Despite uncertainty in global markets, a study suggests that many firms in North America, Australia and the UK expect faster growth in their international markets than at home.
The first State of International Payments Report produced by AFEX, a major non-bank provider of global payment and risk management solutions polled a total of 513 corporate clients in the three regions to determine their perspectives on payments.
Among its findings, 44% of the 148 UK companies polled, which engage in international commerce, expect to utilise international payments more this year than in 2015. As a result, around one in six companies plans to start using or upgrade their online automated international payments tools in the next 12 months to increase operational efficiency, mitigate risk and reduce costs.
“Online marketplaces, such as eBay and Amazon, have brought international commerce within reach of smaller businesses, while mobile payments have opened up access to previously untapped and under-banked markets,” comments AFEX. “Furthermore, a fall in the value of the pound since the European Union [EU] referendum is making UK exports more attractive to foreign buyers.”
This greater weighting given to international payments brings with it greater complexity, with foreign exchange (FX) volatility (62%), cost (24%) and ensuring payments are made correctly (22%) all high on the list of challenges.
AFEX comments that the data supports the findings in the McKinsey Global Institute’s recent report, which asserts that almost all cross-border commerce now entails a digital component. Increased data flow, expected to rise nine-fold over the next several years according to the report, will enable more rapid movement of goods, services and financial transactions.
“It’s never been easier for UK businesses to trade internationally and despite uncertainty over the UK’s trade agreements following the Brexit vote, many are optimistic about growing their exposure to international markets,” said AFEX chief executive officer (CEO), Jan Vlietstra.
“Handling higher volumes of more complex international payments brings with it a new set of challenges, however, and as firms scale their business overseas they need to be aware of currency exchange risks and the associated costs and complexities involved when dealing with different banking systems. Automated payments solutions, coupled with currency exchange, FX products and expert advice, can help mitigate these risks.”
Just over half of the UK firms surveyed said that ease was their single biggest consideration when it comes to making payments internationally. Two in five of these said reducing the amount of time they spend processing payments was a key reason for turning to automation, with the same number eyeing reduced costs as a main driver. Just over a quarter are adopting automated payments technologies to be able to make and receive payments in real-time.
“Importers and exporters want to be able to focus on growing their business while keeping their overheads to a minimum and many are turning to automated payment systems as a result,” said Stuart Holmes, general manager for Europe, the Middle East and Africa (EMEA) at AFEX.
“Increasing globalisation means greater competition and payments is one obvious area where firms can cut costs, save time, improve service and manage their exposure to international markets more effectively.”
Over the past 12 months, 45% of UK businesses surveyed have experienced FX volatility when making or receiving international payments while 14% have experienced a delay in receiving payment. One in 10 had an international payment fail or get lost while transferring and 6% experienced fraudulent activity. Of those that experienced issues when transacting business internationally, 41% saw profitability hit.
The top five sectors Asian fintech investors are interested in are data analytics, blockchain, lending, payments and regtech, according to Gary Hwa, EY regional managing partner.
On the third day of the Singapore Fintech Festival conference, there was a focus on specific applications of fintech innovation. One was trade finance, which is clearly is ripe for a revolution.
Kicking off day two of the Singapore Fintech Festival, Deloitte Chairman David Cruikshank said that fintech is significant for three reasons. First, customer expectations of services are higher than ever. Second, barriers to entry are lower than before. And finally, financial institutions (FIs) face a threat of what a competitor might do.
The EU and US’ shift in accounting standards may bring balance sheet losses and increase credit risk, according to James Elder, director of risk services at Standard & Poor’s (S&P) Global.