by Maite Bezerra, Research Analyst at Juniper Research
In the B2B space, there are significant opportunities for agile, digital-only entrants, which can deliver effective, low-cost products to product within a relatively short timeframe.
The scale of the opportunity is perhaps greatest in underserved segments of the market, where traditional players may have eschewed operations due to a perception that the return on investment will be negligible.
For instance, there is a large number of companies operating in isolated geographical regions, especially in rural areas of emerging economies, that may not engage in international transactions for lack of access to basic banking services. Money transfer players focusing on these costumers have the opportunity to achieve significant revenues.
Incumbent Bank Strategies
Incumbent banks have been traditionally resistant to investing in new technologies in the B2B payment sector, primarily as limited competition in the space means that there has been little rationale for change. However, more recently, they have faced the competition from non-bank companies that offer cheaper services by using up-to-date automated processes, reducing the need for intermediaries.
This process of digitisation has been reactive rather than proactive, beginning with the ISO 20022, published in 2015, which is an international standard designed to simplify global business. In April 2018 SWIFT launched community consultation to initiate the migration of cross-border services to ISO 20022. Later in the year SWIFT launched gpi, a suite of cloud-based tolls that allows fast and fully traceable cross-border payments.
Incumbent banks have been traditionally resistant to investing in new technologies in the B2B payment sector, primarily as limited competition in the space means that there has been little rationale for change.
In order to catch up with the non-bank payment competitors, incumbent banks are investing in automation to lower their operational costs and thereby offer cheaper and fast services. As more traditional players follow this route, the window of opportunity for new entrants diminishes, potentially resulting in a spate of mergers or acquisitions.
The main obstacle for innovation in B2B payments is the slow adoption of digital methods by partners and suppliers, which makes the use of new payments systems impractical, due to a lack of standardisation and interoperability with existing financial systems. Therefore, vendors should invest in tools that can be easily used by partners and suppliers, along with easy implementation and integration.
Non- Bank Players
Money Corp Leads Juniper’s B2B Non-banking Payment Providers List
Juniper assessed 12 non-banking payment providers; comparing their product features, breadth of solutions and revenues, as well as overall network strength. The research ranked the five leading B2B payment vendors as follows:
- Money Corp
- Currencies Direct
Money Corp offers comprehensive platform functionalities, including specific solutions for eight different industries. TorFX offers a broad range of foreign exchange services, marketing insights and the innovative scheduling of regular overseas payments. Third-ranked TransferMate supports transactions in an impressive 134 currencies.
ACI – Leads Juniper’s B2B Payment Vendors List
In the research, Juniper assessed 15 payment vendors; comparing the relative level of their capabilities and offerings in the space. According to Juniper, the 5 leading vendors are as follows:
- ACI Universal Payments
First-ranked ACI Universal Payments recently acquired SpeedPay, a US bill payments company, from Western Union, and post-integration will augment its portfolio with financial payments direct to consumers.
Blockchain Payment Networks Gain Traction
Cross-border payments currently work in a system where a simple international transaction between company A and B results in at least 5 bilateral transactions.
Figure 1: Cross Border Payment Journey
Source: Juniper Research
With DLT networks, mainly blockchain, the originating and beneficiary banks would be able to communicate directly; reducing the process down to 2 intermediaries instead of 5. Juniper Research anticipates that this network is going to make transactions considerably cheaper. Specifically, it will require banks to be transparent about their fees on international transactions, which will be a major driver for future competition.
In our latest B2B Money Transfer research, Juniper Research found that traditional banks, as well as non-bank companies offering international money transfer, profit not only from transfer fees, but from their foreign exchange rate and hidden fees. Blockchain will cause a revolution in this process, by enabling transparent pricing at each stage of the transfer. As such, Juniper Research believes the deployment of blockchain in B2B money transfer is a critical step towards the development of a market with higher standards of transparency and fairness towards customers.
Blockchain will cause a revolution in this process, by enabling transparent pricing at each stage of the transfer.
New Standards, Blockchain Technologies Enabling Banks to Increase Transparency, Transaction Speed
The research found that established banks are in turn seeking to redress the balance through remedial measures; citing the ongoing implementation of SWIFT gpi, a new standard for cross-border payments, as a key development.
Juniper Research also argued that in the medium term, measures such as gpi Link, currently at the proof of concept stage, will reduce systemic inefficiencies and improve transparency by using blockchain platforms to initiate and complete transactions. Banks are increasingly likely to introduce digital currencies, equivalent in value to, and redeemable in, fiat currencies, to accelerate the processes.
Juniper Research Forecasts
Pureplay Digital Companies to Process $14 Trillion in B2B Payments by 2023
New Entrants Surge as Traditional Banks Struggle to Justify Investment in Backend Digitisation
New data from Juniper Research found that B2B transactions processed by pureplay digital operators will reach $14 trillion by 2023, up from $6.7 trillion in 2018, as the new entrants offer cheaper and faster services than established players in the space.
B2B Cross-Border Transactions to Reach 14.8 Billion by 2023, as Blockchain Payment Networks Gain Traction
A new study from Juniper Research found that 14 billion B2B cross-border transactions will be processed by 2023; rising from 13.5 billion in 2019, a 7% increase. This will be driven by the introduction of blockchain-based payment networks.