Essential and complex, cross-border B2B payments are facing unique challenges and significant transformation as new technologies emerge. To gain insight into these evolving dynamics, we sat down with Nick Telford-Reed, an expert in financial technology and payments, to explore the critical aspects shaping the landscape.
What are the primary challenges B2B companies face when handling cross-border payments?
The biggest challenge with cross-border payments is joining different national schemes and systems without a single global platform or regulator. Payments are influenced by social, cultural and economic factors, with technology enabling the systems and regulations shaping their execution. Cross-border payments involve connecting these diverse systems—both regulatory and technological—which leads to complexity.
Even imagining a global payment system brings challenges. For instance, when sanctions are required—for example during Russia’s invasion of Ukraine—providers including Visa and MasterCard had to act swiftly, highlighting the difficulty of coordination. The main issue with cross-border payments is that interoperability often leads to inefficiencies, given the mismatches between different national systems.
Can you explain some of the key challenges - liquidity, timeliness, cost, regulation?
Typically, the way most large companies manage cross-border payments is by bundling them up and moving bigger lumps of liquidity, which can be from various corporate entities — one big payment is easier to manage than lots of small payments. However, this can lead to imbalances and requires extra capital to accommodate differences before final balancing.
Historically, cross-border payments have been slow and lacking visibility, making it uncertain when or if the funds would reach their destination after being transferred between different geographies. SWIFT have recently spent a lot of money and time on their GPI (Global Payments Innovation) initiative to improving the visibility and traceability of money moving through the system.
The involvement of multiple parties also makes cross-border payments expensive as each takes a cut, along with foreign exchange fees and taxation issues. While consumers might not always see these costs directly, merchants face higher fees for processing international cards, especially when accepting non-local cards.
This isn’t money just moved between well-regulated parties; it may also involve less reputable entities, such as sanctioned individuals or criminal organisations, complicating compliance and increasing risk. And for all of those reasons, you can understand why regional and national regulators all look very carefully at the vast tides of money flowing in and out of their countries.
How has the globalisation of businesses impacted the demand for more efficient cross-border payment solutions?
Where consumer payments are often the domain of the product organisation or the technology organisation, cross-border payments are almost always in the domain of treasury or corporate finance. So almost always in the domain of finance.
Consider a huge consumer-facing organisation like a big digital media platform. Just because they're handling enormous volumes of payments from consumers it doesn't necessarily mean that the same people are involved in the decisions about cross-border payments.
And you know, the user experience for people involved in making business-to-business (B2B) payments, can often be very poor. Like the reception of a hotel is often beautiful but the back corridors and staircases in hotels are often grim. The same is often true in treasury as it’s almost always a completely back-office function. The people who are feeling that pain are the treasury organisations because they're the people responsible for managing the cash flow for their businesses.
What are the most exciting technologies currently being developed to improve cross-border B2B payments?
There was a huge wave of interest in crypto, which has since receded, but it left behind innovations like shared ledgers and stablecoins. These have brought new players into the ecosystem, challenging the status quo. Established organisations like SWIFT have had to respond, leading to substantial investments in their technology stack.
Distributed Ledger Technology (DLT) in the context of crypto, was developed to solve how to move money when participants can't be trusted. Bitcoin tackled the ‘Byzantine generals' problem’ by creating a trustless, permissionless system—distributed without central authority.
Now, systems like FNALITY and R3 have taken this technology and added a central authority, creating permissioned distributed ledgers where trust is based on reputation. Bad actors can be ejected, establishing inherent trust. In fact, most of the Central Bank Digital Currencies (CBDC) are likely to be similarly permissioned, trusted ledgers.
Project Nexus is an initiative by the Bank for International Settlements (BIS) aimed at creating instant cross-border payments by linking national instant payment systems. Designed to standardise the way these systems connect; it makes it easier for payment operators to connect to multiple countries. The project initially conducted a proof-of-concept in 2022, linking the Euro system, Malaysia and Singapore, proving the model's viability. Nexus payments are designed to complete within 60 seconds, supporting faster, cheaper and more transparent payments compared to traditional cross-border banking, using ISO 20022 messaging standards for consistency.
