In this globalised world, more and more businesses are connecting with foreign suppliers. International B2B payments via wire transfer should be simple, but the reality is that it's not so easy.
It's simple enough to move money to your supplier's account through the bank pipes, but this technology is decades old. Expediting information with the payment, especially for remittances, is where the difficulties begin. This gives the sender and the receiver of the funds extra work and extra costs.
In B2B payments very important that both the sender and receiver reconcile the payment. This is so that the payment can be linked to an invoice, which means that it needs to have information attached such as an invoice number, purchase description and the remitting company's details.
Because this has to be done manually, there's a lot of room for human error. It also takes lots of time to process the payments, which increases the costs. This makes managing international B2B payments a real pain for the payer and their internal AP staff.
The process begins with typing all the information in to a form on the bank's postal to initiate the wife process. Each payment requires its own wire, and each one can take up to 30 minutes. Since the bank's portal won't be integrated with back office accounting system, the information must then be entered manually there too.
After that, the cash management issues begin. The full settlement amount isn't clear until each wire arrives in the bank account. Along the way, the account can be charged fees from each bank, plus extra fees for wire tracing, recalls, swift confirmations. On top of standard FX fees, the banks "day rate" means that payers don't know the exact amount they are paying until their account is debited.
The trouble with this process is that banks have had a 95% share of the international payments market for decades.
That's where FinTech comes in: by providing a better UX, improved visibility and a transparent, lower cost pricing model, tech firms are beginning to compete with the big banks.
To speed up the process of initiating an international payment, fintechs are pulling all payment types in to a single interface. These include ACH, international wires, card and check. This allows for international B2B payments to become part of an automated workflow along with any other domestic payments, with all fees visible upfront.
In addition, all the remittance information is synced to the cloud where it's visible to both parties. This might seem basic, but connecting payment data to payments is an art banks have yet to mater. Fintechs in the B2B space are revolutionising international B2B payments to make it cheaper and much more efficient.