4 ways digital innovation is transforming cross-border payments

Cross-border transactions are growing quickly. In fact, global payments are expected to reach to approximately $290 trillion by 2030^{, thanks to trends like borderless e-commerce, cross-border trade and digitalization of payments across industries.}

In the face of this growth, global businesses are turning to their banks and fintech partners for solutions that make payments more instant, secure and transparent—all to help them remain competitive in the global marketplace. These payments providers are using the latest digital innovations to transform the cross-border payments experience for treasurers, their beneficiaries and their customers. Here are four key cross-border payments experiences accelerating payments into the digital age.

1. APIs enable real-time FX rates

As cross-border and cross-currency payments increase, treasury departments will need to test digital solutions to optimize their cross-currency workflow without disrupting their existing operations. That’s where application programming interfaces (APIs) can help..

APIs can integrate seamlessly into existing treasury infrastructure and interfaces. As a result, treasurers can access real-time visibility into foreign exchange (FX) rates directly from existing systems and can more effectively manage currency exposure, mitigate risk across their global accounts and accelerate reconciliation.. Via API connectivity, corporate treasurers can also lock in FX rates for predetermined periods of time, enabling them to price their goods in the currency that works best for their client while still effectively managing funds on the backend.

For the beneficiary and sender, API connectivity helps provide greater visibility and transparency into their payment status. For the sender, they can see FX rates upfront before sending a payment. When an issue arises during a payment, beneficiaries can track the payment and receive updates in real time. Once implemented, beneficiaries and senders can better manage their cash positions wherever they operate a bank account, which can help lead to greater predictability in cash movements.

2. Technology enhances visibility and transparency

Businesses now have greater access to diversified settlement mechanisms with global reach, and providers can offer payment options without the burden of complex technical overhead. For instance, providers can partner with banks to leverage local clearing rails to complete cross-border payments, as opposed to using wire payments. As the industry continues moving forward, treasurers are looking beyond traditional clearing rail advancements and leveraging technologies like Swift GPI, validation services, virtual account management and API connectivity to enhance the beneficiary and sender experience.

As new technology becomes accessible, clients will likely benefit from capabilities that make cross-currency transactions simpler and more transparent. This may include: upfront FX rates; access to real-time FX pricing across currencies via APIs; or increased global reach with more countries and currencies incorporated into FX offerings.

3. Virtual accounts increase global reach

Many businesses have direct deposit accounts (DDAs) in countries where their beneficiaries are located. This setup means businesses have money spread across different countries, accounts and currencies—all of which can lead to complex reporting, idle cash balances and unnecessary cross-currency risk exposure. This is where virtual account management solutions fit in.

Virtual accounts provide clients with the flexibility to manage cash flow across currencies through a centralized account structure. Therefore, businesses may no longer need to maintain multiple local accounts in the same markets. In fact, with centralized account structures, businesses can obtain better payment sequencing and manage detailed reporting under one umbrella. Additionally, through this structure, companies can easily transfer and/or concentrate their balances held in one account in one currency to another account in another currency, or fund local payments using a centralized account. This enables businesses to maximize their liquidity, reduce their risk exposure and operate in the currencies that make most sense for their business.

4. Partnerships and blockchain create instant payments

There’s a growing demand for real-time payments in the cross-currency and cross-border payments space. Through globalized partnerships, providers can offer senders more ways to make FX payments in real time, streamlining and simplifying the process through innovative collaboration.Instead of a prolonged settlement period, clients can pay their out-of-country customers and vendors instantly, with little to no friction points.

In addition, thanks to blockchain technology, cross-border payments may become faster, cheaper and more secure as adoption of the technology increases. Blockchain technology like that which is used by Onyx by J.P. Morgan can help make cross-border wire transfers or sanction screenings more efficient by decreasing the number of days such actions take to clear . JPM Coin is able to provide the benefits of near 24×7 cross border value movement, increasing the utility of cash by optimizing working capital and liquidity. Some businesses are already reaping the benefits of blockchain-powered payments to manage multiple currencies and global liquidity.

Another offering, Liink by J.P. Morgan^SM, makes information sharing easier for international trade and transactions, which can increase payment visibility across the entire payments continuum.