Banks and fintechs can gain significant cost saving and efficiency benefits, and remain more competitive, through collaboration within the financial ecosystem. But how can these partnerships help improve access to cross-border payments specifically?
Our 2020 research found that 70% of banks across Europe consider cross-border payments to be a core banking service. Yet the offering remains too slow, too expensive, and ultimately inaccessible to so many businesses.
Delivering both core and non-core services that customers need is fundamental to growing bank revenues, as well as remaining competitive in a market full of innovative new entrants. The challenge is though, that banks often struggle to build and deliver innovative solutions that meet new market needs and in the competitive market of 2021, that puts them at risk of losing clients.
Serving a global customer base
The swathe of online marketplaces is allowing even the smallest business to serve customers all over the world. However, even those startups or small and medium-sized enterprises (SMEs) that can afford to absorb the marketplace fees are faced with the potential added cost of cross-border transactions and all their inevitable delays and added transfer fees.
Smaller banks find cross-border payments even more of a challenge than the larger incumbents, in part due to their small volumes and the high cost of fees, foregin exchange rates and the resources required for processing such payments through the traditional correspondent banking network. This means small banks are less able to support their corporate customers in their international expansion.
If local and regional banks want to offer international payments, they have to find a solution that is not dependent on making changes to legacy systems; and which does not add significantly to their own operational cost. Solutions need to be investment-light yet deliver strong innovation flexible enough to meet rapidly shifting expectations and needs.
The answer, many have already found, lies in collaboration. At the end of 2020 when we conducted our research, half of respondents already had partnerships or plans in place to work with an external provider within the next month. Another third of banks have partnerships on the agenda for the next 12 months.
Collaborating with an expert provider allows banks of all sizes to deliver good solutions quickly and without the same level of investment required for in-house development. Ultimately, if small and mid-sized banks can offer their corporate clients a cheaper, faster alternative, their clients are the winners.
Future-proofing cross-border payments
Last year brought many new challenges and accelerated implementation of banks’ long-standing digitalisation plans as customer needs switched overnight. New partnerships and solutions have helped retail and corporate customers alike to access essential banking solutions in new and better ways, and there is no going back.
International trade has been growing for many years, meaning cross-border payments are a long-term priority for banks of all sizes. Offering business customers access to affordable, friction-free cross border payments, Banks can empower even the smallest merchant to serve customers in any geography, which will bolster international economies at a time when they are in great need.
Working in partnership with expert third-parties means banks can provide a wider range of solutions at low cost to the customer, so they remain competitive and keep hold of their all-important corporate customers. Working with specialist and dedicated partners ensures these objectives can be met without delay, high cost or ongoing commitment to maintenance and development.