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There’s a lot of paperwork when it comes to international payments. When we click that ‘pay vendor’ button, we imagine the technology as a whir of automated processes, seamlessly figuring out exactly what it should (and shouldn’t) be doing.
In short, we imagine slick US cop shows where the protagonists have all the information in the world by waving at a touchscreen, not the Scandinavian ones where the best tool the lead detective has is a nice woolly jumper.
One area where paperwork has been a real friction point is the sharing of information between financial institutions to create smoother services for customers.
It’s a very legitimate and serious question to tackle – how can financial institutions securely share customer information with third parties?
Previously (and still the case in a lot of areas) customer information could not be shared with a third-party without a lot of paperwork being completed. This is obviously for very good reasons; just because a business or individual trusts a particular financial institution with their finances and information, it doesn’t mean they would trust another.
This did lead to serious friction in the financial chain. It was a particularly major hindrance in collaboration between financial institutions.
Two or more parties could come together and create a great idea, build a platform to deliver it, but then find it impossible to bring it to the marketplace because they couldn’t share their customer data. The only way it was possible was an onerous onboarding process where each individual customer would have to work with the two parties and give over swathes of information.
The solution was ‘Open Banking’ – the first industry term we’ll hit today.
Open banking first emerged in the United Kingdom in 2018, when the government passed a law requiring banks to provide customers with access to their financial data in a secure way. On the flip side, it also allowed banks themselves to share information with regulated third parties.
This was only possible through the use of Application Programming Interfaces (APIs), which basically use pieces of code so two pieces of software can communicate with each other. In the case of open banking, APIs allow customers to share their financial data with third-party providers, such as fintech’s, who can then use that data to create new services and products.
To boil it down, open banking allowed that onboarding process to be reduced dramatically to a couple of key pieces of information, such as:
The primary ethos was to come at the information sharing from the angle of the customer; the customer must proactively agree to the information sharing.
This allowed financial institutions to contact their customer and say ‘we have this new solution in collaboration with this third-party, would you like to sign up to it and, if so, can we share this information with them to make it happen?’
What started as ‘Open Banking’ has morphed into ‘Open Finance’ – the second term we’ll hit today – because the thinking (and laws) behind it went way beyond the banks and into all regulated institutions in the financial ecosystem.
While this all seems very process driven and, well, dry, open finance is having a massive impact on how the global financial system operates and how customers (both individuals and businesses) will experience it in the future.
How will that experience change? Let’s look at a couple of key points.
Open finance allows financial institutions to leverage customer data to offer personalized services. For example, if you are a business in the US regularly making and receiving payments into Europe, you may be using a national bank (or software like an expense platform that leverages that banks’ payment rails) that doesn’t have a presence in the US.
This means your business will experience higher fees and slower, less transparent service.
With Open Finance, that bank or software provider can partner with a regulated third-party in Europe (let’s say a fintech like TransferMate), embed the fintech’s capabilities into their services through API integrations, and then simply ask their customer if they want to ‘switch-on’ the service and receive the benefits.
The financial institution in the US is able to offer a better, lower cost service, the fintech third-party in Europe benefits from increasing money flows through their architecture, and the customers benefits from that better, lower cost service.
There are countless other types of examples like this, but fundamentally it’s all about collaborating openly to remove friction points and create win-wins all around.
In the example above, we mention how open finance can result in lower-cost payments, but it’s worth diving in to the ‘why’.
With traditional correspondence banking, a payment from the US to Europe may travel through several banks and third parties before it reaches its destination. Why? Because the global financial network is actually a series of agreements between different banks to accept, and move on, each other’s money.
If you are sending a payment from a local bank in Missouri, for example, they may have to utilise an agreement they have with a national bank based in New York which has links to another national bank in Paris, which then has an agreement with a local bank in Marseille.
At each point in the chain, that handler may take a cut of the money (which translates into those bank transaction fees) and charge FX commissions on the payment as well. Beyond the expense, this can often result in that payment made in Missouri having a shortfall when it lands in Marseille, leaving to friction between the two parties, follow-up payments and annoying reconciliation down the road for both finance teams.
Open finance eliminates all that by making payments direct from A-B through open collaboration, removing significant pain-points when moving money around the world.
Without security and strong regulation, nothing works in finance. We’ve seen in the crypto world over the past year that without it, the whole infrastructure can end up sinking into the quicksand it was built on.
Open finance utilizes strong encryption protocols and authentication processes to ensure that the customer’s data is kept safe, and the customer is in control of who can access their financial data. It also requires financial institutions to adhere to strict security standards and adhere to data protection regulations.
Beyond the regulation, collaboration between banks and third parties like the fintech community has resulted in automated security systems (often led by AI technology) that can sniff out payments that are likely fraudulent, halt them, and flag them to human operators.
