How Can B2B Payments Keep Up With Globalization?
Globalization has been a blessing for the Business to Business (B2B) sector. As more and more businesses jump onto the online bandwagon, the space is becoming even more competitive. Global payments have widely influenced the banking business. As a result, competition in the B2B payments industry is getting tough, and even non-banks are jumping into the fray, offering multi-currency payment processing capabilities at a better value. Traditional banks are under immense pressure to come up with something similar to stay competitive.
The Road Ahead
Banks are starting to realize the importance of digital transformation to keep pace with the globalization spree, which is fueling growth in multi-currency transactions. The need of the hour is to turn electronic payment challenges into opportunities. Banks must find ways to unlock revenue opportunities in the low-interest rate environment. However, it remains a big challenge, as many banks do not have the resources to afford the cost of innovation.
The key to success in multi-currency payment processing lies with building a solid compliance regimen. This certainly adds another layer of complexity for the banking industry. But it is important that banks do this in an efficient way that maximizes revenue.
New Challenges in the Current Landscape of Old Systems
The use of historical, inefficient systems makes things more complex for the traditional banks in processing B2B payments. Every transaction moves within different departments within the bank, which adds another layer of complexity to the system.
Small to medium-sized banks are faced with multi-fold problems in this regard as they lack a foreign exchange department. As a result, they must correspond through larger banks.
Additionally, the lack of front-end system makes it challenging to efficiently deal with customers. This means they must depend on the antiquated, old, and non-transparent infrastructure of their banking supplier.
Banks need to overhaul their entire core banking system to be in pace with the globalization spree. This certainly is a difficult task.
However, with new entrants making inroads into the global financing system, traditional banks are under immense pressure to bring costs down and accelerate tasks.
What Can Banks Do?
Banks should not look at the emerging players as competitors. Rather, they should take steps to rise up to the challenges posed by the global payments system, build a digital stack outside of the system, and offer more transparency.
It all comes down to providing a better deal for customers, who expect no less than a user-friendly system, lower costs, and fast and excellent customer service, which translates into overall better customer satisfaction.
Topping the priority list is the need to maintain a presence in the peer-to-peer market. The need to capture digitally inclined customers is even greater. While the focus has been on the consumer banking side with P2P, there are still complexities in the cross-border business payments segment.
Some of the challenges include:
- High volumes of payments
- Increased cross-border regulations
- Data maintenance requirements for each transaction
- Longer processing times
As smarter banks take charge of the global B2B payments industry, traditional financial institutions have their tasks cut out. Surviving in this challenging environment will get tougher as smart banks continue to innovate and come out stronger with better capabilities.
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