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Financial Utilities are levelling the payments playing field

Anders la Cour, Saxo Payments Banking Circle: Times are changing and banks are responding by investing in fintech or creating fintech solutions in-house

New technology is streamlining business processes, improving the customer experience and cutting costs. With the increased demand for better and frictionless solutions ensuring continuous innovation, service expectations have evolved, encouraging businesses to stay competitive.

This is true across-the-board and the pressure weighs heavily on the financial services industry. As the ecommerce market grows rapidly, the demand for cross border payments is higher than ever, yet banks are retrenching from foreign markets. On top of that, regulation is increasing.

Digitalisation has empowered an influx of new entrants to provide tailored solutions, putting even greater pressure on traditional providers. These smaller institutions are in a strong position to win market share. Attributes such as a depth of local knowledge and experience, strong customer relationships, and leaner cost-structures make these institutions competitive with established providers.

Change is coming

The increasing competition, along with the pressure of new regulation, have impacted financial services. As a result, the banking industry is teetering on the cusp of its most significant change in generations. It has been the case that traditional banks couldn’t compete with the agility of fintechs that react rapidly to changing customer needs. Salesforce has recently reported that 52% of millennials prefer to do basic payment activities using fintechs, as they are easier and more convenient than banks.

Blurring the lines

International transactions usually involve various service elements such as supply chain, trade finance, and payments. But the growth of ecommerce has blurred the lines. For many corporate customers, the distinctions have become irrelevant. What matters is that the transaction and payment process run smoothly, efficiently and quickly, with seamless integration and low costs.

The growth of digitalisation has levelled the playing field of the international marketplace. Today, emerging economies are counterparts on over half of global trade flows. This levelling of the playing field also applies to cross border banking and PSPs, with more providers now able to enter the market, increasing competition and improving B2B and B2C solutions.

Moreover, there has been an increase in the acceptance of an ecosystem approach to cross border transactions and payments, with partnerships between third-parties breaking down barriers that had previously held back smaller businesses from international trade. For the first time, smaller institutions and challengers can enter the market to meet the growing need for corporate cross border payments and banking.

The role of Financial Utility in banking

Employing third-parties to deliver specific solutions is not novel, but it has never previously extended into banking. As an essential service used in everyday life, the banking industry meets the basic criteria of a utility, but has traditionally not held the same structure as other utilities.

New technology is at the heart of new solutions, like Banking Circle. Financial Utilities handle core banking functions, such as payments, for financial institutions outside their domestic core, leaving their time and resources to focus on customer relationships.

Financial institutions are looking beyond traditional routes to meet the evolving needs of customers, including international payment requirements. And the emergence of Financial Utilities could overcome challenges such as high operational costs and slow transfer times. Partnering with a Financial Utility not only removes much of the delay in bringing new solutions to market, but it also ensures that solutions are more efficient and customer-centric, as the company building them is focused only on that one type of service.

The winners in this digital age will be those with the right mindset. They must focus on providing excellent customer service, even if this means breaking from tradition by entering new partnerships to enable delivery of the best solutions. Saxo Payments Banking Circle is leading the emergence of a super-correspondent banking network which offers the infrastructure, liquidity pools and connectivity with payment rails across the globe, to facilitate cheaper, faster, secure cross border payments and banking services.

Working with a Financial Utility such as Banking Circle helps knock down existing legacy walls, allowing faster integration, smoother payments and data integration for the discovery of cross-sell opportunities. All of this comes with low risk, and huge rewards.

Solutions for today’s cross border businesses

Banking Circle helps fintechs, tier 2 and 3 banks, payment providers and FX businesses improve their cross border payments offering. Membership of Banking Circle gives businesses the ability to offer their merchants the facility to make payments directly from a web interface delivered by them, in their name, powered by Saxo Payments Banking Circle.

Banking Circle Virtual IBAN gives FX and payments businesses the ability to issue multicurrency IBANs in their customers’ name and in multiple jurisdictions – delivering full transparency and faster settlement, and enhancing the services that fintechs deliver to their customers.

Banking Circle Marketplaces is a new proposition supporting fintech businesses servicing online marketplaces, and their sellers. It helps with regulatory changes under PSD2 and offers the ability to give marketplace sellers local IBANs.

Banking Circle for fintech Start-Ups provides new B2B fintech companies the ability to open bank accounts in multiple currencies and begin transacting across borders without unnecessary delays.

This editorial was first published in our B2B Fintech: Payments, Supply Chain Finance & E-invoicing Guide 2018. The Guide gathers leading solution providers, consultants, associations, banks and corporates that share their latest insights, technologies and best practices in B2B payments, real-time fraud prevention, instant payments business opportunities, and supply chain sustainability.

About Anders la Cour

Anders la Cour is Chief Executive Officer at Saxo Payments Banking Circle. He used his experience in legal M&A as well as in venture capital, coupled with a strong commercial acumen and entrepreneurial mind-set, to co-found Saxo Payments in 2013, with backing from Saxo Bank. He is also a board member of YouLend and an adviser to other financial technology businesses. Anders was named Entrepreneur of the Year in the 2016 Emerging Payments Awards, in recognition of his leadership in bringing to market the innovative Banking Circle solution to tackle the cost and time challenges of cross-border payments. He was appointed to the Emerging Payments Association Advisory Board at the end of 2016.

About Saxo Payments Banking Circle

Innovative global scale Financial Utility, Saxo Payments Banking Circle is underpinning the service proposition of FinTechs, PSPs, FX businesses and banks. Members of the Banking Circle can offer banking services to their customers – enhancing their own proposition – and helping merchants to trade globally, at low cost and efficiently.

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