Unlocking the promise of digital payments
Sponsored Content: Standard Chartered
The world is moving towards a cashless future. The benefits for both consumers and businesses – convenience, cost and speed – are indisputable. So why is it that B2B digital payments are still lagging behind their B2C cousins and what concrete actions can we take to close that gap?
Image: Standard Chartered
These very questions were addressed in September 2020, when Standard Chartered brought together practitioners from leading banking, fintech and infrastructure providers across the globe in a series of virtual industry think-tanks to propagate a multilateral effort with the end goal of driving concrete business outcomes.
The interest and engagement were evident from the depth and breadth of interactions among the participants. One reason is that rarely, if ever, participants across the entire B2B payments value chain have the opportunity to meet and look at the issues together and from different perspectives. One of the benefits of work-from-home policies and practically inexistent business travel imposed by the pandemic.
“To move the digital payments needle, we wanted to break through the noise of conflicting objectives and the overabundance of opinions and focus on actionable outcomes that will benefit every part of the value chain,” said Anurag Bajaj, global head, correspondent banking at Standard Chartered. “I am extremely pleased that we were able to bring together such a diverse and senior group of decision makers and get their commitment to push in the same direction.”
The guiding principle of the discussion was to identify common pain points and commit to concrete actions to resolve them. Participants successfully pinpointed key areas that can be collaboratively addressed in both the near and long term.
Unlocking the promise of digital payments
1. Lack of standardisation around digital cross-border transactions
Cross-border instant payments were highlighted as one of the most significant obstacles. They are also among the most important, as they are central to everything from expanding digital commerce to the emergence of a real-time corporate treasury-management environment.
The value of cross-border payments is expected to rise more than 5 percent a year to about $30 trillion by 2022, according to an Accenture1 study. Cross-border shopping alone will account for an estimated 20 percent of all ecommerce by 2022, with annual sales of $625 billion.
Explosive growth like this requires efficient payment rails, yet international payments remain intrinsically inefficient and often expensive, primarily because of the lack of standardised global payments or messaging system (though the group agreed that the latter should be addressed with the implementation of ISO 20022). In many markets, the national banking infrastructure isn’t well set up to handle efficient cross-border transactions, a gap that has been filled by fintech companies who offer cheaper, faster, smoother systems.
As a concrete next step, think tank participants committed to identifying corridors where all parties would agree to promote instant payments solutions for serial payments by lobbying relevant local authorities.
2. Non-uniform regulation across markets
The fact that regulations can significantly vary by jurisdiction does not help the case of improving efficiencies. Compliance requirements relating to know-your-customer (KYC), anti-fraud and anti-money laundering, for example, are far from uniform, often resulting in cumbersome and repetitive processes across the payments value chain. There is also a perceived unevenness that sees nimble fintechs subjected to lighter regulatory burdens than banks, despite the fact that fintech payment operators are reliant on banking infrastructure.
The lack of collaboration has led to a fragmentation of the payments landscape, with several consequences. The first has been a proliferation of technologies, leading to a wide diversity of options and solutions across different markets, geographies and languages. While this has delivered choice to customers, it has also complicated the task of creating a more unified global payments ecosystem.
Different payment hardware and software systems often lack a cooperative interface, resulting in processing delays, missing transactions and high fees. The challenge is to develop real-time solutions that integrate systems, cut delays and maintain payment integrity. The solution identified to this problem was, once again, multi-lateral collaboration.
“The industry has to accelerate the engagement with regulators across the world, and it has to think more globally in a way that results in cooperative action,” said Philip Panaino, global head, cash management at Standard Chartered. “Together with other think tank participants, we plan to start approaching regulators as a group – potentially through the Bankers Association for Finance & Trade – and present solutions for such issues as cross-border instant payments and international settlement standards.”
3. Lack of data integrity and optimisation
No digital payments discussion would have been complete without acknowledging the importance of data. This remains a complex challenge. While financial institutions are almost drowning in data, most of them don’t have the infrastructure and processes to analyse and utilise it effectively. An industry-wide consensus on agreed data standardisation protocols could go a long way towards overcoming regulatory hurdles and improving payment efficiency. The industry must collaborate on collecting, storing, sharing and consuming data to unlock the payments process and make it faster.
The mushrooming of payments services has also raised the risk of expansion outpacing security, and a concurrent rise in cyber-attacks and fraud. The industry has to regain consumer trust in digital solutions.
While the think tank acknowledged that creating a seamless digital payments ecosystem will never be a monolithic, one-size-fits-all equation, participants committed to setting up a working group that will work across existing industry forums to address the agreed upon common challenges.
Multi-lateral collaboration as the way forward
The discussion was spread over two half days and expertly moderated by Julia Streets, a leading industry expert and commentator on payments innovation and capital markets.
“It was heartening to see such open collaboration among senior decision makers across the industry”, commented Julia Streets. “Identifying what was in our gift to fix allowed participants to look beyond their organisational imperatives and focus on achieving a common goal”.
