Convenience is marking a new wave across different industries, and in the business-to-business (B2B) cross-border payments space, it’s no different.
Today, about 98% of all cross-border business payments are managed through the SWIFT banking system, which enables the execution of payment transaction flows between financial institutions and banks worldwide.
But according to Terry Clune, founder and chairman of TransferMate, sticking to a decades-old cross-border payment system that is slow and subject to long delays is no longer an option for businesses looking for faster, cheaper and more convenient solutions to make international transactions.
Read more: SWIFT to Test CBDC Ability to Facilitate Cross-Border Payments
“If you want to make a [SWIFT] transfer from the U.S. to Australia, for example, the money will go through three or four different banks depending on the float, and each of those banks will charge a transaction fee and will administer it to some extent, which adds inertia and friction to the transfer [process],” Clune, who is also the CEO of TransferMate’s parent company CluneTech, told PYMNTS in an interview.
See also: B2B Payments Infrastructure Provider TransferMate Partners With Haas F1 Team
It’s a challenge the B2B payments infrastructure firm is looking to solve, enabling organizations, financial institutions and businesses like the Haas Formula 1 racing team and Uber to transfer money internationally using a faster, more efficient and cost-effective application programming interface (API) solution than SWIFT.
For another client like New York-based Columbia University, it’s all about ensuring certainty of payment to teaching staff lecturing in several countries around the world, and a solution like TransferMate’s that guarantees on-time payment through a wide network of local accounts and bank licenses in 160 countries fits the bill.
“If a [U.S. entity] wants to pay 80 different people in 80 different countries, they [simply need to] give us one transaction in the U.S. We then use our accounts all around the world to distribute that money on the same day,” Clune explained.
He added that the fact that the firm is regulated in every state in the U.S., across Europe and all major economies enables them to bypass the infrastructure that banks need to move money worldwide, cutting out a lot of the usual hurdles that impede the smooth flow of payment transactions.
Related: B2B Payments Infrastructure Firm TransferMate Valued at $1B
To expand even further, the Dublin-based firm recently raised $70 million in new funding, valuing the company at $1 billion. The funding has been earmarked for investing in its product suite, which includes its global licensing infrastructure and banking network.
Stablecoins, Not Volatile Crypto
When it comes to the use of digital currencies in cross-border payments, using cryptocurrencies adds another layer of complexity to the process, Clune said, arguing instead that the use of blockchain as a ledger to track payments in real-time and transparently is a much better option.
“You don’t need a volatile cryptocurrency in the middle of that to add unnecessary risks to the journey from [point] A to B,” he said. “Instead, government-backed stablecoins are a logical way to do that and we see that as being the future of money movement.”
One of the avenues through which the firm is looking to achieve that is by working with organizations like blockchain-based digital payment network Ripple and Circle, the firm behind the stablecoin USDC, to administer cross-border transactions through a pegged currency.
“With our solution, we can empower on-ramp and off-ramp from the stablecoin interface and back again [by leveraging] the regulatory approvals we have secured from central banks worldwide to release the payments and administer those transactions,” he noted.
Lending to Medium-Sized Firms
In addition to working with partners in the blockchain space, Clune said the next step will be to inform and educate banks, software and other FinTech firms that “there is a much easier way to transfer money internationally than making cross-border payments on SWIFT.”
There is also increasing opportunity in the payments collection vertical, particularly in the global education arena where universities collecting tuition payments from international students have been hit with huge transfer costs.
“In the past, they used to make those payments by credit card, which would be hit with a 2-3% interchange fee. But using our infrastructure [removes that fee from the] transaction value and brings huge savings to organizations,” he remarked.
Another key area of focus will be business lending, an area where the company will be looking to extend its licenses to be able to provide funding to medium-sized businesses in the exact way as Citibank does today for multinationals and large organizations.
“There’s a massive number of medium-sized companies that are totally underserved and that’s where, with our licenses, we see a huge growth opportunity in the future,” he said.
Sign up here for daily updates on all of PYMNTS’ Europe, Middle East and Africa (EMEA) coverage.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More