A note of warning, however. Any system that shares information in any way will always incorporate an element of trust. We’ve seen many examples of institutions (financial or otherwise) sharing information with unauthorized third parties. Without strong internal protocols and legislation backed-up with genuine repercussions for organizations that fail to protect their customers, the strong foundations people have built can quickly get that quicksand feeling.
Do you have a bank account? If you live in Europe, the answer is almost certainly ‘yes’.
As of 2021, only around 3.5% of the European population over the age of 15 doesn’t have a bank account. In Latin America, that figure is closer to 70%. Almost 58% of point-of-sale purchases in the continent are still made in cash.
There are obvious benefits of being ‘banked’, such as financial security, access to credit, security against risk of theft or loss etc., so reducing the number of unbanked people is a valuable societal goal.
Open finance improves financial inclusion by making banking services more accessible and affordable for more people, especially those who are underserved by traditional financial institutions. By providing access to third-party services, such as payment services, people can manage their money more efficiently and more cost-effectively.
If we think about the services around us, and what we complained about most when it came to the customer experiences we had with them, banking and financial institutions would be right up there. Indeed, they often top the ‘worst customer satisfaction level’ surveys.
This wasn’t always because of apathy towards customers or inertia because of their dominant position (although both certainly played a role) but because of the necessary restraints put on financial institutions by the regulations in the regions where they operated.
Technology has been able to break down the concerns and satisfy the lawmakers that open finance innovations are safe and a benefit to customers.
While the days of beautiful automation and seamless processes whirring in the background without human intervention are still a while away, we can at least watch the incredible progress being made, cozy in our wooly jumpers.
If you’d like to learn how TransferMate utilizes Open Finance technology and processes to benefit our partners in financial institutions, contact the team today.
It’s been nearly three years since Brexit moved from a political conundrum into a real-world dynamic. When we read articles back from the 31st of January 2020, the predictions for what would happen were as wide and as varied as when the vote occurred back in 2016.
Now we have a bit of distance and some hard evidence to look at; how has Brexit impacted the international payments space? How have businesses adapted to the new circumstances, and what has the impact of those changed circumstances been?
If the phrase ‘red tape’ wasn’t the Oxford dictionaries’ word of the year at least once since 2016, the editors missed a trick. It was a constant banner headline, with countless examples from businesses of all sizes having to wade through a whole plethora of new rules and regulations.
This has hit British businesses particularly hard, and particularly those small and medium businesses that didn’t have the capacity or expertise to create new trade channels.
Businesses were forced to adjust their payment processes to accommodate new banking regulations, while new taxes and tariffs were being imposed on imports and exports, further complicating international payments.
Despite some posturing in the media, the EU and UK policymakers have generally remained keen to find solutions to removing frictions in trade. A common solution has been for the UK to build a ‘mirror’ of the infrastructure required to trade as an EU member. In other words, they’ve recreated UK versions of the EU rules they were following pre-Brexit. While this infrastructure costs the UK to both build and run, it does help businesses looking to trade into the respective regions.
The bottom line is that increased regulations and complexity make international payments more costly and time-consuming. Businesses have had to adjust their payment processes to accommodate the new regulations, while also having to invest in technology to ensure their payment processes are secure and efficient.
Hot on the heels of increased regulations was the introduction of taxes and tariffs. When the UK was in Europe, goods could be freely traded between member states. That came to a grinding halt.
With the introduction of taxes and tariffs on imports and exports, goods have become more expensive, and businesses have had to absorb the costs. Sometimes it has been prohibitively high and, combined with the extra red tape, trade has fallen dramatically.
A study carried out in 2021 analysing trade between the EU and the UK estimates that Brexit reduced trade by close to 20% in both directions.
For UK businesses, this is a global problem. Since Brexit, the UK has signed trade deals and agreements in principle with 71 countries as well as the EU. However, these agreements mostly use that ‘mirror’ principle of copying previous trade deals the UK had with these countries while in the EU.
At best then, in cases where agreements have been made, UK businesses have yet to benefit from the ability of the UK to negotiate individual trade deals. What’s more, an agreement with the US still looks like a distant prospect.
The effect of all this is to potentially increase costs of trade (and therefore international payments) in those countries without agreements, without receiving any benefits in those ‘rollover’ agreements.
While a direct political line can certainly be drawn from the Brexit vote to the government of Liz Truss and Kwasi Kwarteng, their economic policies were not a direct result of Brexit itself. Those policies were, however, in pretty much everyone’s eyes, disastrous.
While that September to October period of her government was the most headline-grabbing period of economic volatility, the UK hasn’t had much respite in that regard since 2016.
