Cross-Border Payments 2.0: Faster, Cheaper and More Transparent

Cross-border payments are an integral part of the engines that keep economies worldwide going, but they get a bum rap.

As payments wind their way across the globe, senders and receivers watch the proverbial game of telephone. Messages are lost, fees are layered on, tracking things can be hard — and often the “net” amount at the end of a transaction chain looks nothing like what was originally sent between banks or along various intermediaries.

“The more parties there are in a transaction, the more risk there is … information is not passed along in the same exact fields as it moves between providers,” Nium Chief Payments Officer Alex Johnson told PYMNTS for the Outlook 2030 series.

But things are evolving, she said. Real-time verification and global payment networks can positively impact the approach to cross-border payments, simplifying complexities and reconciliation so that cash flow can be optimized.

A Common Language

The financial services industry is moving toward standardization in cross-border payments with ISO 2022, a common messaging standard that’s being embraced by financial institutions and providers — a single language to be spoken globally, Johnson said.

It’s a seismic shift, one that proves, in Johnson’s words, that there’s never a dull moment in the payments ecosystem.

Getting to that uniformity is a challenge, especially with the emergence of faster payments, given the fragmentation and differing infrastructures tied to various payment schemes.

Nium operates as a global infrastructure firm enabling real-time payments across borders, as the firm accepts all manner of messaging (MX messages across Swift) to enable interoperability between schemes. Participants can choose between 100 currencies across 220 markets, she said. Financial institutions already connected to the Swift network can, with a single point of connectivity with Nium, access those currencies and markets, reducing the barriers to entry into those markets.

“You just tell us where and what currency you want, and we will then convert the information in either the MT message or the ISO message that we receive to the local clearing scheme of [a given] market,” Johnson said. “And so, you get that global access to our real-time local payment network through the connection” with the company’s APIs.

With connectivity to Nium, financial institutions get the status of transactions via Swift’s GPI tracker, she said.

“You can reconcile via Swift,” said Johnson, who added that “you can get return codes via Swift. Everything just is the same process you have today, but then you get that added transparency and the confidence of transaction that you get from an instant payment.”

Nium also handles the compliance aspects of those payments with no fees or reductions to the payments other than upfront pricing as they crisscross various regulatory schemes and regions, she said.

“We have ground teams understanding all the regulations of every market in which we operate, and we get the licenses to manage everything for end-to-end legal compliance,” she told PYMNTS. “We take the complexities away from those customers.”

As she told PYMNTS: “As you eliminate some of the intermediary layers of a transaction, there’s less opaqueness, and the transactions are more cost-effective. It’s not just about the speed of the transaction; it’s about the transparency and knowing where it is at every point of time.”