The myriad initiatives to speed processing for corporate payments mostly have at least one major problem — they don’t work well together across borders, if at all.
Mastercard has connected its multi-token network to
These international transactions are often fragmented due to a long-standing mix of correspondent banks and currency transfer services. While new processing networks such as the
“Cross-border payments have long suffered from a lack of transparency, due to the involvement of multiple banks that don’t use the same data standards,” said Aaron McPherson, principal at AFM Consulting.
A new message
Swift is testing an interlink for central bank digital currencies and traditional currencies to improve supply chain finance and reduce friction resulting from currency conversion. Central banks in Australia, France, Germany and Singapore are part of the Swift project, as are HSBC, Deutsche Bank, Standard Chartered and others.
“The appeal of blockchain-based systems like MTN and Kinexys is that they provide real-time visibility into the status of a transaction,” McPherson said, adding interoperability is also a key focus of Swift’s work. “Bilateral agreements such as this one are a precursor to multilateral arrangements such as Swift is piloting,” he said, adding these agreements are more attractive to prospective corporate clients.
Ripple and other firms such as Flywire and dLocal are reducing cross-border friction by acting as domiciled merchants of record, offering faster settlements and simplified tax compliance for businesses, according to Richard Crone, a payments consultant.
Swift did not respond to a comment. Mastercard and
“At Kinexys, we believe our solutions can play a transformative role in the ecosystem for digital global commerce and digital assets, where the value proposition of commercial transaction venues is enhanced by the availability of commercial bank payment rails that can natively integrate with any digital marketplace or platform,” said Naveen Mallela, co-head of Kinexys, in a release.
Lots of payments
The stakes in the B2B cross-border payments market are massive. The market is estimated to have a total value of $68 trillion in 2024, grouping at a rate to reach $121 trillion by 2033, according to Custom Market Insight.
“The challenge is how to reduce the time not just from sending to receiving funds, but the speed to ‘how can I apply those funds?'” said Jessica Pinkston, a senior director at Cornerstone Advisors. “And how can I do that in a digital-first intuitive manner in fewer steps and make the technology accessible across multiple business types and sizes?”
The advantages that
“
Most legacy international B2B payment systems rely heavily on older Swift protocols and existing proprietary, closed connections at international banks, according to Crone, noting these older connections are private links between financial institutions, and not B2B clients or trading partners.
“Integration into local clearing and settlement networks will be critical for overcoming regulatory and infrastructure barriers, ensuring compliance and seamless fund transfers across geographies and among all trading partners, not just banks,” Crone said. “That is the advantage of partnering with Mastercard.”