And then there are other developments like Corda, a permissioned distributed ledger technology developed by R3. Used widely across the financial sector, it offers features like privacy, scalability and the ability to handle smart contracts. Corda has been deployed in various initiatives, including the UAE's Central Bank Digital Currency (CBDC) Implementation Strategy.
The advantage of these newer cross-border payment systems is that they create shared infrastructure between participants, providing competition to incumbent methods. Shared ledgers are now advancing beyond message formats to include more detailed account information, enabling more direct routing without large liquidity pools. These innovations are making cross-border payments more transparent, efficient and competitive.
On the downside, adding more participants to a cross-border payment system increases complexity and potential fragility. But then there is Ripple, for instance, that acts as a bridge between different ledgers, using its blockchain to facilitate instant routing and value exchange and leveraging its cryptocurrency, XRP.
Could you explain how business is using consumer payment technologies to help manage cross-border transactions?
Online travel agencies like Booking.com or Expedia use consumer payment technologies in an interesting way. When you book through them, they generate a virtual card to pay hotels or suppliers. Essentially, they pool consumer funds into digital wallets and use virtual cards to settle payments, taking a significant margin in return. This is a good example of consumer-to-business-to-business (C2B2B) transactions.
In marketplaces, we also see companies acting as intermediaries—aggregating and disbursing funds—where consumers play a market maker role, leading to more efficient settlement within the market. Mangopay is a good example of a payment service provider that specialises in offering tailored payment solutions for marketplaces, crowdfunding platforms and financial services businesses. Their white-label solution, allows businesses to fully integrate and customise the payment experience within their own brand.
What are the key regulatory hurdles businesses face when making cross-border B2B payments, and how can they overcome these challenges?
B2B payments introduce exponential regulatory complexity. Each country has its own regulator and when more countries are involved, each regulator must interact with the others, creating multiple layers of regulation. For example, three countries mean three regulators and at least six regulatory relationships. The more global the network, the more complex regulation becomes.
Key global regulations include those by the Financial Action Task Force (FATF). One significant requirement is the ‘Travel Rule,’ which mandates that international payments must identify both the sender and the recipient, posing privacy challenges as different countries have varying privacy and data-sharing rules. ISO 20022 is helping to address some of these challenges by allowing richer transaction information to improve compliance.
What strategies can businesses adopt to reduce the cost of cross-border payments, especially in terms of transaction fees and foreign exchange rates?
Aside from using new emerging technologies they can also be smarter in managing their own liquidity, netting off transactions and sending only balancing payments where possible. This allows them to retain more funds within their own treasury, minimising cross-border transfers.
Pooling liquidity involves managing funds locally to retain as much liquidity within the business as possible. Sophisticated treasury practices like hedging, options and futures are critical when managing international operations, helping mitigate currency risks. A mature treasury department actively manages these risks, using financial tools to hedge against exchange rate fluctuations, effectively insuring against foreign exchange exposure as businesses become more global.
Where do you see cross-border payments in 10 years’ time?
The future will still involve a mix of legacy systems and advanced technologies. Banks, which act as gatekeepers, tend to adopt changes slowly and regulators are similarly cautious—especially when it comes to fintechs. Regulators are often wary, as fintechs may not be as rigorous in screening their clients, making them more vulnerable to fraud. Cryptocurrencies also face challenges due to their greater susceptibility to criminal activities.
Yet it’s clear that the future of cross-border payments includes greater choice for enterprises with richer visibility and traceability, with money moving faster, more effectively and at lower cost. Over the course of the next decade, we will see giant networks compete against each other to win this lucrative market and blur the edges of the consumer-to-business, business-to-business and business –to-consumer markets.
To learn more about B2B Payments challenges and AI advances in banking and payments, you can access our eBooks on the Payments Content Hub.