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The changing landscape of cross-border payments

Many individuals and organisations have suffered inefficient and expensive cross-border payments for years. The market has been dominated by legacy players who have often failed to embrace technological change and are now offering sub-optimal products and services. Technology driven payment platforms, like Tuxedo’s, are now taking advantage of these opportunities by carefully targeting key segments and delivering a disruptive solution to the cross border payments market.

The World Bank estimates that cross-border payments are increasing at a rate of 8% year-on-year which is predicted to increase with greater movement of labour and enterprise across borders, including ever rising numbers of refugees, travellers and overseas workers.

Transferring money overseas through the traditional legacy institutions can be expensive; banks can charge $25 or more to send money over a border and load on fees of between 2-3% when changing currencies. For corporates transferring large sums to suppliers and individuals, international workers remitting money home and holiday makers spending overseas, this is an unnecessary financial burden.

For organisations that are willing to move onto an entirely electronic platform, transferring money abroad can be a lot cheaper and more efficient, both in terms of the transfer itself and the related administration. Many new technology companies, including my own firm Tuxedo, are entering the market place to offer cheaper viable alternatives to traditional financial institutions. They are seeking to take advantage of the explosion in electronic payments taking place across the globe. By way of illustration, in 2022 the value of noncash transactions is expected to reach an estimated $712trillion as compared with an estimated $1.1trillion in the traditional payments and transaction-banking revenues.

What we have observed is that the greatest opportunities lie in entering the market with a clear view of serving an identified demographic or client-base, whether that be through provision of a global Automated Clearing House (ACH) or a consumer-led proposition. Whilst our platform can serve a very broad customer base, we recognise that the greatest opportunities for profitable market disruption result from focused targeting of opportunities.

Large multinational corporations will often have a treasury function that is well versed in moving money around the world and can take a strong negotiation position with the more traditional providers. The big opportunity in the UK and overseas is in supporting mid-sized corporates that don’t have this expertise but make up a significant share of the market. These businesses are paying far too much to transfer money overseas and Tuxedo can help them reduce their costs significantly.

Tuxedo’s Cross Border Payment solution will be one of the most versatile and flexible solutions in the market. We have focused our innovation on developing a multi-channel payments gateway, enabling users to undertake a range of payments, choosing the channel that is most appropriate and cost effective for them and their recipient, be that a corporate supplier or individual.

This allows corporates to make payments via SWIFT, ACH (lower cost bank-to-bank transfers), virtual cards (an electronic representation of an open loop card), prepaid VISA or MasterCard and electronic or mobile wallets – all through a single web portal. Aggregating the varying payment channels through one web portal doesn’t only offer users a compelling alternative, it means that the Tuxedo solution can be used globally, with customers able to choose the payment channel(s) that is most cost effective for them.

The versatility of Tuxedo’s solution will be important to our international clients as their needs vary from one country to the next. Local banking infrastructure, customs and culture mean that banking and payments are used differently in each market. For example, countries like Dubai, with large migrant populations, are now beginning to move away from a heavy reliance on cash to plastic card and electronic money solutions, while many countries in Africa have transitioned straight from cash to mobile payments.

For a sector worth over £500 billion and growing rapidly, businesses undertaking cross-border payments have suffered for too long with poor service, inefficient products and a lack of choice. However, the market is changing rapidly as technological development drives innovation and entrepreneurial firms, like Tuxedo, are able to offer credible, cost effective alternatives for businesses of all sizes across the globe.