The positive response to these think-tank sessions and ongoing commitment from participants showed that much can be achieved when everyone is willing to overcome group think. Standard Chartered is committed to playing an active role in bringing the industry together to lead the next stage of the digital payment evolution.
The interest and engagement were evident from the depth and breadth of interactions among the participants. One reason is that rarely, if ever, participants across the entire B2B payments value chain have the opportunity to meet and look at the issues together and from different perspectives. One of the benefits of work-from-home policies and practically inexistent business travel imposed by the pandemic.
“To move the digital payments needle, we wanted to break through the noise of conflicting objectives and the overabundance of opinions and focus on actionable outcomes that will benefit every part of the value chain,” said Anurag Bajaj, global head, correspondent banking at Standard Chartered. “I am extremely pleased that we were able to bring together such a diverse and senior group of decision makers and get their commitment to push in the same direction.”
The guiding principle of the discussion was to identify common pain points and commit to concrete actions to resolve them. Participants successfully pinpointed key areas that can be collaboratively addressed in both the near and long term.
Unlocking the promise of digital payments
1. Lack of standardisation around digital cross-border transactions
Cross-border instant payments were highlighted as one of the most significant obstacles. They are also among the most important, as they are central to everything from expanding digital commerce to the emergence of a real-time corporate treasury-management environment.
The value of cross-border payments is expected to rise more than 5 percent a year to about $30 trillion by 2022, according to an Accenture1 study. Cross-border shopping alone will account for an estimated 20 percent of all ecommerce by 2022, with annual sales of $625 billion.
Explosive growth like this requires efficient payment rails, yet international payments remain intrinsically inefficient and often expensive, primarily because of the lack of standardised global payments or messaging system (though the group agreed that the latter should be addressed with the implementation of ISO 20022). In many markets, the national banking infrastructure isn’t well set up to handle efficient cross-border transactions, a gap that has been filled by fintech companies who offer cheaper, faster, smoother systems.
As a concrete next step, think tank participants committed to identifying corridors where all parties would agree to promote instant payments solutions for serial payments by lobbying relevant local authorities.
2. Non-uniform regulation across markets
The fact that regulations can significantly vary by jurisdiction does not help the case of improving efficiencies. Compliance requirements relating to know-your-customer (KYC), anti-fraud and anti-money laundering, for example, are far from uniform, often resulting in cumbersome and repetitive processes across the payments value chain. There is also a perceived unevenness that sees nimble fintechs subjected to lighter regulatory burdens than banks, despite the fact that fintech payment operators are reliant on banking infrastructure.
The lack of collaboration has led to a fragmentation of the payments landscape, with several consequences. The first has been a proliferation of technologies, leading to a wide diversity of options and solutions across different markets, geographies and languages. While this has delivered choice to customers, it has also complicated the task of creating a more unified global payments ecosystem.
Different payment hardware and software systems often lack a cooperative interface, resulting in processing delays, missing transactions and high fees. The challenge is to develop real-time solutions that integrate systems, cut delays and maintain payment integrity. The solution identified to this problem was, once again, multi-lateral collaboration.
“The industry has to accelerate the engagement with regulators across the world, and it has to think more globally in a way that results in cooperative action,” said Philip Panaino, global head, cash management at Standard Chartered. “Together with other think tank participants, we plan to start approaching regulators as a group – potentially through the Bankers Association for Finance & Trade – and present solutions for such issues as cross-border instant payments and international settlement standards.”
3. Lack of data integrity and optimisation
No digital payments discussion would have been complete without acknowledging the importance of data. This remains a complex challenge. While financial institutions are almost drowning in data, most of them don’t have the infrastructure and processes to analyse and utilise it effectively. An industry-wide consensus on agreed data standardisation protocols could go a long way towards overcoming regulatory hurdles and improving payment efficiency. The industry must collaborate on collecting, storing, sharing and consuming data to unlock the payments process and make it faster.
The mushrooming of payments services has also raised the risk of expansion outpacing security, and a concurrent rise in cyber-attacks and fraud. The industry has to regain consumer trust in digital solutions.
While the think tank acknowledged that creating a seamless digital payments ecosystem will never be a monolithic, one-size-fits-all equation, participants committed to setting up a working group that will work across existing industry forums to address the agreed upon common challenges.
Multi-lateral collaboration as the way forward
The discussion was spread over two half days and expertly moderated by Julia Streets, a leading industry expert and commentator on payments innovation and capital markets.
“It was heartening to see such open collaboration among senior decision makers across the industry”, commented Julia Streets. “Identifying what was in our gift to fix allowed participants to look beyond their organisational imperatives and focus on achieving a common goal”.
The positive response to these think-tank sessions and ongoing commitment from participants showed that much can be achieved when everyone is willing to overcome group think. Standard Chartered is committed to playing an active role in bringing the industry together to lead the next stage of the digital payment evolution.
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