By Mike Massaro
No matter your business, industry, geography or politics; globalization is happening. In this environment, cross-border payments have become common. Yet, for the most part, they remain costly, complex and inconvenient for businesses, institutions and individuals. Will this change in 2018? Here are five things to watch for.
A large majority of cross-border payments are still controlled by banks and other large incumbents. If we are going to make these global transactions easier for payers and receivers, these incumbents must accelerate their progress and level of innovation. We saw good signs in late 2017 with a flurry of announcements about cross-border payment initiatives from big names including Citi, First Data, IBM, JPMorgan Chase, Mastercard, PayPal, Royal Bank of Canada, Swift and Visa.
Banks will always play a critical role in the cross-border ecosystem, and we continue to find new ways to collaborate with them to remove friction from the process. These recent announcements show more promise, but will they drive real innovation? 2018 will tell us a lot.
Today, the lifecycle of an international payment involves multiple players and handoff points. Different solutions are focused on optimizing different aspects of the transaction – from the creation of an invoice, to initiation of a payment, to the foreign exchange transaction, to payment delivery and, ultimately, reconciliation in the biller's accounting system. In many cases, these handoffs create added cost, complexity, cycle time and lack of transparency for both payer and receiver.
Payers and receivers want solutions that work for them and with the systems and tools they already like using – whether that's integration with their invoicing and accounting systems, choice of payment methods or local currencies. Those "best" solutions that can plug in with other "best" solutions will win over solutions that require compromising capability and flexibility to run on a single platform. Can we find ways to partner to better integrate all the steps in the process to make it smoother and more efficient for all involved?
In many industries, payments are becoming more verticalized – optimized for specific sets of customers and requirements. We already can see examples of this in healthcare, higher education, K-12 education, kids' sports, real estate and travel. The drivers behind this can be type of transaction, specific industry regulations, connected accounts, international requirements or payment-related customer support needs. Expect to see more of this in 2018 as businesses and institutions look more holistically at how to create frictionless relationships with their customers.
No matter what region of the world you are in, many variables impact payments – security, taxation, import/export regulations, trade agreements, monetary policy, demographic shifts, immigration, politics and more. In response, we see different countries collaborating more closely to create more predictability in their markets and protect their common interests.
These collaborations also lead to competition with other regions – to attract new trade, build new skillsets or offset aging populations. The Asia-Pacific region has been dominant and grown the fastest in recent years, but we're starting to see Latin America and Africa emerge, building off their mobile technology infrastructures. What impact will these geo-political shifts have on global trade and commerce? Will it shift volumes through different payment corridors? How will different players in the payments ecosystem respond?
The pace of change today requires everyone in the payments industry to predict the future to some extent. And we're beginning to see that as different players in our ecosystem start to incorporate the principles of artificial intelligence and machine learning into their business. Whether this is predicting exports, foreign exchange rates or the trajectory of bitcoin investments, the business of payments will increasingly depend on these types of predictive models for success. How quickly will the industry adapt as a whole?
Mike Massaro is the CEO of Flywire, a leading provider of cross-border payment and receivables solutions. He has extensive experience in solution engineering, sales and marketing and a history of leveraging technology to solve gaps in consumer and business transactional experiences. His background spans global payments, mobile software and hardware, and e-billing at high-growth technology companies. As CEO, he has led Flywire’s expansion in North America, Europe and Asia-Pacific regions. Contact him at firstname.lastname@example.org.
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