New network order and cross-border dynamics define future of business payments

Banking And Financial Messaging


Eli Shoshani

Sep 14, 2022

SIBOS kicks off on Oct. 10 in Amsterdam under the tagline “progressive finance for a changing world.” It’s a brilliant way to capture the current cross-border payment situation, which is both aspirational and dynamic. Because regardless of the geopolitical pressure brought by the Russia-Ukraine crisis and its impacts on cross-border networks, including SWIFT, “progressive finance” is an issue that will be the most consequential and relevant to the future of business payments. SIBOS, from my perspective, should really focus on alternative payments networks and their place in an “ever-changing world.”

There’s no shortage of important issues here, some of which involve the SWIFT network. Of course, the Russia-Ukraine conflict has now supplanted the pandemic as the complicating factor in cross-border payments. But for our purposes, let’s look outside the crisis to drill down into business payments in the new network order. I’m seeing five key issues:

Seeking alternative payment networks: For all its excellence and utility since 1973, the payments world fell short when Russia invaded Ukraine and most of the international community isolated Russia via economic sanctions. That put several dynamics into play. First, if you were an APAC-based business that used the SWIFT network to make payments to Russian entities, no other network could replace it. Second, if you were an APAC-based country that used a Russian bank to facilitate cross-border payments, you needed to find an alternate solution. So you can see how alternative payment rails may need switching in the blink of an eye. In a region rich with exotic currencies and plagued by trapped liquidity the opportunity to leverage multi-lateral platforms and intelligent routing  is key - where you choose the best channel for a payment based on specific requirements e.g. speed, cost, location, FX rates etc. Afterall, no payment is ever the same and so the flexibility to choose what matters most and then decide the payment rail is key to operational efficiency. A path recommended by the Bank of International Settlement in multiple cross-border best practice guides. For example, the Visa B2B Connect exchange removes the need for a correspondent bank to complete a transaction. Bottomline also operates a cross-border payment network in APAC. Alternatives exist, so no company or country should wait for the next crisis to identify them.

Countries and companies at risk: Before the current crisis, most companies could make payments to another company without complicating it with a central bank’s involvement. Not anymore. Here’s an example: When the crisis first hit, we were contacted by representatives from the central bank in Mongolia. Not only were they cut off from their correspondent banks in Russia, they were also cut off from any kind of payments networks or cloud services. In essence: Mongolia couldn’t pay or get paid. The Mongolian banks are heavily dependent on Russia. The oil, gas and the power of the electricity of Mongolia comes from Russia. So it's not just the cross-border lines. Our team was able to accommodate their payment needs and flipped their network easily. My advice – regardless of where in the world you are or what kind of company you run – is to be aware of the complexities at central banks, as well as member banks, and ensure you’re not solely reliant on that infrastructure alone.

Digital transformation: What I like to call the second level of digital transformation will be a positive factor for cross-border payments. Here I’d like to focus on cloud migration. Without the cloud cross-border payments are stuck in a world of high fees, low speed and minimal transparency. Access to the cloud is a proprietary process. But not all cloud structures are built equally. Now, do you want to build your own private cloud and maintain it yourself? I would say you don’t, for two reasons: reliability and security. Banks invest billions of dollars every year to maintain the security needed for cloud-based cross-border payments, and they don’t need to. A reliable partner should guarantee security and maintain infrastructure. Again, the next crisis might expose vulnerabilities here. And if you can’t guarantee security, your customers will find another bank.

SWIFT short-term changes and long-term future: It’s an issue, but not the only issue, and I don’t think anyone at SWIFT would disagree or disparage that. And it has absorbed some naysayer criticism, most recently from The Economist. According to Finextra, the Economist report paper says "setting up and scaling a full-fledged alternative bank-messaging system would be expensive and time-consuming. Given the prevalence of dollar-denominated cross-border flows, it would also have limited real-world impact. SWIFT will remain the dominant network.” It will, for as long as it can provide cloud services, which it does currently, ISO 20022 messaging, which it has a mandated November adoption deadline, and it embraces fast-payment technology, which it does with SWIFT gpi. Perhaps the naysayers should withdraw, or perhaps the industry should spread its risk. Either way, the most important call to action is to know the alternative choices and to prepare should you ever need to flick the switch.

Adopting digital currencies: First, let me say that my inbox is not chock- a-block full of clients demanding business payments via cryptocurrency. It is on the horizon, but much more likely as a government-backed currency. Russia and China will be very important to watch here. China will make the digital yuan its cross-border currency, and already has ties to the SWIFT network. Russia is a complete wild card on this issue and, for a time, it looked as if it would rush a digital ruble onto the market. That has now been postponed. The operative technology is the blockchain. It is secure, independent of current networks and provides a more accessible and agile digital storage and provenance technology.

The Bottomline: Churchill said: “Never let a good crisis go to waste.” Those words are applicable when it comes to cross-border payments. Businesses of all shapes, sizes and verticals need to line up alternate networks, scope new technologies and be prepared for good times as well as tough and unexpected ones in the changing world of business payments and geopolitical uncertainty.


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Eli Shoshani

Eli Shoshani is head of the APAC region for Bottomline heading up the strategy for financial messaging and fraud & financial crime.

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