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3 ways digital innovation is changing cross-border payments

By Leandra Monteiro

June 18, 2021

  • America

cross-border paymentAs digitalisation blurs the physical borders between countries, it is estimated that the total global cross-border payment flow can surpass USD156 trillion by 2022. As globalisation is now more and more intertwined into the daily operations of businesses, redefining cross-border payment management practices is becoming more important.

With a strong international payment strategy, companies can achieve a better ROI, gain better control over international transactions, leverage advanced reporting tools, and enhance payment security.

Global businesses are now turning to FinTech partners for solutions that make payments more instant, secure and transparent. In the face of this increased demand, payments providers have turned to the latest digital innovations to transform the cross-border payments. Here are three key cross-border payments experiences accelerating into the digital age:

APIs aid real-time FX rates: Different businesses transact across a variety of countries and currencies. The finance departments within global organisations continually test digital solutions to optimise cross-currency systems without disrupting their existing operations. Hence, application programming interfaces (APIs) are so important.

Just like plug-and-play solutions, APIs integrate into existing treasury infrastructure and interfaces. As a result, treasurers can access real-time visibility into FX rates directly from existing systems and can more effectively manage currency exposure, mitigate risk across their global accounts and accelerate reconciliation due to having FX rates earlier in the process. Via API connectivity, corporate treasurers can also lock in FX rates for prearranged periods of time, enabling them to price their goods in the currency that works best for their clients while still effectively managing funds.

Improved visibility and transparency through technology: Providers now have the ability to offer payment options without the burden of complex, technical overhead. For example, providers can partner with banks to leverage local clearing rails to complete cross-border payments, as opposed to using wire payments.

As the industry moves ahead, it is now looking beyond traditional clearing rail advancements and leveraging technologies like SWIFT GPI, virtual account management and API connectivity to improve the beneficiary and sender experience.

For the beneficiary and sender, API connectivity helps provide better visibility and transparency into the payment status. For the sender, they can see FX rates upfront before sending a payment. When any payments issue arises, beneficiaries can track the payment and receive updates in real time.

Virtual Accounts: Numerous businesses have direct deposit accounts (DDA) in countries where their beneficiaries are located. This arrangement means businesses have money spread across various countries, accounts and currencies, all of which can lead to complex reporting, idle cash balances and unnecessary cross-currency risk exposure. This is where virtual account management solutions come in.

Virtual accounts enable the clients to flexibly manage cash flow across currencies through a centralized account structure. As a result, businesses no longer need to maintain multiple local accounts in the same markets. In fact, with centralized account structures, businesses can obtain better payment sequencing and manage detailed reporting under one canopy. Furthermore, through this structure, companies can simply transfer and focus their balances held in one account in one currency to another account in another currency, or fund local payments using a centralized account. This enables businesses to maximise their liquidity, reduce their risk exposure and operate in the currencies that make most sense for their business.

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