Collaboration is key to survival for banks and financial institutions
By Pierre-Antoine Dusoulier, CEO and Founder, iBanFirst
The payments market opportunity
With the unexpected nature of COVID-19 many businesses are still fighting to stay afloat. On a global basis, CFOs are embarking on a mass cost reduction exercise, reassessing their overheads due to a significant decline in sales, cashflow and supply chain disruption.
Many SMEs are among the hardest hit. According to a recent COVID-19 survey of UK SMEs conducted by McKinsey (2020), more than half view the country’s economy as very or extremely weak, and half expect market stagnation or recession.
As the COVID-19 lockdown across the world lifts, financial directors are identifying areas they can cut costs and drive greater efficiency across their overheads to ensure they remain resilient. Businesses will now be exploring a plethora of financial service providers to choose from to provision for B2B cross-border payments. However, many banks and financial institutions have been slow to respond to the ‘new normal,’ failing to adapt to market conditions, particularly when SMEs are concerned.
It’s important to note that banks and financial institutions are not being callous in their response to the needs of SME businesses, but rather the impact of a slow to manoeuvre legacy infrastructure.
Supporting business resilience post-COVID-19
A widespread perception in the UK and Europe is that SMEs have been underserved and overcharged by the big banks and financial institutions when it comes to cross-border payments. Research by the European Central Bank found that traditional financial service providers, across Europe, earn hundreds of millions of euros a year by overcharging their small corporate customers.
As businesses begin to bounce back from the COVID-19 pandemic, it is crucial for banks to change this perception by supporting business resilience. If they fail to do so, they will not be able to cater to their clients’ needs and make it even harder to compete with their competitors.
So, how can banks and financial institutions stay competitive? Banks must harness a FX payments platform that can integrate with their existing core banking infrastructure to facilitate fast, reliable and secure payments for their customers.
A FX payments platform that connects to banks via ‘Open Banking’ will enable a variety of payment options to capture the needs of each and every customer on a global basis. More broadly, the promise of transparency of options and freedom of choice.
Furthermore, the hidden fees of foreign exchange payments need to be re-evaluated, providing companies with full visibility over their transactions, and access to real-time FX exchange data to make the most informed decisions possible for CFOs to keep costs down.
A secure cross-border payments platform
The Coronavirus pandemic has seen an increase in online fraud and phishing attempts seeking to capitalise on uncertainty. Action Fraud, the UK’s National Fraud and Cybercrime Reporting Centre has received more than 2,500 reports of coronavirus-related scams, mostly online, totalling almost £9 million in losses.
Within this uncertain environment, it is essential that banks and financial institutions have a cross-border payments platform that is secure and trusted. The platform must be compliant with European payment services legislation such as PSD2 regulation and must have the appropriate security measures in place. For example, state-of-art encryption and digital security with account access protected by dual-factor authentication and single-use and password (TOTP).
It’s clear that in a saturated market of multiple payment providers, banks and financial institutions need to collaborate to survive with fintechs and PSPs providing trusted FX payments platforms. Only then will they be able to compete for their share of the payments market by championing secure, reliable and transparent cross-border payments.