Wise adds partners as fintechs battle for cross-border payments

Bloomberg News

The U.K. fintech Wise is trying to make international payments more routine by building as many connections to directly execute cross-border transactions as it can.  

"You want to make cross-border payments like a local payment," said Brian Linthicum, head of partnerships at Wise. "Any extra intermediary who is involved with managing or processing an international payment takes a fee and time."

Wise, which collaborates with local partners in dozens of countries to create a network for international payments, has partnered with Bluevine, a small-business-banking technology company. The Bluevine partnership will extend the options for users to make or accept payments in their own currency, even if they are in different countries. 

Payment firms such as Wise, Ripple and others are battling each other to enable cross-border payments without requiring third parties such as correspondent banks. These payment firms are betting on demand from remittances, a need for small businesses to manage supply chain finance, and online merchants that want to sell their products to customers in more countries. 

Bluevine's users, mostly small to midsize businesses, can make international payments in eight currencies in 26 countries with Wise initially, with more markets and currencies to be added in coming months, eventually racing a total of 63 currencies. 

Wise embeds its payment processing system in Bluevine's dashboard and integrates with Bluevine's customer bill pay and checking accounts. That enables an e-commerce-style user experience in which people make payments directly on a site or app. 

These partners connect to Wise via an application programming interface, which is designed to simplify onboarding. "A lot of small businesses now have international suppliers, vendors or contractors that can now get paid in their local currency," Linthicum said. 

More than 50% of the transactions can settle instantly and 80% settle within a day, Linthicum said of Wise's network. Most international transfers using correspondent banks to manage processing can take two to six days to settle, he said.

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 "There's a need to improve things like employee reimbursement for staff in other countries, or pay bills between firms that use different currencies," Linthicum said, adding small-business travel payments are another potential use case for the Bluevine partnership.

Wise, which was branded as TransferWise before its initial public offering in 2021, works with local financial institutions to create a network that enables cross-border payments without using correspondent banks. It is active in about 50 countries and is accessible in other countries if the recipient's account is denominated in U.S. dollars, euros or pounds.

Wise's Bluevine collaboration follows other recent partnerships that have boosted Wise's scale, including with Globalization Partners, Ramp, Brex, Deel and AvidXchange – all deals it has signed in the past year. Wise also recently connected its customers to the data aggregator Plaid, which enables Wise's customers to connect their accounts to challenger banks and digital payment companies. To support the expansion, Wise has been adding staff at a time when many fintechs have been downsizing. The firm has 6 million monthly users and moves about $30 billion per quarter. 

Reducing reliance on correspondent banks in cross-border payments has become part of how payment fintechs compete. The common goal is to attract small to midsize businesses or consumers. Both consumers and small merchants are using cross-border payments as e-commerce and peer-to-peer apps expand. Visa recently reported mobile apps perform 53% of cross-border transfers. 

Small-business and consumer transfers tend to be much smaller than the corporate transfers of years past, making the use of correspondent bank intermediaries more costly for a flow of payments that are smaller but more frequent than large business-to-business transactions.  

To solve that problem, Wise's rival Ripple uses the blockchain technology that supports the XRP digital asset token to streamline cross-border processing. The XRP token bridges two currencies, allowing firms to eliminate pre-funding the bank account in the payment's destination market. 

Other firms pursuing cross-border payments include Visa and Mastercard, which are building technology internally and partnering with fintechs to build international payment networks that support direct transactions in the sender and recipient's own currency. 

Payment firms such as Xoom, Remitly and MoneyGram are also actively digitizing cross-border payments. Western Union has invested heavily in recent years in powering digital options that reduce its reliance on brick-and-mortar offices. The payment technology firm Marqeta recently partnered with Western Union. That partnership integrated Marqeta's card-issuing technology with Western Union's digital wallet –enabling Western Union's service to be offered entirely online – using physical or virtual cards for distribution. 

Digital assets such as central bank digital currencies are also emerging as an option to take costs and time out of cross-border payments. For example, the Federal Reserve Bank of New York  is experimenting with blockchain-based central bank digital currency models to increase processing speed for cross-border transactions. 

The larger the network, the greater the advantage when competing to supply cross-border payments, according to Giles Ubaghs, a strategic advisor for commercial banking and payments at Aite-Novarica Group. 

"Cross-border payments remain challenging and expensive," Ubaghs said, adding that the card brands and networks that can enable cross-border payments over a large and diverse market have an inherent advantage. "We're seeing demand for international payments rising at the commercial payments level."