The battle to support cross-border payments is pushing banks to partner with fintechs to expedite expansion while avoiding lengthy and expensive technology projects.
Morgan Stanley this week hired Wise to facilitate foreign exchange settlement for the bank's corporate clients. Morgan Stanley is the first investment bank to partner with Wise, which recently signed Standard Chartered and Nubank to support cross-border payments.
Fintechs have traditionally targeted smaller, more frequent cross-border payments as e-commerce sellers look to increase sales to foreign buyers. Wise's partnership with Morgan Stanley expands the fintech's strategy to support larger institutions that process payment for large corporations.
"This is part of a larger trend toward lower cost, higher speed cross-border payments. Wise is just one of a growing number of systems that have the ability to disrupt legacy correspondent banking processes," said Aaron Press, a research director at IDC.
Banks are serving customers with increasingly complex needs, said Ryan Zagone, head of partnerships for Americas at Wise Platform, in an email. "This growing demand for instant and reliable international payments is driving a fundamental shift in how leading global financial services firms, like Morgan Stanley, are transforming these capabilities."
Wise faces competition from firms such as Ripple, which uses blockchain technology to enable banks to avoid correspondent banks to process international payment. New York recently approved
Blockchain supports digital assets such as cryptocurrencies, which are also emerging as a way to simplify cross-border payments.
Since digital assets aren't yet mature as a payments option, established firms like Wise are a good option now to streamline international payments, according to Aaron McPherson, a payments consultant. "I expect that this announcement will help Wise win additional business by reinforcing its contention that it is capable of supporting the largest institutions," McPherson said. — John Adams
ABN Amro turns to fintech to speed business payments
In a similar move, Dutch banking giant ABN Amro is collaborating with European payment fintech Two to build a digital "pay on invoice" product that supports flexible terms for corporate payments. The system is for B2B e-commerce.
The ABN Amro/Two product, which launched Monday, enables businesses to offer "pay later" at the point of sale via a click on a payments page. The bank and fintech will also manage payments security.
"Companies are accustomed to paying in 14 or 30 days, and the service we offer lets business buyers maintain their payment habits when buying online, with no extra steps," said Andreas Mjelde, CEO of Two, in a release.
Other banks have recently made moves to strengthen their B2B payments businesses, with a particular focus on enabling cross-border payments in a faster-processing environment.
JPMorgan Chase's expanded
The B2B cross-border payments market is massive. The market is estimated to have a total value of $68 trillion in 2024, growing at a rate to reach $121 trillion by 2033, according to Custom Market Insight.
While large banks such as ABN Amro and Morgan Stanley are collaborating to boost cross-border payments, the availability of fintech options creates an opportunity for smaller banks.
"If a smaller institution acquires this capability in advance of it being explicitly demanded, they can hang on to some of those clients that would otherwise switch," McPherson said. "In this way, providing cross-border payments capability is an important defensive move, apart from any additional revenue it might bring in." —John Adams
UK's Payment System Regulator to cap cross-border card fees
The United Kingdom's Payment System Regulator has plans to cap cross-border card fees amid rising interchange costs for small businesses.
PSR, in a 231-page report on international interchange fees, found that Visa and Mastercard increased cross-border interchange fees to 1.15% on debit and credit cards, up from 0.2% and 0.3%, respectively, during the two year period between 2021 and 2022.
The PSR estimates that the increases cost businesses between 150 to 200 million pounds ($197.8 to $254.4 million) per year.
The regulator is proposing a price cap in two stages, the first being an interim price cap set at 0.2% on card-not-present debit card transactions and 0.3% on card-not-present credit card transactions while it conducts a
"Cards are a popular way we make payments in the UK. Our findings confirm that, due to a lack of competition, Mastercard and Visa were able to raise cross-border interchange fees to an unduly high level, costing UK businesses hundreds of millions of pounds," said PSR's Managing Director David Geale in a statement.
"We consider that consulting on a range of options for capping prices is the best way forward to ensure UK businesses get a better deal. We look forward to receiving evidence on these proposals from all interested parties," he said.
Comments are due by February 7, 2025.
