Accelerated innovation was the buzz at the 2020 SIBOS conference in early October. Spurred by the pandemic, innovation is coming faster than ever before in all aspects of banking, including cross-border payments, where a key trend is a new focus on the consumer and small business sectors.
A virtual panel discussed a critical question facing many banks today: “Can banks win in consumer and small business cross-border flows?” While corporate B2B flows have historically dominated this space, there has been increasing attention and innovation on the consumer and small business side.
With a potential principal market of $7-8 billion and $80 billion in revenue at stake, there is growing competition from fintech start-ups that have made user experience a priority. But the panelists agreed that there are still significant opportunities for banks because they are best positioned to serve this use case, and because of their substantial infrastructures and ability to innovate. Plus, many fintechs are focused on one or two solutions, while banks offer a full suite of services to consumers and small business.
The keys for banks are leveraging their existing capabilities and partnering to develop world-class cross-border platforms that can compete to deliver a strong experience and help build greater customer loyalty. Small businesses and consumers rely on their banks for a multitude of services, and by adding a user-friendly cross-border experience, banks can win in the consumer and small business market.
However, the panelists agreed that banks must act with a sense of urgency. Customers have choices, and so far, they are often finding better cross-border experiences outside the traditional banking channel. Still, banks have a real opportunity to evolve into a concierge, or curator, of the best of the fintech world and maximize the tools provided by the tech enablers to create a superior end-to-end customer experience.
Also adding to the urgency is the fact that many fintechs are going upstream into more core banking offerings, such as bank and stored value accounts. Clearly, based on their success in cross-border payments, these start-ups are looking to use optimized customer experiences to contend for a larger share of the banking market.
The panelists concluded that there will be significant changes over the next decade as businesses innovate to meet the increasing demand for cross-border transactions. Payments will be faster and happen in real time – with greater transparency into the status of the payment. More information and content will travel with the payment, and the customer experience will be more seamless. The panelists also agreed that partnerships is the way this space is expected to evolve – that banks, who see the complexity and cost of building their own customer-optimized cross-border offerings, will not take this journey alone, but will collaborate to get to market with strong offerings, faster.
Net, net: To win in cross-border payments, banks need fintechs and fintechs need banks – the ecosystem cannot survive without both.
Sponsored by Western Union, the panel included Grace Klopcic, Partner, McKinsey & Company; Alex Johnson, Head of Foreign Exchange Product Network and Partnerships, JP Morgan Chase; Rebecca Mann, Global Head of Enterprise Partnerships Commercial Development, Western Union; and Scott Johnson, Global Head of Product, Western Union Business Solutions.