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Expert opinion

International B2B payments crossing borders without delays and high fees

Monday 20 March 2017 | 08:46 AM CET

According to a McKinsey Global Institute report, global trade flows could reach up to USD 85 trillion by 2025, tripling current levels. The report also states that one in three goods is sold across borders and over 33% of financial investments are international transactions.

These figures demonstrate the importance of efficient payments services. Many businesses pay a 3% international payment fee, which may seem low, but for all the trade predicted for 2025, that equates to USD 2.55 trillion in profit wasted by companies around the world – not a figure many can afford to ignore.

Straightening priorities

Payments can be seen as an insignificant detail in setting up a business, and as low priority they risk being overlooked even when they are not performing well enough. Whilst the product and customer service should, of course, be the main focus for any company, ensuring the business does not waste money unnecessarily every time it sends or receives a payment could make a meaningful difference to profitability.

It has long been said that the world is becoming a smaller place and in terms of buying, selling and providing services, that is undoubtedly true. But the reality is that unfortunately many businesses, particularly start-ups and smaller firms, are finding it prohibitive to trade internationally due to high transfer fees and poor FX rates.

Time poor equals business poor

With international trade increasing rapidly, payments processes need to keep up or they could hold businesses back from their full potential. Traditional cross border bank transfers are no longer the only solution. Yet research we carried out earlier in the year shows that companies often lack the time and resources to investigate alternatives. This means they put up with paying high fees for poor FX rates and slow transfers, potentially seriously affecting the ability of companies to compete in a global market.

63% of payments-related businesses we surveyed stated that they are dissatisfied with how long international transfers take to arrive in the recipient’s account, and just 38% believe they get a competitive FX rate for cross border payments with their current provider. However, a third of respondents hadn’t even looked at other options – with lack of time being the most common explanation.

Whilst banks will continue to play an important role, there is undoubtedly a place alongside them for new payment entrants and financial services providers to offer alternative solutions. But our research reveals that we are a long way from this future vision.

Companies are focused on day-to-day tasks and providing customers with a good service, which makes it hard for them to spend time considering the bigger picture to realise they could get a better payments service elsewhere.

Seeking a better solution

It is time for businesses to reassess their priorities to see just how much they could benefit from streamlining their payments process. Encouragingly, our survey showed that businesses would be willing to switch provider if they could see clear benefits. A cheaper service (for 79.4%) or faster transactions (for 63%) would push them to change payment provider.

The most exciting part, for us, is the high proportion of respondents who recognise the opportunities of newer and lesser-known providers, and who would be willing to employ one if it meant a more efficient service. Again, the reason they have not yet made that move is the lack of time to research alternatives, rather than a lack of alternatives. Just 27% were even aware of any new entrants in the market, showing how time-poor businesses are when it comes to researching payments process options.

The best of both worlds

At Saxo Payments, we’ve created a solution specifically to provide faster and cheaper cross border payments, by becoming a hybrid between a traditional bank and a FinTech company. Our infrastructure works on the same Oracle platform used by the banks, but we have the agility and mind-set of a FinTech. It’s the best of both worlds.

By providing global payment account transactions and foreign exchange services to payment providers, including acquirers, Payment Service Providers, FX businesses, money transfer businesses, e-wallets and Alternative Payment Providers, the Saxo Payments Banking Circle provides a seamless conduit for bank transfers in multiple currencies anywhere in the world. As a result, payment service businesses can extend their value chain by providing bank transfer capabilities in their own or their clients’ name.

The Saxo Payments Banking Circle provides access to a global banking platform with over 25 currency accounts, making cross border payments ‘local’ by using segregated international bank account number (IBAN) accounts in multiple currencies.

Nominated for 12 awards so far in 2016, and adopted by global payments businesses including First Data, Credorax, SafeCharge, Allied Wallet and Valitor, the Banking Circle is already empowering B2B enterprise and global trade.

This article is part of the exclusive Online Payments and Ecommerce Market Guide 2016, an educational overview of the global payments industry. For more insights into the latest trends in ecommerce and e-payment methods developments please download a free copy here.

About Anders la Cour

Anders la Cour, Chief Executive Officer of Saxo Payments graduated from the University Master of Laws in Denmark and was admitted to the Bar in 2008. He worked as a technology and financial M&A lawyer at Bech Bruun, a tier one law firm in Copenhagen. Using his experience in legal M&A as well as in venture capital, coupled with a strong commercial acumen and entrepreneurial mind-set, he co-founded Saxo Payments in 2013, with backing from Saxo Bank.

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