What The Last 25 Years Of X-Border B2B Payments Tells Us About The Next

Much changes in a quarter century in any realm — personal and professional — but especially in payments. And especially in cross-border payments, where, amid globalization, currencies shift and businesses connect across time zones, languages and even industries.

In an interview with PYMNTS’ Karen Webster and Gary McDonald, CEO of Cambridge Global Payments, discussion hinged on the ways moving money remains a challenge, and how technology has played a role in streamlining some processes.

Cambridge, of course, as an international B2B payments provider, has seen some sea change of its own, having been acquired this past August by FLEETCOR Technologies. The deal gives FLEETCOR leverage in the $145 billion B2B cross-border payments market.

Journey back two and a half decades and, as McDonald noted, moving corporate funds across borders “was certainly very limited in terms of your options and how to do it.” For corporate transactions, he said, everything went transaction by transaction, settled at prices that firms may not have necessarily had a chance to negotiate.

The upshot: “Nobody understood what they were paying and how they were paying it,” due to a lack of transparency. And, added Webster, there is nothing more unsettling than money leaving a gap in an account and wondering if it ever got to the other side.

Technology, of course, proves a salve when addressing transparency issues, said McDonald.  Systems in place today can provide the client with tracking functions to gain a sense of where the money is, where it has been and when it will get to where it is needed.

The financial crisis, said McDonald, led to scrutiny about fund flows and regulation of the movement of money — with legislation like the Sarbanes-Oxley Act part and parcel of looking out for client interests. As part of the combination of service and technology, with the attendant movement toward transparency, the executive said that clients (including those served by Cambridge) can be consulted over price, method of payment, beneficiary details, etc. – which means we get to know the person behind the transaction.

Such familiarity builds solid and tailored relationships, said McDonald. For example, when transactions can be facilitated through online conduits like file uploads and APIs and individualized attention, a percentage of transactions can be hedged, with an eye on payments of various sizes.

The changes in conversation mean that Cambridge, and ideally any payments firm, should be able to service the clients based on their needs, as opposed to years ago, when there were fewer options. For instance, today there can be a transaction contoured for individualized activity, such as hedging a percentage of the volume that is done internationally. “It’s moved more to a needs-based relationship than it ever was before,” the CEO said, especially as clients make multiple payments of varying sizes.

Risk and compliance? They go hand in hand, said McDonald, with concurrent processes and technologies scrubbing and validating payments every minute of every day.

McDonald highlighted the value-add of Cambridge’s long-standing client relationships, which stretch across decades — where the teams in place at the firm “have a good sense of the payments patterns of those companies. [These individuals] can spot something that is out of pattern pretty easily and go back and validate with the client.” Nuance matters, and careful eyes can spot names misspelled on innocent-looking invoices that are, in fact, phishing scams, or where codes and bank account numbers have been changed.

Webster queried McDonald about the changes wrought by the FLEETCOR acquisition. FLEETCOR, he stated, brings financial firepower to Cambridge “that in our business is so vitally important.” The bigger the client Cambridge pursues, “the more [those prospective clients] want to see a strong balance sheet.”

Technology is also bolstered and complemented between the two firms, said McDonald, as FLEETCOR has built its own arsenal across some 77 acquisitions. This interplay “allows us to bring new thinking from outside the [B2B payments] industry” that will be important. And, of course, FLEETCOR’s footprint is a global one, where if Cambridge wants to hypothetically open shop in Europe, so to speak, the logistics giant already has a presence there.

Cross-selling opportunities abound, and the fleet management and logistics space remain alluring for Cambridge, and vice versa.

“The real jewel here is the acquisition of Comdata,” said McDonald of FLEETCOR’s 2014 acquisition of the latter, as it is “changing the way domestic payments are being made.” He said that firm is aligned with what Cambridge is already doing in the B2B space. “We can certainly see a world where we eventually make international payments using virtual cards,” he told Webster.

Looking at other niches that may prove tempting, McDonald said the overarching theme will be moving money more than anything else, with a focus on where in “our industry the rails, which are predominantly bank rails to reach each beneficiary, have been changing a lot.” Even with the banks, he said, “they are getting much better at in-country movement.” As an example, he held up eCommerce companies, who are making mass payments via low-value, high-volume transactions. But with wire fees, traditional rails really do not accommodate that as a cost-efficient solution.

The discussion turned to blockchain technology and distributed ledger offerings and how they might contribute to B2B transactions across borders.

McDonald said: “We are in a skunkworks kind of discovery phase, where businesses like ours [have to consider] where we are,” in the event that these new models become successful. In some cases, he said, Cambridge might serve as a clearinghouse or offer settlement with different banks globally. In other cases, the company can provide liquidity.

The key, he said, “is to keep an open mind. I believe some of these things will happen, but I cannot tell you when or where our place is here … but I do know there is a place,” even as it may be “miles away from the traditional role we play [in payments] today.”