More transparency needed in payment transfers, say experts
dubai — High costs, slow speeds, and a lack of transparency are some of the issues that still need to be addressed in traditional cross-border payment transfers, experts say.
The value and volume of crossborder transactions globally are growing steadily at eight per cent and 10 per cent, respectively, every year, according to Boston Consulting Group (BCG) Global Payments. In addition, the value of cross-border transactions is expected to nearly triple to over $54.8 trillion by 2022, from $20.5 trillion in 2012 and the number of transactions will grow from 9.9 billion to 20.7 billion.
According to a survey by PayCommerce, more than 70 per cent of the companies in the UAE feel there is a lack of transparency in traditional cross-border payment transfers. In addition, 32 per cent of respondents said that international wire transfers were very slow, while 44 per cent said that they were very expensive. Also, 10 per cent also said they were unable to get payment status and some regard it difficult to find correspondent banks in certain regions.
Max Narro, CEO of PayCommerce, said that the weaknesses of traditional international transfers are already leading to a shifting of customer preferences as they become educated about the various models in the marketplace. This brings the traditional correspondent banking model for cross-border payments under acute pressure from customers, regulators and competitors alike.
The PayCommerce survey also revealed that 67 per cent of the companies are willing to opt for a more cost-effective and transparent method of sending and receiving international payments.
“The widening gap between customer expectations and effectiveness of traditional international payment systems are leading customers to look for innovative payment solutions such as PayCommerce’s first ever instant cross-border payment. This will enable payees to receive remittances in real-time, eliminating costly clearing processes and reducing risk in settlement procedures. We are not very far from the time when majority of businesses would prefer real-time, digitally enabled cross-border payments,” Narro noted.
Waqas Mirza, managing director and chief marketing officer of Avanza Solutions, also noted that blockchain technology will play an increasingly important role in the coming years in the payments and transfers industry. He spoke about the recent MoU signed between Avanza Solutions and Smart Dubai Office to implement a citywide blockchain-based payments platform.
As part of the Dubai Future Accelerators programme, Avanza Solutions’ blockchain platform Cipher was selected by Smart Dubai Office to deliver a pilot project to provide an instant reconciliation and settlement platform to Smart Dubai Office for DubaiPay payment platform. The pilot project was delivered in collaboration with Dubai Smart Government and Emirates NBD.
Smart Dubai Office now plans to roll out Cipher across all its existing 38 partner government entities, partner financial institutions and Departments to set up the first blockchain based building block within its financial plumbing. Avanza Solution’s Cipher platform will enable each of these entities to process instant payment payments and reconciliations across the Cipher network, to create a streamlined process for more efficient and effective service.