The UK’s decision to leave the European Union has undoubtedly created volatility and uncertainty in exchange rates.
In June 2016, the month of the Brexit vote, the British pound was 1.43 against the dollar. Today, it stands at 1.23. This has made imports from the US more expensive, while exports from the UK have become more attractive. Hedging against these fluctuations, and planning for them, is again a difficult (and potentially costly) proposition for most businesses.
As a result, businesses that rely on international payments have had to adjust their foreign exchange strategy to minimise their exposure to currency risk. While the coin has two sides, stability is usually the path most business leaders would choose.
One of the wins in the post-Brexit payments landscape is the UK remaining in the SEPA (Single Euro Payments Area). SEPA transactions allow customers to make quick and inexpensive cashless euro payments to anywhere in the EU, plus Iceland, Norway, Liechtenstein, Switzerland, Monaco, San Marino – and the UK.
Unfortunately, there have been several cases where some companies refuse SEPA payments and direct debits from UK IBAN accounts. This is illegal and should be reported.
Despite remaining in SEPA, there have been extensive reports from UK businesses stating that international payments have become more expensive. J.P. Morgan found that ‘some European banks now treat SEPA transactions between the UK and Europe as cross-border from a fee perspective, resulting in additional bank charges’. Another report found that ‘the UK is no longer covered by EU regulation limiting interchange fees, which has led to some card acquirers increasing fees that EU merchants must pay when receiving orders from the UK.’
Brexit has not been easy for businesses. It’s complicated international payments, added costs in many areas, and increased economic volatility.
There are though, reasons for optimism.
Calmer heads have generally prevailed within the trade negotiation teams in all respective parties. The policy of ‘copy and pasting’ previous trade deals, infrastructures, and processes has allowed businesses to keep trading in a relatively stable manner in a lot of cases.
The grand promise of Brexiters – that increased sovereignty will allow for more bespoke and beneficial trade deals – has not come to pass, but there is logic in the claim. Successful countries have chosen that path. The issue right now is that path takes a long time to build and is usually built organically – not in the hot fires of political debate and economic stability.
The problem when it comes to increased sovereignty and international payments is that generally the more jurisdictions a payment goes through the more complex, more expensive, and slower they are.
A final reason for optimism is the increasingly positive impact advanced payment technology is having on world trade. Businesses can access new payment infrastructures to speed up international payments, lower their costs, increase transparency for all trading parties, and do it all in a secure, regulated environment.
While the three years that have passed since Brexit came into being have been tumultuous, and the road ahead looks long and pretty bumpy in places, there is at least a road with most people agreeing on the destination – allowing businesses to trade freely across the globe.
Contact our team now to discover how your business can leverage TransferMate’s technology, reduce costs with an extensive global payments network, and speed up international transfers, all in a fully regulated environment.
How does money move from one bank account to another when making international payments?
It’s an easy question to dismiss in this digital age. Numbers seem to dance on our phone and desktop screens, quickly losing the meaning behind them, and we no longer see the infrastructure beneath the surface carrying out the tasks.
Taking cash out of a bank in a big sack and then carrying that sack to another bank in another country is obviously nonsense, but the reality is that is what’s happening millions of times a day, except that the big sack of cash has been replaced by computer code.
One of the pieces of infrastructure used to communicate this code is the SWIFT messaging system.
SWIFT is a vast messaging network banks and other financial institutions use to send and receive information, such as money transfer instructions (Investopedia). It also acts as a global standard for these messages, meaning the instructions are understood by all participants across the world.
You can think of it as a global game of pass-the-parcel. When a bank in Country A wants to send money on behalf of its client to Country B, it will utilize the SWIFT messaging service. SWIFT assigns the banks that use it a set of numbers, along with numbers for the country, the region within that country, and the local branch it’s ultimately going to – this is what we know as a BIC code.
SWIFT doesn’t move the money or participate in the actual clearing of transfers at all; it simply provides the network that allows instructions to be sent on where the money should go.
At a base level, a financial institution can transfer money in and out of a country if they have a banking license for that country – this is the same for banks and fintechs.
The way the banking industry developed, however, meant that most banks are essentially national banks operating within one country i.e. they only have a banking license for the country they are based in. The way they operate outside of that country is having an agreement with a bank within the other country they want to do business with.
This is where SWIFT comes in – they act as the global messaging service between those national banks who want to make international payments.
Fintech takes a different approach by creating their own parallel payment network. This is based on acquiring many individual banking licenses around the world (a long and arduous process) and then combining them into a single network.
They then replace the complex SWIFT system of messaging between banks with a direct transfer within their own platform. This allows them to create more flexible networks as they own the infrastructure from one end to the other – their network, their rules.
