Companies turn to innovative electronic payment solutions at a rapid pace

BNY Mellon and Aite-Novarica Group collaborated to publish a report, What The Data Say - Choosing Between Payment Channels, on commercial payment trends. Real-time payments (RTP) and digital wallets are a few of the cutting-edge technologies that businesses are adopting. The report also reveals notable regional differences in channel usage.

The study’s major findings, based on responses from 790 employees of mid-size and large organizations in North America, Europe and the United Kingdom, are noted below:

• Digital wallets are projected to expand in North America, Europe and the United Kingdom over the next year.
• Only 7% of European businesses and 10% of North American businesses intend to use cryptocurrencies in the near future.
• Approximately 67% of corporations in Europe use instant payments, compared to 46% of North American corporate entities.
• 86% of European and UK non-users of instant payments state interest in using the transaction method within the next 12-24 months, while 68% of North American non-users state the same.
• 76% of North American businesses have used paper checks in the last year, compared to 61% in Europe.

Carl Slabicki, Co-Head of Global Payments within Treasury Services, BNY Mellon, commented that these study results demonstrate that businesses that have already implemented emerging payment technologies are already benefiting from them. Conversely, businesses that have been slower in adopting them require more assistance to make the change. The report, authored by Gilles Ubaghs, Aite-Novarica Group, suggests that the scope of payments is intricate and drastically different from one region to another, noting that payment fragmentation will continue to persist until centralized payments methods fully evolve as an option.

Banks at risk of losing 89% of their SME businesses to fintechs

Despite worldwide economic challenges, the Capgemini Research Institute's World Payments Report 2022 (which surveyed 150 respondents across 17 markets) found that new payment methods are forecasted to increase from approximately 17% of total non-cash transactions in 2021 to almost 24% by 2026. Additionally, the report indicated that while B2C payments have thrived, the B2B value chain has been overlooked.

The payments industry has reportedly remained steady, bolstered by the use of innovative new digital payment methods for consumers. However, many banks are reportedly struggling to provide the same level of assistance to small and medium-sized businesses (SMBs). Many SMBs are still having trouble with cash flow and conversion cycles, delaying growth. Due to this, there is an increasing need for payment service providers to realign their priorities and establish the necessary tools to assist SMBs in exploring new market opportunities.

According to Jeroen Hölscher, Global Head of the Payments and Cards segment, Capgemini, SMBs are the most impacted by recent market volatility. However, the report particularly notes that despite the SMB market segment's current global value of up to US $850 billion, the existing banking sector still prioritizes larger corporate accounts and the retail market.

In order to regain the loyalty of SMBs, banks will reportedly need to increase their platform values. More than a quarter of banks reportedly have rigid infrastructures, and 75% of the executives prioritize costs associated with maintaining current systems over developing new service offerings. Payment companies, however, embrace composability, enabling them to pick and combine key components in different ways to meet customer needs. By enabling payment firms to create B2B marketplaces for SMBs, reports suggest that payment companies would be able to configure their offerings to best meet the needs of their customers, driven by unified data and services.

With the continued growth of B2B cross-border transactions on blockchain and the popularity of cryptocurrencies, 64% of SMBs state that distributed ledger technology (DLT), an emerging tech solution, could become a viable alternative to already existing payment networks, further supporting international and regional payment networks.

SWIFT, TCH and EBA Clearing to test accelerated cross-border payments between Europe and the US

The Immediate Cross-Border Payments (IXB) pilot service, which is reportedly expected to fundamentally transform cross-border payments, is on schedule, according to EBA CLEARING, The Clearing House (TCH) and SWIFT. The IXB pilot service uses TCH's existing real-time payment (RTP) systems in the US and EBA CLEARING's RT1 in Europe. IXB is expected to process the first live transactions in the euro and US dollar currency in the upcoming months.

Reports indicate that EBA CLEARING, TCH and SWIFT have been collaborating to design and develop a live IXB service after a viable proof of concept. The three organizations, in collaboration with twenty-five financial institutions, created a service that leverages current investments and existing key structural components to ensure a quicker time to market. Synchronized settlement of RTP and RT1 payments will reportedly be made possible by IXB, helping to ensure the operations of immediate cross-currency transactions while forming the foundation of the future IXB service.

The launch of a full-service IXB offering is anticipated to occur after the IXB pilot, in line with priorities for enhancing cross-border payments set forth by the Financial Stability Board and Committee on Payments and Market Infrastructures in terms of speed, access, cost and transparency. Additionally, the IXB initiative is anticipated to include more currencies initially in order to satisfy customer expectations for instant cross-border payments around the world. The initiative is based on a model that can be replicated across other currencies and payment systems.

Global currency reserves decrease by a record US $1 trillion this year

Global foreign-currency reserves have reportedly fallen rapidly by approximately US $1 trillion (7.8%) to $12 trillion this year according to reports, which attribute a portion of the downturn to changes in valuation. Reports show that the dollar's rise to two-decade highs against other reserve currencies, such as the euro and yen, reduced the dollar value of these currencies' holdings. The declining reserves, however, are said to reflect the tension in the forex market, which is reportedly causing an increasing number of central banks to draw from their budgets in order to stave off depreciation.

The stockpile in India, for instance, has reportedly decreased by $96 billion to $538 billion this year. The nation's central bank stated that asset valuation changes accounted for 67% of the decline in reserves during the fiscal year beginning in April, indicating that the remaining 23% derived from intervention to support the currency. This year, the rupee has declined by approximately 9% against the dollar, and last month it reached a record low, said reports.

Last month, Japan spent approximately $20 billion to slow the yen's decline in its first intervention to support the currency since 1998, accounting for approximately 19% of the reserve loss this year. The Czech Republic has reportedly also contributed to a 19% decrease in its reserves with a currency intervention since February 2022.

Despite the extraordinary size of the decline, using reserves to protect currencies is not a new practice, according to reports. When influxes of foreign capital occur, central banks purchase dollars and increase their reserves to halt currency appreciation. Additionally, central banks are said to dip into their reserves to lessen the impact of currency devaluation during financial challenges. Alan Ruskin, Chief International Strategist, Deutsche Bank AG, commented that some nations, particularly those in Asia, can move in both directions, mending weak spots and highlighting areas of strength.

Reports show that the majority of central banks still have sufficient reserves to continue interventions if they so choose. India's foreign reserves, which are said to be sufficient to cover imports for nine months, are still 49% higher than they were in 2017. However, reserves in other nations are reportedly diminishing quickly. According to reports, Pakistan's $14 billion in foreign reserves are insufficient to satisfy three months' worth of imports after declining 42% this year.

Oracle and Traderoot Africa collaborate on a TCIB payment solution

Oracle Financial Services and Traderoot Africa have joined forces to provide a solution for payments cleared on an immediate basis (TCIB), supporting the South African Development Community's (SADC) financial inclusion strategy, which is aimed at providing the underbanked and unbanked groups access to financial institutions in the SADC member countries.

Reports indicate that the combination between Traderoot Africa's TCIB Integration ISO E-Bus and Oracle's TCIB payments processor will provide SADC financial institutions with access to accelerated cross-border payments. Ruhling Herbst, TCIB Executive, BankservAfrica, stated that TCIB enables authorized financial services participants to connect and offer services by providing interoperability. This can reduce payment fragmentation and provide customers with additional payment options.