Global Payments: A Journey Towards Convenience, Efficiency, and Transparency

 Blog - Global Payments: A Journey Towards Convenience, Efficiency, and Transparency

London, 9th November 2023

In today's interconnected world, cross-border payments are an essential part of global trade and commerce. However, traditional methods of sending money internationally have often been characterized by high fees, slow processing times, and a lack of transparency. Fortunately, the landscape of global payments is undergoing a rapid transformation, driven by technological advancements and a growing demand for more efficient and transparent solutions.

The Challenges of Traditional Cross-Border Payments

 Traditional cross-border payments often involve a complex network of intermediaries, including banks and correspondent banks. This network can lead to significant delays in processing payments, as funds are transferred between different institutions. Additionally, the fees associated with traditional cross-border payments can be substantial, often amounting to several percentage points of the transaction value.

Furthermore, traditional cross-border payments often lack transparency. Senders often have limited visibility into the status of their payments and may not be able to track the progress of their funds. This lack of transparency can lead to uncertainty and frustration for both senders and recipients.

We therefore need to provide a safer and easily accessible alternative that makes global payments cheaper, faster and more transparent. There are now more than 70 domestic, fast-payment systems around the world. By supporting different formats and messaging standards, the benefits of automation would finally extend more fully to cross-border payments. Such a move would also improve efficiency by shortening transaction lifecycle and ensure more open and seamless connectivity between payment systems.

Margins in payments are under pressure. Growing volumes mean growing costs, as do the inefficient legacy and ageing payment solutions and increased regulations such as ISO 20022 adoption and push towards open sharing of financial data. These factors accelerate payment commoditisation and disintermediation. Banks' outdated and silo'd payment solutions are not adept at keeping pace with the competition and meeting demanding customer expectations. 

New Standards, new opportunities 

While payments may have been slow to transform and costlier to process due to their complexities, the rich data afforded by new ISO 20022 format and AI-powered normalisation, and enrichment present an opportunity for banks to optimise and transform their payment systems for the better through frictionless processing and product innovation and differentiated offerings.

Payments are going through an inflexion point, and ISO 20022 migration is only one of the many contributing factors. Alternative channels such as card networks, PayPal, Wise, etc., are increasingly disintermediating and challenging business areas that used to belong exclusively to banks. Also, Real-time payments and other overlay services, such as request-to-pay, QR code payments, offered by neo banks, FinTechs, and Big Techs are elevating customer expectations from their banking partners.

The ISO 20022 adoption and accompanying rich payments data present an opportunity for banks to transform their payment systems for the better. 

The application of advanced A.I. - ML and NLP techniques on payment data to remove frictions points in payment processing – from manual intervention to investigation and chargeback costs -  along with the use of APIs to bundle engaging and personalised products and services to customers has a proven potential to turn payment processing into a revenue driver. 

The Rise of Innovative Solutions

The challenges of traditional cross-border payments have spurred the development of innovative solutions that are making global payments cheaper, faster, and more transparent. These solutions are leveraging advancements in technology, including cloud, artificial intelligence (AI), and application programming interfaces (APIs), to streamline the payment process and reduce costs.

AI is also playing a role in making cross-border payments more efficient. AI-powered systems can be used to automate many of the manual tasks involved in processing payments, such as verifying identities and checking compliance with regulations.This automation can help to reduce processing times and costs.

One prominent example is the role of AI-powered payments solutions in cross-border payments. These solutions have developed more efficient payment processing and utilize advanced AI technology to automate processes, reduce exceptions, significantly reducing payment processing costs. Additionally, such solutions often provide real-time analytics on transaction data, empowering financial institution to offer bespoke and personalised products and services to their customers, increasing customer loyalty and stickiness.

Innovative and intelligent cloud-based payment platforms leverage advanced technologies such as machine learning (ML) and natural language programming (NLP) to improve process efficiencies and enable service-oriented ecosystems of best-of-breed partners. Such innovative platforms also provide full integration with financial crime compliance processing. The enhanced capabilities of intelligent payments use payment transaction data to provide bank treasury and operations teams with a decision-support system to optimize payments life cycle, especially in the near future when full adoption of ISO 20022 standards will turn payments into a commodity, minimizing format translations. 

A comprehensive payment platform that leverages AI and payment data offers an  unparalleled competitive differentiation in a heavily commoditised payment processing space through the following capabilities

• Frictionless Payments processing: AI-powered payment data normalisation and enrichment enables automated human-like contextual repairs, significantly reducing manual interventions and increasing the STP rates 

• Compliance: A payment platform with integrated compliance is much more valuable to FIs than having a separate system for payment processing and compliance.

• Speed-to-market: A cloud-native, and API-first platform enables seamless and non-disruptive integration with legacy systems.

• Actionable insights & recommendations: A solution that leverages artificial intelligence (AI) to generate predictive and actionable insights from payments data can turn payment processing from a cost center to a revenue generator.

Furthermore, a cloud-based, API-first payment platform offers a new way for banks and other financial institutions to connect and share data. Such platforms enable financial institutions to create integrated payment solutions that are more user-friendly and transparent for customers.

The Benefits of Cheaper, Faster, and More Transparent Payments

The benefits of cheaper, faster, and more transparent cross-border payments are far-reaching. These benefits include:

• Increased trade and commerce: Businesses will be able to trade and invest more easily across borders, leading to increased economic activity.

• Reduced costs for businesses and individuals: Businesses and individuals will save money on transaction fees, which will improve their bottom lines.

• Greater financial inclusion: More people will have access to financial services, which can help to reduce inequality.

• Increased transparency and accountability: The use of intelligent and open solutions and technologies discussed here will make cross-border payments more transparent and accountable, which will help to reduce fraud and money laundering.

The Future of Global Payments

The future of global payments is bright. As technology continues to evolve and demand for more efficient and transparent solutions grows, we can expect to see even more innovative solutions emerge. These solutions will make it easier, cheaper, and faster for people and businesses to send money around the world, contributing to a more interconnected and prosperous global economy.

And AI-powered solutions have an incredibly important role to play to help it achieve its potential.