This brings us to the crux of the matter – how does the fintech infrastructure system compare against the SWIFT messaging system when making international payments? Let’s look at it through 5 key parameters – Cost, Speed, Transparency, Security and Usability, paying particular focus on the end-user.
Cost
SWIFT is typically more expensive for end-users versus going through a fintech payment rail. This is because a SWIFT message can often go through several banks, several branches of that bank, and several countries. At each stage, the handler can charge a fee, both a straight-forward banking fee but also an FX commission for exchanging currencies.
As well as this, banking fees are typically higher than a fintech would charge for sending an international payment.
The fintech infrastructure means payments go directly from payer to payee, and both the charges per transaction and FX rates are low compared to the industry standard.
Winner: Fintech
Speed
This is a big one. As we said before, the SWIFT messaging system can go through multiple touchpoints on its journey from payer to payee.
A whole plethora of delays can happen here, but even though most transactions will go smoothly, it often takes a few working business days for the money to land in the intended account.
With the integrated infrastructure fintech’s have built, even international payments are essentially real-time in a lot of cases because they are all travelling within the same system.
Winner: Fintech
Transparency
Transparency is another area where that integrated fintech infrastructure really pays off.
Imagine the SWIFT messaging system as all the international shipment companies working together to deliver your package. DHL picks up your item from the company that you bought it from, bring it to a FED Ex depot, UPS pick it up from there and bring it to the port, DHL ship it to your country, and then a local delivery service drops the package to your door.
Now, imagine having to track that. Now imagine something going wrong and trying to figure out where your package is by having to call all the companies.
We are now in a world where people want to order something and then track it at each stage of its journey in real-time. Because all international payments going through a fintech are going through a single ecosystem, both the payer and payee can track that payment like when they order a new lamp from Amazon.
This not only helps with keeping suppliers happy (and with fewer questions) it also helps the reconciliation process if things go wrong (such as the full amount not arriving due to unexpected fees).
Winner: Fintech
Security
A fundamental part of any financial system is the security underpinning it. If systematic risks aren’t reduced enough to be perceived as negligible, no business would use the system to send their hard-earned money.
The underlying truth here is that these systems are as secure as each other, mainly because A) everyone has to adhere to the same laws and regulations and B) every financial institution, including fintech’s, needs to have significant security in place to give their customers peace of mind.
A happy byproduct of the fintech revolution is that both sides have been pushing each other on the security front. As well as this, there is a healthy amount of collaboration and information sharing, especially around predictive and automated security systems. The priority on all sides is to keep the bad guys out.
Winner: Draw
Usability
Usability is a tough metric to compare as all systems are different. Remember, the SWIFT messaging service does not hold any funds of its own, it simply relays messages from one financial institution to another. This means that usability all comes down to the system the user has to communicate that message to SWIFT or to the fintech.
This is another area where fintech’s have been pushing the envelope in terms of making these systems user centric. This has led to traditional platforms investing to catch-up. It’s a win-win for the user.
Winner: Draw
Currently, 98% of all money transfers go through the SWIFT messaging system. This is a hugely dominant position in the market, and one that is not likely to be replaced soon.
The dominance of SWIFT could be seen in the Russian sanctions, where removing their banks from the SWIFT messaging system was debated more than almost any other move. This demonstrates how entangled the global financial system is with SWIFT, particularly at that governmental and institutional level.
This does not deter fintech’s however, because they know that their system has significant benefits for the user. Banks and financial institutions recognize this themselves, and partnerships and collaborations are very commonplace.
This direction of travel means SWIFT will remain dominant for some time to come, but we will probably see its market share diluted slowly but surely, with this competition hopefully driving better customer experience. This dilution may come in the form of direct replacement, or an amalgamation of infrastructures.
How will money move from one bank account to another in the future? That’s up to the market to decide.
If you want to learn more about how fintech’s can help your business move money faster, quicker and cheaper versus traditional methods, get in touch today.
In a sentence: Transact Campus was looking for a white-label solution that would allow their university clients to offer a seamless, transparent and cost-effective way for international students to pay for tuition.
Transact by the Numbers:
| 12 million | $45 billion | 1,750 | 38+ years |
| Students served | Transactions facilitated | Education institutions partnered with | Of higher education focus |
Times have changed a lot since Transact Campus started specializing in the higher education market 38 years ago. It wouldn’t be until nearly a decade later that student campus ID cards were introduced in the US, and a digitally integrated campus was just an ambition for education administrators.
Transact has been at the forefront of the dramatic change we see today in how students engage and interact with their campus and the university itself.
They were the first to work with Apple and Google to integrate a contactless student ID credential on smartphones and watches so with a tap of their phone, students can make purchases or securely access dorms and classrooms.
