Because so many real-time payment networks are being developed by individual countries, they introduce friction when the payer is in one nation and the recipient is in another. That's where fintechs come in.
"A lot of central banks are encouraging real-time payments domestically," said Cecilia Tamez, chief strategy officer for the money transfer segment at Euronet, which has entered its internal international payment system into the race to connect real-time transactions. "But there isn't a universal way to do it internationally."
Euronet is among the organizations that are trying to move funds quickly for international transactions. Since real-time processing is still relatively new, banks have an opportunity to capture share in this market, but they lack the connections to quickly reach new countries, particularly in emerging economies, according to Tamez.
"Banks have an advantage in preexisting relationships with consumers and businesses," Tamez said. "But they are often missing the product that enables fast cross-border payments."
Other organizations are working to establish their own platforms for real-time cross-border payments.
The boost in the transfer ceiling — to $1 million from $100,000 — is opening new use cases for firms such as Dwolla that connect to the transaction rail.
Fintechs such as
Euronet, a Leawood, Kansas-based digital payment company, recently made its Dandelion payment platform available, and has recruited a network that includes 4 billion accounts and 500,000 retail locations in 170 countries. This allows it to support real-time cross-border payments to about 81% of the world's GDP, according to Euronet.
The overall cross-border payment market is on pace to reach $156 trillion in 2022, according to
"We have seen so much innovation in domestic payments, and cross-border has lagged a bit, at least in adoption," said Erika Baumann, director of commercial banking and payments for Aite-Novarica, adding banks are getting disintermediated at an unprecedented rate. "This is because fintechs have become very adept at selling a solution to a business problem, and paving a way to implementation and adoption that makes it much easier on the business clients."
Euronet is attempting to streamline fragmented cross-border payments by taking ownership of the full payment rail, which it contends improves visibility into a payment's status. It's a mix of old and new approaches to payments — Euronet has an international network of offices and boots on the ground, while it also uses open development technology to connect parties in an international transaction.
Euronet developed the Dandelion payment rail for its own use, and uses an application programming interface to connect with business, banks, fintechs and neobanks in other countries.
Companies deploy the API natively from their own platform, a model that's designed to eliminate a need for intermediaries who are not directly involved with the parties in the transfer. That reduces the transfer fees to the actual transaction, as opposed to any party that touches the payment to perform compliance or currency transfers in a particular country.
"A payment to Senegal can take up to five banks, with intermediary banks taking fees. So when a customer sends money it costs a lot to get to emerging markets, and it causes frustration," Tamez said. "And if a payment gets lost it's hard to know where the funds are. An end-to-end connection makes the funds easier to track."
Most of the attempts to build standardized real-time payment rails are in individual countries, though there are early efforts to build international real-time payment systems. In the U.S., the main current rail is the Clearing House's RTP Rail; the central bank's FedNow rail is not expected to launch until 2023 at the earliest. Other systems that support real-time payments include the U.K.'s Faster Payments rail and similar systems across Europe.
While there have been calls for different real-time payment systems to
For example, the Paris-based
Baumann's research shows that 76% of businesses that are utilizing payment services from a fintech instead of their financial institution are doing so because it is just too hard to submit a payment file otherwise.
"Also high on the list is access to real-time payments," Baumann said. "Financial instructions have an opportunity here to stop some of this attrition by partnering strategically with fintechs that can bring some next generation solutions to their business clients quicker than ever before."
Like the fintechs that are looking to remove intermediaries from cross-border payments, Euronet is also attempting to support an end-to-end rail that can also reach traditionally underserved markets. Euronet has offices in 49 countries and has about 5,000 employees, 40% of whom are based in emerging markets remotely.
"Businesses are built by people who are on location," Tamez said. "We hire people in emerging markets and have teams that know and understand the needs in an area firsthand. When the teams aren't diverse it creates an inability to see the different perspectives that are necessary."