Mastercard and Visa have been feeling interchange-fee pressure from both sides of the pond. Both payment card processors were put under the gun in November by Republican lawmakers to
Klarna's quest for scale extends to eBay
Online marketplace eBay is offering Klarna's payment options in the U.K., Austria, France, Italy, the Netherlands and Spain, with plans to expand to more markets.
The collaboration also enables Klarna's app users to resell items on eBay, and comes as Klarna adds to its product roster ahead of an IPO in the U.S. Klarna recently added
Klarna in November filed an IPO registration with the Securities and Exchange Commission. Details were not disclosed, though Klarna's valuation has been estimated to be about $14.6 billion following an investment from Chrysalis Investors.
EBay, which once owned PayPal, is in the midst of a strategy to add new payment options and partnerships that improve its reselling ability. The company recently added monthly invoicing for German shoppers through a partnership with German fintech Riverty. — John Adams
Standard Chartered lands reserve management partnership with Paxos
Standard Chartered has closed a deal with regulated blockchain and tokenization infrastructure platform Paxos to provide reserve management services for its stablecoins.
The London-based bank will provide cash management, trading and custody services to Paxos' two stablecoins in Singapore and the United Arab Emirates, Standard Chartered said. Paxos' stablecoins are pegged to the U.S. dollar.
"As the stablecoin industry continues to attract the world's leading enterprises, it's more important than ever to ensure they have access to sophisticated, institutional-grade products," said Adam Ackermann, head of treasury and portfolio management at Paxos.
Open banking firm files monopoly complaint against Norwegian banks
Open banking payments and data company Neonomics filed a formal complaint with the Norwegian Competition Authority against Norwegian banks and domestic and international financial service providers for anticompetitive practices.
The complaint alleges that Norwegian banks are undermining the Payments Service Directive, a statute implemented in Norway in 2019 that aims to foster innovation by allowing new entrants to offer payment services.
Specifically, the complaint alleges that Norwegian banks have coordinated to block access to direct debit payments. It also alleges that banks have applied unfair terms and pricing and offered preferential treatment to dominant players like Vipps, Visa and Mastercard.
"The actions of the Norwegian banks not only undermine the core principles of PSD2 but also stifle competition, innovation, and choice in the payment services market," said Christoffer Andvig, founder and CEO of Neonomics, in a statement. "This behavior harms consumers and businesses alike, while protecting entrenched interests. We urge the competition authorities to act decisively to restore fair competition and ensure compliance with both EU and Norwegian regulations." —Joey Pizzolato
Affirm and Adyen expand partnership
Buy now/pay later lender Affirm has expanded its partnership with Adyen to bring its BNPL offering to Adyen for Platforms and merchants in Canada.
Adyen for Platforms includes peer-to-peer marketplaces, on-demand services and crowdfunding platforms, among others. Merchants in Canada will also access Affirm's monthly installment option in addition to biweekly payments, Affirm said.
The expansion builds on a partnership inked in November 2020 between the two companies that made Affirm's offering available to eligible Adyen merchants online and in-store through Adyen's payment terminals.
"The opportunity for platforms to embed payments and financial services is incredible — a game-changing
Payment firms have been
Fiserv gets regulatory approval to expand payment processing
Fiserv has received conditional approval for a special purpose bank charter in Georgia, enabling the bank technology seller to control the entire payment process.
Called a Merchant Acquiring Limited Purpose Bank charter, this includes authorizing, settling and clearing debit and credit card transactions. Fiserv normally uses bank partners as part of payment processing.
In an email, Fiserv's public relations department said the conditional license will enable it to apply for direct acceptance into the card networks and complete other administrative tasks to establish the charter, which it anticipates completing by 2025. "Fiserv has no intention to become a traditional financial institution or regional bank and will continue to partner with financial institutions that want to serve as acquiring sponsors," Fiserv's public relations office said.
Fiserv has recently expanded its merchant services beyond payment processing. In late 2023 it began selling embedded finance tools to independent software vendors that sell to merchants in e-commerce, health care, logistics and travel. That service uses tools from Finxact, a firm Fiserv acquired in 2022 that sells cloud technology and open development tools to speed financial technology upgrades. A bank charter, even limited, would provide Fiserv another incentive to keep merchants from using other vendors. —John Adams