Transact helped pioneer campus commerce through point-of-sale and mobile ordering. On top of that, Transact Integrated Payments solutions – focused around tuition and fees – was aimed at making campus payments a seamless experience for the students and their families.
The challenge for Transact was bringing this frictionless and transparent experience of tuition payments to international students wanting to study in the U.S. Previously, international students would have to leave the Transact ecosystem to make a payment, meaning the data was split between two systems – both for the student and the the school administrator.
“The payment would initiate through our system, but we would then have to hand it off to a second provider” said Laura McLaughlin, Executive Vice President, Transact. “So, we wouldn’t know if the payment actually went through. It meant a lot of follow-up with the second provider asking for reports and manually reviewing spreadsheets to confirm the payment was processed. Basically, a lot of reviewing and reconciliation.”
What’s more, the old system meant international student payments were subject to high banking fees and significant FX (foreign exchange) charges – something Transact wanted to eliminate for the students.
Utlizing TransferMate’s global payments infrastructure and technology, Transact is able to co-create a fully integrated international payments solution. Through API integrations, TransferMate sat in the background as a white-label solution. For the students, this meant they no longer had to register and use two separate systems to make a payment. This meant a lot of positive changes for the Transact team.
“It’s really painful to have to reconcile payments from two different systems and there is a lot of follow-up involved. Sometimes, because the systems weren’t fully integrated, the student would overpay which causes its own administrative challenges. It could become a painful process. And we thought, “We’re in the payment space. This is what we do. We facilitate over $45 million dollars annually. How can we make this process easier for our clients?”
So, Transact engaged with TransferMate to create a bespoke API integration that would solve these issues around international student payments. The result was ‘Transact International Payments’ which provides Transact’s university partners a streamlined way to accept international tuition payments in multiple currencies.
“The building and implementation of the API solution went really well. We learned together as we went, and we both had to develop things on each side to make it work. In order for us to succeed, we needed to have a trusted partnership, be transparent with each other, and agree fully on the timeframe for implementation. I think it was a great partnership because we both had the singular focus on getting this up and running, making it really attractive and seamless, and solving those pain points for our clients.”
The backbone to the system was the global payments infrastructure TransferMate had built up over many years. By obtaining banking licenses in over 90 countries, they allowed the Transact International Payments solution to process payments from 201 countries and 141 currencies.
Leveraging this infrastructure, the API integration was built to match Transact’s system and the requirements of their finance team, making the whole process seamless for all stakeholders – from the students to the universities and for Transact itself.
And, because this global payments infrastructure didn’t use the traditional banking system to process international student payments, which often means the money travels between several different banks and third-party entities (each charging a fee), the cost to the students of making the payment was significantly reduced.
As the money moved through a single system, this also meant transparency for everybody was increased dramatically. The student, university and Transact could see when a payment was made, when it was accepted, and any steps in between.
“I think we have taken the friction out of the process for our university clients and have made it a lot easier to see transparent payments through a singular system. We now fully understand and can track where that payment is, and when it’s coming in. And transparency extends to the students and their parents, particularly in making it easier to what their options are, and not have a disparate experience between multiple systems. I also would say that the economics have been beneficial for students.”
The Transact International Payments solution has been welcomed enthusiastically by the university community, solving some long-held problems in the tuition payments process.
“It’s clearly evidenced that we’ve solved a real pain point because, even though we’re in relatively early days, we have over 100 schools signed up for the Transact International Payments solution and only in a few short months. Our clients clearly see the value and benefit to themselves and their students.”
While the breadth of the challenges was significant – by delivering a more transparent, cost-effective, secure, and seamless experience for campus operations and students – all the objectives have been met through the partnership.
“We needed to ensure we had the international reach for this to be effective for students. With TransferMate’s global footprint, we were able to not only offer the service to the top 10 countries with students coming to the United States, but countries with smaller populations as well. The cost factor was critical for us too. We needed to be sure that the service was really competitive and the most economical choice. Finally, we really wanted to work with somebody that we felt we could have a true strategy partner, not just a– we weren’t looking for a vendor. It was really important for us that we worked together, that there was longevity in the relationship, that there was trust in that relationship, and that we had ease of working together.”
“I definitely would recommend TransferMate. They are easy to work with, transparent on how things are going, and from a project management perspective, we’ve had unbelievable support in getting things done. At the end of the process, we’ve been able to build something great that will benefit students and universities alike – you can see that from the take-up.”
Laura McLaughlin, Executive Vice President, Transact
To join the 100+ universities that have taken advantage of the Transact International Payments solution, click here to request a custom demo.
In a sentence: American College Dublin were spending too much time tracking and managing payments – they needed a system that would bring significant time savings for the finance team. They got even more.
