The future of international banking and the changing nature of payments

The financial sector is entering a new phase in its evolution, as the evolution of banking methods heralds a change in the way companies send, receive and process payments. Accelerated advances in financial technology in recent years have resulted in lower operating costs, API-enabled tools and accessible cross-border payment, helping SMBs around the world gain speed in the middle market, without headcount or expenses in the middle market.

Over 66% of bank executives now believe fintech will impact wallets and payments globally, and with the fintech sector expected to experience a compound annual growth rate of 25% this year, the opportunity for fintech growth has never been greater. As businesses acclimate to the capabilities offered by increased backend automation and efficiency, less reliance on legacy systems means a period of integration and adaptation for a growing industry. perpetual change.

The Challenges Facing Traditional Banking Methods

The average global supplier payment term reached 66 days. These extended processing times for international buyers and sellers can have serious financial and operational repercussions on a business, often denying them the opportunity to break into lucrative global markets. Expensive foreign exchange fees, transfer fees, elaborate local legislation, and manual taxation processes can pose barriers to entry for businesses looking to expand their offerings, and businesses struggle to streamline operations by using existing banking infrastructure.

Traditionally, traditional banking methods organized cross-border payments through slower local accounts in each new market before companies could start trading there. But the e-commerce industry has proven to be mercurial over the past decade, adapting to the needs of rapidly growing businesses at a faster pace than banks, enabling fintech payment providers to meet ever-changing demands. developments in supplier financing and securing supply chains.

Accelerating globalization makes our world more interconnected than ever, with global cross-border flows are expected to reach $156 trillion in 2022. However, companies cannot capitalize on this market using static processes designed for a bygone era – in banking, “a bad worker blames his tools” is less accurate than “a bad worker doesn’t use the right ones” .

The importance of an efficient payment infrastructure

To fail to prepare is to prepare to fail, and without an efficient and transparent payment infrastructure, buyers and sellers don’t equip themselves properly. The advent of automated cross-border payment solutions has irrevocably changed the payments ecosystem, developing a multitude of features that limit the often costly and slow processes offered by large banks.

Setting up a virtual bank through an automated payments provider can be done in minutes, providing instant reconciliation capabilities that enable real-time transfer of payments anywhere in the world, mitigating the effects of shipping delays due to slow billing, thus increasing trust in vendor-supplier relationships. All-in-one payment providers can deliver a frictionless, paperless virtual banking experience with platforms that automate VAT, tax, and payroll processes. These additional capabilities allow companies to realize operational savings that can be reinvested in their global expansion plans, thereby increasing profitability and reducing stagnation.

We live in a culture of convenience that traditional means of banking are struggling to meet in 2022. Businesses, entrepreneurs and suppliers looking to expand internationally are adapting to modern transaction methods, considering financial technology as an enabling partner rather than a disruptive force. Although virtual bank accounts are driving the industry forward, the real test of time will be how these automated and technological banking methods and traditional methods work harmoniously together for the benefit of the community.

Author: Kenny Tsang, Managing Director of Unicorn FinTech, PingPong Payments