are improving the ease with which businesses can send money across borders, meaning they can trade anywhere, without a local presence or massive investment in infrastructure. We are empowering businesses to achieve their cross-border trade ambitions.

The results of the Banking Circle research are published in a white paper:  Better business banking: Collaborating for success. Download the report here.

About Anders la Cour 

Co-Founder and Chief Executive Officer of Banking Circle, Anders la Cour used his experience in legal M&A and venture capital, and strong commercial acumen, to co-found Banking Circle in 2013. In 2018 he orchestrated a USD 300 million management buy-out with EQT and secured a Banking Licence in 2020. Anders is the inaugural Chair of the Emerging Payments Association EU, having been on the EPA Advisory board since 2016. He is regularly invited to speak and present at industry events around the world, has won multiple awards and had thought leadership articles published in a range of industry publications. 


About Banking Circle 

Next-generation provider of mission-critical Banking infrastructure, Banking Circle is leading the rise of a super-correspondent Banking network. Banking Circle is a fully licenced Bank able to deliver compliant and secure financial infrastructure at low cost. Clients, including Banks and Payments businesses, can now access near real-time payments regardless of borders and regardless of size, allowing them to seize market opportunities without having to commit to significant investment in their own internal infrastructure. 



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Keywords: Banking Circle, cross-border payments, fintech, banks
Categories: Banking & Fintech
Countries: World
This article is part of category

Banking & Fintech