The American College Dublin (ACD) is located in the birthplace of Oscar Wilde. Across the street, a statue of the great writer sits relaxing on a giant stone, looking across to where he spent his youth. In the tradition of their former resident, American College Dublin is primarily a liberal arts college.
Rather than being a place for Americans to study in Dublin, the ethos behind the university was to bring that liberal arts style education to the students of Ireland. Over the years, it’s grown both in size and reputation, and has indeed become a place for international students to come to Ireland and study. In recent years, Buzzfeed listed it as one of the top-five best places to study abroad.
The challenge for American College Dublin when it came to their accounting process was two-fold; 1) tracking and managing payments from across the world, and 2) their strategic plan to expand globally.
Simply tracking the payments was a struggle, leading to significant administration time being spent on tracking the source of payments and where they were in the banking system. Secondly, the cost to the students of making the payments often led to a shortfall in the amount received into the ACD account, leading to further time being spent on follow-up with the student and also adding complexity to the reconciliation process.
“A lot of the pain came down to tracking the payments”
“Our student body essentially breaks down into a third Irish, a third American, and a third from the rest of the world’ says Rowland Crawte, Director of Administration, American College Dublin. ‘A lot of the pain came down to tracking the payments. We’d spend an awful amount of time figuring out where payments came from, who was sending them, and for what. You’d have situations where you have a student whose uncle’s company is paying for them, or something along those lines. Trying to figure that all out from very little information was very, very difficult and time consuming.”
Another challenge came as American College Dublin was expanding its presence across the world, opening up a new college in Bulgaria. This meant the finance team needed a simple and cost-effective way to make and receive payments for the school.
“We also have a truly international faculty coming in to the school – composers from Japan, America, Italy, South Africa, and many more – which meant we had to set-up an easy way to pay these people, and not to be too concerned about where they were coming from. We wanted to focus on the quality, not the process.”
The final challenge was the visa process for students – usually requiring proof of payment of the tuition to be granted. In the past, as the process was slow and time-consuming, any delays there would also mean a delay in the visa application for students. This again led to more administrative support being required to manage all the issues (and complaints) coming from these delays.
With TransferMate’s platform, American College Dublin were soon up and running with all the requirements they needed to solve their issues.
“Everything was very simple. TransferMate already knew how the approach works with international students so it was just a case of giving them our regulatory information needed to set-up the account. The actual technical implementation was utterly painless. It was basically 24 hours and we were switched over.”
The system itself made tracking and managing international payments so efficient that American College Dublin started using it to process domestic payments as well.
“It’s become our one true source! We’re not just using this for international students, we’re using this for all our payments. And it’ll make our life a lot easier”
“It was so great having that one place where all the information lay. So, if somebody says “Oh, I’ve paid” I can simply log-in and within a few seconds I can see if they have. It’s no longer a case of me having to go in to look through one bank account or check the US bank account or anything like that – I just go into one system. It’s become our one true source! We’re not just using this for international students, we’re using this for all our payments. And it’ll make our lives a lot easier.”
The cost-effectiveness of the system was also welcomed by the team. As TransferMate’s payment rails don’t use the traditional banking system (where payments go through many intermediaries, each taking a fee for their services), and instead utilize the payment rails they have built themselves, the banking and FX fees were much lower.
“The old system was hitting our bottom line – there’s no question about that. We had tried many, many ways of doing this before TransferMate and we thought we had gotten the best rates we possible could. It was only when the TransferMate team explained how they operated that the penny dropped that there was this whole new way of doing this. At first, the decision was made on the basis of this – cost – but it’s really been the time savings that have made such a difference to how we work, and to our bottom line.”
The systems success in Bulgaria has also encouraged the team to further expand internationally.
“We have a couple of plans for courses that are aimed internationally. This system, again, allows us that option. That just wouldn’t have been that simple before.”
For visa applications, it hasn’t just sped up the process for students and made it easier for all parties, it’s helped the university proactively protect themselves against money-laundering schemes – a common threat when it comes to international tuition payments.
“It’s really helped us tighten up the security side. Before, we had requests from people saying, “Oh, can you transfer that back to my cousin in the UK?”, or something similar. With TransferMate, it’s very, very clear – you pay from this bank account, you are refunded to that bank account. Before we were chasing up on these things, now we’ve eliminated all that.”
It wasn’t just the finance team that benefited from the TransferMate system, it was the whole college.
“It’s increased the revenue of the college by about 3%, just purely on the savings we make on bank charges and credit card charges.”
“It’s increased the revenue of the college by about 3%, just purely on the savings we make on bank charges and credit card charges.”
The amount of time saved by the finance team was also very significant.
“In terms of processing time; I would say per payment we’ve probably knocked 20 to 30% off the amount of time that we would normally have spent chasing up those things.”
