The globalisation of businesses has significantly boosted cross-border payments, particularly in the B2B landscape. As companies expand, they require efficient, secure, and fast methods to transfer funds internationally. Traditionally, banks have dominated this space, but the rise of fintech companies has disrupted the landscape. This blog explores the evolving roles of banks and fintechs in B2B cross-border payments, their advantages, challenges, and how businesses can benefit from both.

The Traditional Role of Banks in Cross-Border Payments

For decades, banks have been the primary facilitators of cross-border payments. They offer comprehensive services to businesses, including foreign exchange, global accounts, and regulatory compliance support. Their strength lies in their:

• Established Infrastructure: Banks have long-standing relationships with other financial institutions worldwide, providing businesses with access to global banking networks.

• Trust and Security: Businesses have traditionally trusted banks with large international transactions due to their regulatory oversight and compliance with global financial standards.

• Liquidity and Capital: Large banks often have better access to liquidity, which is crucial in managing large cross-border payments. They can also provide lines of credit, bridging gaps when payments take time to settle.

However, despite these strengths, banks are not without limitations:

• Slow Processing: Traditional banking methods rely on SWIFT and correspondent banking networks, leading to delays in transaction processing, often taking several days.

• High Costs: Banks typically charge high fees for cross-border payments due to currency conversion, administrative costs, and intermediary bank charges.

• Limited Transparency: Businesses often have little visibility into the status of their payments, which can cause uncertainty, especially with large transactions.

The Rise of Fintech in Cross-Border Payments

Fintech companies have identified these pain points and disrupted the cross-border payment landscape by leveraging technology to offer faster, cheaper, and more transparent solutions. Key innovations brought by fintechs include:

• Speed and Efficiency: Fintechs use blockchain, artificial intelligence, and automation to speed up payments. They bypass traditional networks, enabling payments to be processed within minutes or hours rather than days.

• Lower Costs: By reducing the reliance on intermediaries, fintech companies significantly cut down transaction fees. Many fintechs also offer better foreign exchange rates compared to traditional banks.

• Transparency: Most fintech solutions offer real-time tracking of payments, providing businesses with end-to-end visibility and helping them manage cash flow more effectively.

Which Should You Choose: Banks or Fintechs?

1. Speed:

• Banks: Transactions can take several days, especially when multiple intermediary banks are involved.

• Fintechs: Payments are often near-instant, thanks to more efficient technology and fewer intermediaries.

2. Cost:

• Banks: High fees due to complex infrastructures, currency conversions, and involvement of correspondent banks.

• Fintechs: Lower transaction fees, with competitive FX rates and fewer intermediaries.

3. Transparency:

• Banks: Often lack real-time tracking, leaving businesses uncertain about the status of their payments.

• Fintechs: Provide transparent, real-time tracking of payments, giving businesses full control over their financial operations.

Choosing between banks and fintechs for B2B cross-border payments depends on your business’s specific needs:

• For large enterprises with complex financial operations and regulatory requirements, banks may still be the best option, especially if they require large-scale liquidity, credit lines, or extensive financial services.

• For SMEs or startups looking for fast, affordable, and transparent solutions, fintech companies provide a more agile and cost-effective option.

Conclusion

As the cross-border payment landscape continues to evolve, businesses are no longer limited to traditional banks. At Infinity, we offer faster, more cost-effective, and transparent solutions. However, banks still play a crucial role, especially for large enterprises with complex needs.

For businesses involved in global operations, finding the right balance between banks and fintechs can lead to greater efficiency and savings in their cross-border payments. By staying informed about the latest innovations and industry trends, companies can ensure they are optimising their payment strategies to remain competitive in the global marketplace.