Looking back at the international payments landscape during 2016, I think it’s fair to say that while the year started predictably enough, the vote for Brexit has led to fairly unpredictable third and fourth quarters for many businesses making and receiving international payments.
What was so predictable about the first six months of the year? Well, the continued proliferation of alternative payment methods (APMs) and financial technology (fintech) is a trend we’ve seen developing for a number of years, which shows no signs of slowing down yet.
As Ralph Waldo Emerson sagely noted in the 19th century: “Build a better mousetrap and the world will beat a path to your door.” So it’s little wonder that a plethora of established fintech providers and tech start-ups are gaining traction in the marketplace with their new apps and platforms. Businesses – just the same as the man in the street – will always seek out quicker, better and more cost-effective ways to do things, and that includes paying for products and services in other territories and currencies.
It’s also reasonable to say that the last year has seen a marked rise in both the trust and credibility of fintech payment methods generally. All of which begs the question: “Will new APMs and the explosion of Fintech Apps and platforms continue to be successful?”
Putting fintech in the context of global payment systems
The rise of APMs and fintech is largely driven by the increased convenience and reduced cost of payments that a clever app or platform can sometimes provide.
Yet it’s worth noting that however slick and affordable these payment methods may appear on the outside, the inescapable truth is that they can only ever be a doorway to other banking systems and payment processes, which they must have the ability to negotiate, just the same as any other provider of international payment services.
So while B2B organisations are always, quite naturally, looking for slicker and cheaper ways to buy their overseas payments, the efficiency and reliability of every platform will always depend on having established relationships with major global banking groups.
Even long-established and experienced players in the market will occasionally hit a very localised problem when making or receiving international payments on behalf of a client; and that’s when the shiny veneer of an app will be of much less help than simply having the ability to call in the services of a big banking group with experienced people on the ground in the country you’re dealing with.
It should also be remembered that both costs and delays when making and receiving international payments are often incurred far from home, and there isn’t always an app for that: mitigating or circumventing issues like these often requires expert, telephonic involvement from your payment provider.
So if I had to make a prediction with regard to fintech in 2017, I’m bound to say that I expect recent growth to plateau, if not to lose ground as many of the less robust platforms fail to meet the new challenges of this very dynamic arena.
The challenges and opportunities posed by Brexit
At the time of writing, the pound is 20 per cent lower than before the referendum, which is naturally leading to increased costs for organisations who have to pay staff abroad, or whose supply chains stretch across other territories and currencies: problems we are working to mitigate for many clients.
However, while the weak pound is causing problems for many businesses, it is also providing something of a bonanza for exporters, as their goods and services now look better value than ever to buyers abroad, which is a significant reason why the FTSE has risen as sterling has fallen.
I think that’s why we are now seeing some really interesting export trends emerging. For example, some B2B clients who are established exporters are now taking the opportunity to raise the prices of their products and services: simply because they can do so and still offer highly competitive prices to customers using many other currencies. After all, it’s one of the oldest unwritten rules of business: if demand is rising, then maybe your prices should too.
Perhaps most notably of all, we have a number of new B2B clients who have never traded overseas until recently, but whose products and services have suddenly become competitively priced in other territories for the first time.
It’s a whole new experience for some of them, but, like everyone else, we applaud those who can find new opportunities abroad in such challenging times.
In fact, if I had to make another prediction for 2017, it’s that international payment providers like us will be helping more and more B2B organisations to manage and reconcile payments from the markets that have just opened up to them.
Nick Pedersen, Managing Director, Equiniti International Payments
For more information about Equiniti International Payments, visit www.equinitiinternational.com