With the TransferMate system in place, the American College Dublin have added revenue to the bottom-line, saved substantial administration time on the payments process, enhanced the student experience, saved the students money, and added greater protection against fraud and money-laundering.
“I’d wholeheartedly recommend TransferMate. Besides the time and cost savings, and the better student experience it helps us deliver, the customer service is impeccable. If I have any issues – and there haven’t been many – there’s always a response. If anyone is thinking about it, I’d say start the conversation as soon as possible.”
Rowland Crawte, Director of Administration, American College Dublin
If you’d like to learn how TransferMate can save your university time and money when processing payments, get in touch with the team here.
When the Knights Templar set-up what is often regarded as the first international banking system, the church didn’t allow them to charge interest. When a pilgrim lodged money in a Templar bank in London, and collected it in Jerusalem, they received every penny of their original lodgment.
Of course, the Templars got around this through a variety of loopholes, but it wasn’t for another couple of centuries that modern banking methods had interest and fees as standard practice.
This system built was built upon and expanded, middleman upon middleman, as the world became more globalized and interconnected. By the time we got to the latter part of the 20th century, the global payments system was a tangled spiderweb where money would be routed from the payer to the payee through several banks and third-party handlers – all taking a cut as it passed through their hands.
Foreign exchange rates added a layer of complication, causing headaches for finance departments trying to predict if the amount they sent across an international border would arrive at the destination as expected.
This has all changed.
With modern fintech infrastructure, businesses can cut out layers of those middlemen, using new payment rails to reduce FX fees and banking costs when making international payments.
It’s important when looking at this area not just to look at the ‘what’ but also the ‘how’. Once you understand how it all works, the solutions (and their benefits) become obvious.
Traditional correspondent banking is built on that network created over centuries. It’s complex and uses multiple handlers along a payment chain. If you send a payment from the US into Australia, for example, that payment may go through several banks, each taking their fee for moving the money through the chain.
A survey focused on international payments showed that 48% of respondents were unhappy with the fees charged, while 80% of businesses would consider changing providers to reduce costs.
Saxo Payments
And it’s not just those fees that cost businesses; it’s the time delays, lack of transparency, and reconciliation issues that goes along with this type of payment process.
With today’s fintech payment solutions, businesses can access payment rails with much less steps along the path. Instead of going through multiple banks and third parties, they go directly from one country to another.
How is this possible?
Basically, a new international payments infrastructure has been created over the last decade or so. These fintech’s have gone out to each individual country and secured regulatory licenses to operate there, allowing their clients to access these payment rails themselves and generate all kinds of benefits.
Because they have put in the groundwork in creating this simpler and more straightforward infrastructure, they can charge those clients much lower fees than traditional banking methods.
Additionally, because they control this network their clients can have complete transparency over their payments, seeing it move (often instantaneously) through the chain at every step. It also helps reduce administration time because there are never any follow-up payments to make up shortfalls due to unexpected bank charges, and it reduces support questions from suppliers enquiring where their payment is.
Accounts payable and receivables is a complex business at the best of times. Every step in the chain is a potential for more complexity, making it difficult to reconcile payments and resolve errors when they happen.
This leads to significant resources being put into administrative work, requiring the need for more staff and, maybe more importantly, staff not working on more productive activities.
“Our platform allows the user to upload one file and request up to 10,000 payments at once in multiple currencies”
David Hughes, Chief Commercial officer, Transfermate
Beyond potential errors, even large enterprises will often be using multiple platforms to record invoices and reconcile payments, leading to more administration time connecting the dots, and leaving financial leaders in the dark on a daily basis. This also makes mass, batch payments much harder to manage and execute.
Modern fintech platforms solves many of these issues.
By using API integration and other embedded technologies, fintech’s offer businesses platforms that can significantly reduce administration time, eliminate errors, allows for same-day payments in many cases (with receipt confirmations), gives the user the ability to make mass payments in multiple currencies, and give them visibility over the process in real time.
This hasn’t been the result of a single breakthrough. It’s been achieved through innovative technical engineering combined with that payment’s infrastructure built up over years of diligent work.
Many of the same reasons that modern payment rails reduce banking fees also apply to the reduction of FX fees, with a few nuances and additional benefits.
Those same steps along the chain that generate banking fees are also vulnerable to detrimental exchange rates and handler commissions. The outcome is also the same – additional costs to the bottom-line and the payment sent may not be the payment received.
SMEs are often charged up to 4% (and higher) using the more traditional payment providers
Money mover
By using the modern payments infrastructure, and its shorter payment rails, businesses can take advantage of lower fees. But how do these platforms offer lower fees? Put simply, because the money goes through less steps on the chain due to the infrastructure they’ve built, the fintech providers are not paying the normal correspondent banking rates and therefore can pass on those lower fees to their clients. When that relationship gets to a certain scale, it can even mean that clients are offered a percentage of the FX commission back to them, generating a revenue stream from their international payment activities.
