How software providers are upgrading their payment engine

Developing software is like building and selling a house – you need to get the foundations right, pick the right materials, make it functional, and decorate it so people enjoy experiencing it. For software engineers, instead of using bricks and mortar they use solutions they bring together in a ‘tech stack’.  

Tech stacks can be relatively simple (and ‘relatively’ is a relative term here) to incredibly complex but it’s all about bringing together lots of different solutions to create a product or service that works digitally.

When it comes to adding an international payments element into a software solution, that stack of solutions will suddenly become exponentially more complex to hold together. Even for financial experts, payments are a tough nut to crack, so building that solution from scratch is unrealistic.

And, if developers had to build all the elements from scratch every time, we’d all still be using Nokia 3210s.

Bringing international payments to the masses

Any software company that needs a payment part of their platform – think expense, procurement, business spend management, payroll, eCommerce, and ERP companies – will need a partner with a ready-made global network and technology to ‘bolt-on’ to their solution.

Some global banks will have that ready-made global network, but rarely the user-focused technology to integrate successfully. Plus, the banking network itself can be a disconnected affair, making it difficult to leverage it for those user-friendly front-end systems the software platforms customers will be using.

Enter fintech’s to fill the gap.

By building their own proprietary global payment networks and combining that with a customer-centric approach, fintech’s offer software providers an ideal partner to ‘upgrade their payment engine’ in several ways.

1. Streamlining user experience

Software platforms, whether they’re e-commerce marketplaces, SaaS providers, or digital wallets, recognize the importance of seamless user experiences. Fintech’s bring user-friendly interfaces, intuitive dashboards, and simplified processes to the table.

When we think of the user experience, we often think of an individual consumer, but entire finance departments will be using these solutions too—think of platforms like Sage, SAP Concur, Coupa Software, Accounts IQ, and the like.

An example would be a spend management software provider assisting a manufacturer in sourcing materials the world over.

Manufacturers making international payments to their suppliers via the traditional correspondent banking network could endure numerous problems. Critical information and reference data could be lost in the hand-off from one bank to another, and oftentimes the amount sent is different to that received, making it difficult for respective AP and AR teams to reconcile payments without increased communication. A poor payment process could mean the difference between a functioning and a non-functioning production line.

When spend management software providers and fintech's combine their solutions though, that payment is made with a built in FX rate (meaning the payment will be accurate), webhooks will automatically tell the suppliers when the payment is made, and a matching reference number will be generated for the manufacturer and supplier for swift reconciliation and to facilitate all other communications.

Suddenly, the manufacturing finance team has a lot more time to focus on important work, production teams are confident of delivery, and suppliers get paid correctly on time, first time.

2. Enhancing speed and efficiency

Traditional cross-border payments can take days or even weeks to settle. Fintech’s specialize in real-time or near-instant transactions. Through APIs, software platforms can connect directly to fintech providers, reducing intermediaries and expediting the payment process.

For a lot of clients, speed doesn’t matter too much (within reason), but for others it can be literally lifesaving.

Not-for-profits, for example, can be working in really difficult environments, and sometimes in emergency situations. What’s more, these environments are typically even more difficult to use your regional, national, or even international bank to send a payment to.

For software providers serving these not-for-profits, giving them the capability to get set-up and pay into new territories, and in ‘exotic’ currencies, is a core part of their value proposition. Because fintech’s have gone out and built infrastructures in these territories, those not-for-profits can send payments at speed whenever it’s needed.

3. Competitive exchange rates and fees

Currency conversion can significantly impact the cost of international transactions. Fintech’s leverage advanced algorithms and market data to offer competitive exchange rates. By partnering with these companies, software platforms empower their users to get more value out of their money.

Transparent pricing and minimal markups ensure that businesses and individuals can make informed decisions.

4. Storing and moving funds in multiple currencies

Beyond the transfer of currencies across borders, fintech’s also offer software providers the capabilities to open virtual accounts (with BICs and IBANs) in multiple currencies to receive payments locally, store those funds, and then move them back across borders when rates are favourable.

This ability to open local currency accounts, for both the software providers and for their clients, has a multitude of applications. Really, it allows platforms and their customers to build their own international banking network they control, bringing all the cost-savings and efficiencies that bring in-house.

An example here is eCommerce platforms. They can now offer a business in Malaysia (to pick a country at random) the ability to sign-up to their platform, open a Euro account, collect payments from customers locally, pay out to suppliers locally if they want to (without having to pay the FX fees of moving the currency back home first), and then ‘bring profits home’ when the exchange rate suits them—all at low cost.

5. Compliance and regulatory support

This is a big one but probably the one least seen by front-end users of a software platform.

Navigating the complex web of international regulations, anti-money laundering (AML) requirements, and Know Your Customer (KYC) checks is not only daunting; it can also be an existential threat to a software platform. Do this themselves and get it wrong, and it can lead to significant legal, reputational, and financial damage.

Fintech’s specialize in compliance solutions, ensuring that transactions adhere to legal norms. They take on the burden of putting the right regulatory framework in place, linking that to their solutions, and keeping up with the latest laws across the world. Software platforms benefit from this expertise, minimizing risks and maintaining trust with their user base.

6. Expanding global reach

It can be hard for a software platform to build an infrastructure to pay from one country to another, so what about paying into every country in the world?

Software platforms often operate across borders, serving diverse customer bases. Fintech’s provide access to a wide network of payment rails, including local payment methods, digital wallets, and alternative currencies. By collaborating with fintech’s, platforms can expand their reach and cater to users in different geographies.

The largest fintech payment infrastructure in the world, and the third largest anywhere even including the world’s biggest banks, has been built by TransferMate. This gives our partners access to this global reach, and to our technologies for leveraging it in a practical way.

Upgrading the world’s payment engine

When it comes to software development, we’re all standing on the shoulders of giants. It’s rare that a solution comes ready-made from all original parts. Innovations are built on top of other innovations, combing them all in an original and unique way.

Fintech’s have become the payment part of the software developer’s tech stack; their partner in delivering secure, user-friendly and cost-effective payment solutions to their end-users. Without them, they can very easily end up building a house nobody wants to live in.

To learn how TransferMate partners with software developers, read our client stories, or contact the team to see how we can support you.