The rise of global commerce between enterprises, always on in a 24/7 world across time zones and currencies, shows that cross-border payments need a (digital) makeover.
Depending on the vertical (technology stands out as an example), supply chains are comprised of many links that stretch across borders. Firms of all sizes, particularly smaller ones, are finding new audiences in new markets located far away from domestic strongholds.
And in the perennial build vs. buy debate, for the payments giants – specifically, Visa – the strategy comes squarely down on the side of “buy,” particularly when it comes to B2B.
On Thursday (July 22), Visa said it had spent 700 million U.K. pounds (the equivalent of about $963 million USD) to buy B2B cross-border payments firm Currencycloud. Visa, which already had a strategic partnership in place with the firm, now takes the Currenclycloud APIs and platform fully into its fold.
Currencycloud offers real-time notification on FX and access to multi-currency wallets, as well as virtual accounts. As reported Thursday, Currencycloud has relationships with about 500 banking and technology clients spanning 180 countries.
Second FinTech Deal In Rapid Succession
This is the second large FinTech-related acquisition by Visa this year, on the heels of its announcement that it would buy data aggregator Tink in a $2.1 billion deal. Different price tags and a different geographic scope, perhaps (Tink is focused on Europe, while Currencycloud is global) — but the acquisitions reflect Visa’s desire to build new financial services on top of, and alongside, its own rails and offerings, with platforms and connectivity squarely in sight.
As many as 43 percent of all small businesses dabbled in global trade last year, PYMNTS noted upon the news of the Visa-for-Currencycloud deal.
Earlier this year, Visa’s strategy was signaled in part by Kevin Phalen, head of global business solutions at Visa, in an interview with Karen Webster. Interoperability, fostered in part by advanced technologies and ease of interaction between infrastructure and corporates, helps eliminate the frictions that have long rendered B2B payments less than optimally efficient.
In one illustration of those inefficiencies, a recent “Innovating Cross-Border Payments” report, done in collaboration between Visa and PYMNTS, found that it takes roughly 33 days for U.S. businesses to receive cross-border payments. Roughly a quarter of sales generated by U.K. and U.S. businesses come from international transactions, which hints at how payment delays can hurt revenue-to-cash generation.
Part of the problem stems from a lack of information (and a resulting lack of transparency) as those payments cross borders. According to the research, more than a third of mid-sized businesses in both countries said that the inability to attach detailed remittance data to a payment — and the time spent reconciling invoices — creates yet more drag. That puts transaction clarity front and center for businesses and consumers in 2021.
In the aforementioned interview, Phalen said that “buyers and suppliers don’t really care about the network, but they want to have the payment. They want the data [and] they want the information.” He added that interoperability will get a boost with messaging standards such as ISO 20022. Along the way, the $20 trillion in paper checks that are sent out across the U.S. B2B space alone would be winnowed down.
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