The world of cross-border and international B2B payments is at a pivotal moment. As businesses expand globally, the demand for faster, more efficient, and more secure payment systems continues to grow. That’s largely a function of interoperability.
However, the journey toward seamless international payments is strewn with challenges, from legacy systems and integration hurdles to FX costs and regulatory speed bumps. It’s not that we lack smart systems. Getting them to talk to each other is another matter.
Eric Campbell, Bottomline Global Solution Architect, spells it out: “Technology is not the problem. There have been a lot of new vendors in the FinTech space rolling out new solutions that can make international payments, both high value and low value. The space is fairly saturated. But connecting to these services has still been a real challenge.”
To that end, Campbell recently shared his expertise on three critical areas shaping the future of international B2B payments: the role of emerging technologies, the challenges of interconnectedness and network integration, and the persistence of legacy systems.
Emerging Technologies: A Double-Edged Sword
Emerging technologies such as blockchain, generative artificial intelligence, and open banking are revolutionizing business payments. These innovations promise to streamline processes, reduce costs, and enhance security.
However, as Campbell points out, the adoption of these technologies is not without complexities. "While new FinTech solutions are available, connecting to these services remains a challenge, especially for sanction screening, where that service is usually only implemented within existing payment channel frameworks” he said. Campbell highlighted that while these technologies offer immense potential, their effectiveness depends on the creation of robust interoperable networks that can support widespread adoption.
"Until the critical mass of the network is large enough, you may only impact 5% of the payments that are going out or coming in," he said.
One of the most promising developments in this space is the rise of instant book transfers. Campbell notes that some companies are already offering these services, enabling instantaneous account transfers between banks on essentially a private bank network.
However, the challenge lies in scaling these networks to include more participants.
Despite hurdles, Campbell remains optimistic about the potential of emerging technologies to transform B2B payments. He emphasizes the need for collaboration among stakeholders to build networks that can deliver on the promise of faster, more efficient money mobility.
Integration Challenges: The Roadblock to Innovation
For many banks and businesses, the process of connecting to new payment systems can be daunting, particularly given the resource constraints faced by smaller institutions.
"Most banks are very resource-constrained when it comes to IT and can't entertain a major integration project with a new partner," Campbell said. “This lack of resources often prevents smaller banks from taking advantage of innovative payment solutions, leaving them reliant on traditional systems that may be less efficient and more costly.”
Campbell highlights the role of PSPs in addressing these tasks. By acting as network enablers, PSPs can help banks onboard users quickly to new services, reducing the barriers to entry for SMBs. "We need facilitating technologies to help banks onboard quickly to new services," he adds.
One example of this is the concept of "correspondent network in a box," which Campbell describes as a solution that allows smaller banks to access international payment services without the need to build up their own correspondent network. This can be particularly interesting to mid-size banks who often choose just one or two banks to be their correspondent where the services could vary greatly depending on the international corridor that the payment is destined for.
"The new players do all the clearing at a fixed price and offer competitive rates," he explains. This approach not only simplifies the integration process but also provides smaller banks with access to the benefits of having a mature best of region correspondent network.
Legacy Systems: The Inertia of the Past
A significant challenge facing the international payments industry is legacy systems. Despite availability of advanced technologies, many banks and businesses continue to rely on old infrastructure ill-suited to modern digital commerce.
Campbell illustrates the point by showing how far back ideas go that we still use: "It's like many of today’s train tracks, which are the width they are because of Roman chariot roads,” he said.
“Legacy systems persist because they work, even if they're not optimal."
This reliance on legacy systems creates a significant barrier to innovation, as businesses are often reluctant to abandon systems that have served them well in the past. One of the key reasons for this inertia is the value of existing relationships with correspondent banks.
"There's a lot of resistance to change because of the established relationships and the perceived risks of moving to new systems," Campbell notes. These relationships, while valuable, can also prevent businesses from exploring more efficient and cost-effective alternatives. However, Campbell sees opportunities for disruption in this space.
He highlights the potential for smaller banks to benefit from replacing correspondent banks with new solutions. "Smaller banks could benefit from FX revenue streams if they can replace correspondent banks with new solutions," he suggests.
By embracing change and adopting modern payment systems, these institutions can unlock new revenue streams and improve their competitiveness in the global market.
Looking Ahead: A Collaborative Effort
The future of cross-border and international B2B payments requires a concerted effort from all stakeholders to realize their full potential. From embracing emerging technologies to overcoming integration challenges and addressing the inertia of legacy systems, the path forward is both challenging and exciting.
As Campbell puts it, "The industry is moving in the right direction, but the pace of change is slow. We need facilitating technologies to help banks onboard quickly to new services." By fostering collaboration and innovation, businesses and financial institutions can unlock the full potential of global commerce and drive economic growth.
The transformation of international B2B payments hinges on addressing the challenges of today while preparing for the opportunities of tomorrow. The industry is now well-positioned to navigate this complex and dynamic landscape. Whether through the adoption of emerging technologies, the simplification of integration processes, or the modernization of legacy systems, the future of international payments is looking brighter.