The banking and finance industry is the bedrock of global economies. And keeping the wheels of international markets turning is the safe and efficient movement of money between individuals, businesses, and governments.
As global businesses and financial markets continue to evolve rapidly to migrate towards tech-enabled futures, retail and corporate banking needs are also changing. International enterprises demand seamless, quick, and reliable payments to facilitate their growth in a fast and dynamic landscape. However, conventional banking players are often slow to address the evolving needs of modern-day consumers and businesses, leaving service gaps in the industry.
So, what’s a business to do?
The rise of Fintech
Fintech startups are filling this service shortfall by leveraging technology to innovate customer-oriented banking systems and infrastructures. A key value and competitive proposition of many fintechs is the promise of seamless, smart, and safe payments, both local and cross-border, between businesses. By radically streamlining customer experiences, fintechs are gaining unparalleled momentum and will be dominating this space in the near future. With the gauntlet thrown down, established banking institutions are in a position where they must either adapt… or disappear.
Listed below are nine ways fintechs have revolutionized the B2B payments ecosystem.
- Instant real-time payments…globally!
Traditionally, B2B payments were conducted via bank cheques, an inefficient method prone to manual errors and delays. To this day, many businesses still opt for this method, losing critical time, especially where inter-bank and cross-border payments are concerned.
Conversely, modern payment rails and tech-enabled B2B Fintech payment systems allow businesses to pay their counterparts, vendors, and merchants within seconds through seamless bank transfers, e-wallet transfers, real-time payment rails etc., both locally and internationally. By paying and receiving funds almost instantly, businesses can better manage their cash flows, improve supplier relationships and enhance traceability.
- Real-time payments fraud and money laundering detection
Fraud is the primary concern of companies across borders requiring international payments. Whether it’s an external entity infiltrating the payment process, or internal criminal activity, fraud costs businesses billions every year.
Fintechs are now automating fraud detection. Using technology to identify potential fraud to take prompt preventative action, they’re taking a customer-focused approach in their tech crusade. Anti-money laundering (AML) protection is a critical pillar of these detection systems, helping businesses comply with international AML and fraud-protection regulations.
- End-to-end payments visibility
End-to-end cross-border payment visibility means greater traceability of money across borders and banks – from start to finish. With tech-backed payment solutions, especially B2B payments, businesses can improve their cash flow management, reduce foreign exchange risks and fees, avoid delays, and improve partner and vendor relations.
- Minimal banking fees
Payments conducted via the traditional banking network are prone to absurd banking fees. Funds are typically routed through multiple banking stakeholders, with each handler charging its fees. These fees and commissions are often hidden. The parties transacting only realize the financial damage upon receiving reduced funds at the end of the exchange.
Fintech payment solutions shield businesses from hidden foreign exchange commissions and charges. They offer transparency across the financial supply chain and ensure that the funds are routed through the minimum number of banking systems to avoid extra costs.
- Reduced FX risk
Cross-border payments often involve multiple banks and currencies, resulting in significant FX fees and detrimental currency fluctuations that can create discrepancies between funds transferred and received.
Fintechs’ payments infrastructure reduces FX risks associated with conventional cross-border payments by routing funds efficiently, often at a favorable exchange rate.
- An interconnected ecosystem
To minimize transfer costs and FX risks and enable instant payments, fintechs form strategic partnerships with payment providers worldwide, offering them lucrative commissions and a piece of the FX margins. The scale of the network allows businesses to benefit from a sustainable payment system that saves them money.
- A digital infrastructure
Fintech payment service providers and operators have introduced an entirely new banking model and infrastructure. It leverages a global network of regulatory licenses and bank accounts to circumvent traditional banking payment rails safely and securely.
- Seamless mass payments
Fintech platforms now allow businesses to send and receive mass payments in batches, saving finance departments considerable admin time reconciling payments and recording invoices on multiple platforms.
- Inter-connected banking networks
Global payments rely on the ability of different banking systems to communicate and interact with each other. Systems involved in a transaction often use different formats and communication platforms.
For example, Axletree’s financial messaging and bank connectivity tools help fintechs leverage API integration to connect disparate payment systems. These systems streamline communication throughout the financial messaging chain – between organizations and the people operating them.
A collaborative future of the banking industry
While conventional banks operate with experience, fintechs lead with innovation. The continued evolution of the banking and finance industry across the globe requires more streamlined communication between both.
To understand how Axletree can provide you with a digital infrastructure that ensures a seamless, smart, and safe transaction process, get in touch with us.
June 3, 2022
