Technology can be a great disruptor to traditional industries. In this article we discuss some of the factors shaping the future of international payments.

The international payment landscape is evolving rapidly. These days, customers demand simple products, better rates, lower costs & increased transparency, not to mention efficient customer service. These are things that banks have always struggled to provide.

Real Time Payments

Businesses want the ability to move money around the world faster. In countries like the UK, digital banks and global fintech providers are collaborating with companies like Earthport, who already have global payment networks in place. (Bank accounts in countries all over the world) This infrastructure essentially allows businesses to create a real time payment and settlement network for cross border payments. Money is deposited locally in one account and then paid out of another account on the other side of the world, almost immediately. There you have it, an instantaneous cross border transaction where the money hasn’t moved. It’s basically just a big reconciliation exercise at the end of the day. To stay relevant and competitive, financial institutions are looking for ways to incorporate real-time services into their payment strategies. Unfortunately, in South Africa exchange control regulations prohibit the use of asset swaps to transfer funds abroad. We operate on a Balance of Payments system where all transactions (under exchange control regulations) are required to go through an appointed Authorised Dealer. The SARB is continually simplifying exchange controls. Who knows, with everything going on in the world today, we may have an opportunity to relook at transfer opportunities like this in South Africa in the future.

Regulation and Compliance

Changes to regulation and compliance are creating opportunity for innovation. Fintech providers are better positioned to use technology to bridge the compliance gap between customers and banks. FX Paymaster for example, has just started using 3rd party data verification services to analyse and compare FICA documents. This technology has enabled us to fill the regulatory and compliance gaps and process.

Collaboration

Will Fintech disrupt banking? Consider an interesting point raised by EY. “Collaboration — not competition — will be the primary driver of disruption”. The belief is that the greatest threat isn’t from fintech’s themselves but from traditional institutions who partner with fintech’s in order to leverage off their advanced, agile, innovative tech. Most banks tend to use legacy systems which are clunky and outdated. there is a wide gap between customer expectations and financial institutions’ capabilities in South Africa. . In this respect, FinTech’s have an advantage over banks. Unless banks and FinTech firms get better at working together, neither will reap the full benefits of innovation.

Information and systems

Moving money efficiently is important, but it’s not enough. Financial institutions can improve their customer experiences by putting more power into the hands of consumers and businesses. Over the years customers’ expectations and needs have changed substantially. When making international payments in a market like South Africa, the quality of the information will outrank the price ever every time. CFO’s of the future need information to make quick & accurate decisions and they need system to independently complete transactions. The future of international payments isn’t limited by technology, infrastructure or regulation but by legacy thinking. The complexity, scale and siloed nature of banks is often why they struggle to do this effectively.