There are many different revolutions happening in the payment systems market. Each one is different and offers opportunities for corporate treasurers to improve their payment and collection processes.
Card company’s role is changing
Visa (and MasterCard) are slowly, but surely, offering a “more comprehensive business solution” to their corporate clients. The latest example is Visa’s announcement that they are to acquire Fraedom, a Software-as-a-Service (SaaS) technology company providing payments and transaction management solutions. Fraedom has been a Visa partner for nearly ten years, and their technology underlies Visa’s IntelliLink Spend Management, a core platform for its commercial and small-business clients. This purchase will enable Visa to provide (mainly through their bank owners):
- technology that maximises the value of banks commercial card programmes under their own brand
- payable services to SMEs and mid-sized corporates.
CTMfile take: Visa and MasterCard have all sorts of other payment systems initatives on a global and a local level. When discussing payments and collections, corporate treasury departments should ask what are VISA and MasterCard doing here? You’ll be amazed.
Nordic banks common payment infrastructure plans
Major differences between domestic payment systems make it more difficult to trade between them, which is why the SEPA was set up and has fostered trade in the SEPA region. Earlier this month the major Nordic banks announced that they were considering a similar iniative.
The key difference will be that it will be the world’s first area for domestic and cross-border payments in multiple currencies (SEK, DKK, NOK and EUR). It will be based on open access and common European standards.
CTMfile take: If this initiative comes to fruition, it will make setting up and operating a pan-European payment factory.
Will RippleNet cut it v. SWIFT GPI?
There are almost daily announcements from Ripple - the blockchain payment provider - of new agreements with local banks to offer instant payments or with a local companes, e.g.:
- Standcharts launches Ripple based corporate based payment system
- teams up with LianLian for instant payments to China.
Ripple has 100+ customers, 75+ of whom are deploying their service commercially. So now Ripple can say “Banks, payment providers and digital asset exchanges process and provide liquidity for payments on RippleNet”.
Ripple say that their block chain network is “Better Than Any Blockchain because it”:
- is built on advanced blockchain technology that is scalable, secure and interoperates different networks
- provides optional access to the world’s fastest and most scalable digital asset for payments, XRP.
At SIBOS last year, Santander, who have invested in Ripple, explained (reported in Bob's Guide) that, “The feedback we’ve had from retail, SMEs, financial institutions and corporates have mainly revolved around the uncertainty and transparency of when a payment will arrive with the current SWIFT model. This is becoming more important in a time when exchange rates are moving volatility. This is how we came to use the Ripple network, which had massive potential. We chose Ripple because of its speed, transparency and certainty. These three characteristics provide relief to the pain points of international payments.”
But that is where the SWIFT GPI programme fits? Ripple (Bob's Guide) claim that what Ripple does that SWIFT GPI doesn’t is:
- Aside from the much shorter payment wait - 4 seconds compared to 3 days - Ripple differs from SWIFT’s messaging service in that Ripple’s nodes are constantly communicating but moreover, is actually settling the transaction between the two banks.
- The next level problem with international payments is liquidity. a cryptocurrency like XRP will enable banks to fund other accounts by using a global currency. This will be particularly beneficial for settling accounts in Africa or Latin America, where local currencies are fairly illiquid, whilst also going a step further towards financial inclusion.
- In summary, by using a piece of blockchain technology we are able to scale, and we are able to create an internet of value whereby our high speed cryptocurrency acts as the settler and liquidity tool.
CTMfile take: Corporate treasury departments will decide who wins……..
New normal - subscription payments
McKinsey surveyed thousands of US shoppers to understand subscription e-commerce trends (reported in a McKinsey article) and found that:
- subscription e-commerce market has grown by more than 100 percent a year over the past five years
- largest such retailers generated more than $2.6 billion in sales in 2016, up from a mere $57.0 million in 2011.1
But the suscription business model is not easy because “It can be difficult for subscription e-commerce companies to acquire and then retain consumers. On the acquisition side, only 53 percent of consumers know about even one of the top services. Moreover, conversion is weak: only 55 percent of those who consider a service ultimately subscribe, probably because people are reluctant to sign up for a long-term commitment. Replenishment services have a higher conversion rate than curation or access services (65 percent, 52 percent, and 51 percent, respectively).”
McKinsey believe that the subscription e-commerce market has plenty of room to grow as more consumers become aware of it.
CTMfile take: Subscriptions are becoming one of the new normals.
New normal - Faster payments launch in Australia
The New Payments Platform (NPP) in Australia which SWIFT helped to design, build and deliver and will play a key role in operating the infrastructure for the NPP.
The key features of the NPP include:
- 24/7 instant payments and real-time line-by-line settlement via the Reserve Bank of Australia
- PayID, new and easy way to link a financial account with an easy-to-remember identifier such as a mobile phone number, email address or ABN for businesses
- Open access infrastructure that truly empowers innovation through competition
- Overlay services framework that will provide new value services to Australian consumers, businesses and government.
CTMfile take: How can your company use NPP to improve your payment and collection processes in Australia.
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