Visibility over how much cash a company has, where it sits, and what currencies it is divided into, can be a more difficult task than it would seem at the surface level. This is particularly true in large, multi-national enterprises.
The result of this can be the inefficient allocation of resources and being in danger of getting caught by currency fluctuations.
With modern solutions, company’s can gain much more visibility over their international currency holdings. They can manage payments in one account, view all their holdings on one platform, lock in currency rates for future payments, and allow customers to pay in their local currency.
This leap forward allows treasury, procurement and finance departments work together more efficiently and transparently, allowing an agile allocation of resources depending on the business needs.
When we look back at those first international payment networks, controlled by knights and popes, it’s difficult to reconcile them with the systems we have today.
It’s hard to imagine a time without high handling fees and commissions on currency exchanges, but in a lot of ways we’re moving closer to that original system than ever before. The pilgrim that took their promissory note thousands of miles over border after border, only to be given the same amount they put in at the start of their journey when they reach their destination, is analogous to the journey our international payments go through today.
Through building a new banking and payments infrastructure, and combining it with innovative technologies, modern fintech’s offer businesses a new way of payments very similar to the old one – albeit a lot quicker than carrying it all the way yourself.
To learn how TransferMate can reduce your banking and FX fees when making international payments, get in touch with the team.
TransferMate, the world’s leading provider of payments infrastructure as a service, and WEX, a global financial technology service provider, today launched new capabilities that simplify how businesses of all sizes execute complex international payments. Through the partnership, TransferMate has integrated its leading payments technology directly into the WEX system. WEX clients will be able to execute seamless international transfers with ease, and experience new levels of simplicity, security and speed through TransferMate’s extensive global payments network.
With the custom integration, WEX – known globally as a leader in corporate payments – will be able to expand its offering to give clients domestic, regional and international transfer capabilities via TransferMate. The partnership shows a commitment by both organizations to improve the payment options for global companies, enabling international transfers at lower costs, higher speeds and with greater reconcilement benefits.
Sinead Fitzmaurice, CEO of TransferMate, a subsidiary of Clune Technology Group, said: “We are excited to join forces with WEX to provide the most efficient payment process possible for global businesses. At TransferMate, we are committed to making international payments easier than ever before and a key way to accomplish that is through strategic partnerships with likeminded, cutting-edge companies in the industry, like WEX.”
The TransferMate and WEX partnership streamlines payment management and reconciliation for accounts teams, allowing for full transparency and one login to make fast and secure payments. With the new capabilities of the WEX payments platform, businesses can take control of their business spend, with tracking, insights, security and automated reconciliation.
Jay Dearborn, President of Corporate Payments at WEX, said: “Through the WEX and TransferMate partnership, businesses will be able to make domestic, inter regional and cross-border payments by paying locally in their own currency, with funds settled locally in the beneficiary’s currency. As WEX continues to unify global AP to AR payments processes, we are thrilled to provide new flexibility and payment rail choice to our customers–helping them save both time and money as a result of simplifying the traditional transfer process.”
About TransferMate Global Payments
TransferMate — a subsidiary of Clune Technology Group founded by Terry Clune — is the world’s leading provider of payments infrastructure as a service, enabling companies to send and receive cross-border payments faster and easier. TransferMate, under the leadership of Clune and CEO Sinead Fitzmaurice, has built one of the largest portfolios of payments licences worldwide, including in 51 US states and territories, to support trading in 162 countries.
Leading banks, fintechs and software providers partner with TransferMate to offer an enhanced user experience for their business customers. The company has created bespoke integrations for banks like ING and AIB, who are also investors in the company, and Wells Fargo and software providers such as Coupa, SAP Concur, Tradeshift, Workday, etc. The TransferMate API solution allows partners to digitalise the payments flow within their software, enabling all businesses to achieving significant time and financial savings. For more information, visit www.transfermate.com.
About WEX
Powered by the belief that complex payment systems can be made simple, WEX (NYSE: WEX) is a leading financial technology service provider across a wide spectrum of sectors, including fleet, corporate payments, travel and health. WEX has offices in more than 10 countries and employs more than 5,200 associates around the world. WEX fleet cards offer approximately 16 million vehicles exceptional payment security and control; purchase volume in travel and corporate solutions was $20.9 billion in 2020 and was processed in over 20 currencies; our health division provides consumer-directed healthcare technology and services, and reached an estimated 34.3 million U.S. consumers as of March 31, 2021. For more information, visit www.wexinc.com.
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