If you think innovation in consumer cross border payments has been big, just wait for the business-to-business (B2B) side of the equation. The complexity, cost and the nature of how companies manage their payment flows mean this sector has lagged behind consumer solutions, but that’s changing fast. Currency Cloud is one of the players quietly building up an empire in the space, now processing $15bn in payments across 30 currencies for over 150 platform clients. Speaking at Money 20/20 Europe as part of The Bancorp’s Finetics™ Studio interview series, CEO Mike Laven talks about what’s next for cross-border payments.
Where’s Currency Cloud in its journey?
Our initial funding was three years ago, at which time we were a startup with very little flow and a few customers. Today billions of dollars comes through us.
Who uses Currency Cloud?
We have three broad types of customers – one is a variety of payment firms usually offering services between the customer and the merchant. Then there’s digital economy players such as challenger banks and digital platforms alongside existing banks. The third type is a more traditional foreign exchange (FX) business. The defining tech piece is that almost everything that we process through Currency Cloud in terms of cross border is machine to machine.
How is demand for cross-border payments evolving?
First off, the degree of interconnectivity within the world, whether it’s migrant populations, cross-border commerce or supply chains, magnitudes bigger than it was a couple of years ago. And you feel it every day, when you open something up and it’s been made somewhere else.
Meanwhile, if you look at supply chains from a payment perspective, where a retailer might have been paying once or twice a year for seasonal shipments, now they might be paying a hundred times in the same season. But while the volume of interconnectivity has gone up on the commercial side and on the personal side, many of the systems that service them are still in the dark ages.
Why has innovation in B2B payments lagged behind consumer?
B2B trails for a number of reasons: one is that a company may do a check run of 500 payments at one time as opposed to paying as they spend. They might batch the payments and pay all of June’s invoices at the beginning of August. We have a lot of payments on the first and last days of the months and more on Monday than the rest of the week. The nature of consumer payments is that they tend to be more consistent, while business payments are lumpier.
B2B is actually bigger than consumer to consumer (C2C), but it is harder because business transactions are more complex.
What is the main advantage of using Currency Cloud?
The first is the API connection, which means our customers send a cross border payment from inside their own user experience (UX). The second is the way we price it. We believe FX and payments have been totally commoditized – there is no value in competing on price or even functionality.
So where is the value for customers? It’s in the tools for accepting the payment, checking the compliance, managing liquidity, treasury functions - a whole series of things. Of course you have to sell the FX and payments, but ultimately it’s a commodity. That’s how we see the world.
Will we look back at growth in cross border payments as a giant shift?
There are a whole series of financial flows in commerce that are not based on the traditional model. The question for the future is if the ways money moves will require different providers altogether. As global economies grow as consumers interact across marketplaces, what kind of structures and payment structures and financial firms do we need to be able to do that? Right now we are very centralized in our approach.
You’re thinking of a more conceptual transfer of value?
It won’t all be bitcoin or blockchain but the concept is right. So if financial flows are not all centralised how do we organize commerce to handle that?
In the world of the internet of things (IOT) there will soon be 50 billion devices connected. Each will be an e-commerce device but no one has a clue how we’ll make that work. If it’s paying per click, per word, kilowatt, or mile on the road, and all those are being collected by sensors and taken back to some place and monitored - the magnitude of complexity and magnitude of low value payments on a machine-to-machine basis is about to increase astronomically.
Some of these things could happen faster than traditional infrastructure can deal with. We need to have some future thinkers thinking further ahead than getting the next batch processed - though that is important too.
The opinions, findings, or perspectives expressed in this content are those of the author and do not reflect the official policy or position of The Bancorp, Inc., its affiliates, or its or their employees.