Finance Monthly - November 2021 Edition

48 Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s money abroad is commonplace, whether that’s due to trade and e-commerce, international investments, global supply chains, or the sending of money via international remittances. And according to the Bank of England, cross-border flows are expected to grow significantly in the coming years, from $150 trillion in 2017 to an estimated $250 billion by 2027. As a result, banks, financial institutions and other global businesses must be able to facilitate these transactions with ease and efficiency if they want to attract and retain their customers. Partnering with FinTechs using APIs can play a significant role in achieving this. The benefits of open banking for cross-border payments Cost & speed Open banking enables senders and recipients to bypass the intermediaries that would otherwise be involved in facilitating cross-border transactions. For instance, direct access to customers’ bank accounts means that a business or financial institution could verify their identity and creditworthiness without the help of a third party. This results in reduced fees and quicker services. Time and money can also be saved because FinTechs using open banking will provide an efficient alternative to the slow, expensive legacy systems currently in use. Ease Open banking can make it considerably easier to make cross- border payments. APIs can be designed to provide a streamlined, responsive user interface and thereby provide an excellent customer experience. In addition, open banking makes know-your- customer (eKYC) processes much simpler as they can be entirely digitised, gaining the required information in seconds rather than days. Safety As well as improving KYC processes, open banking allows banks, financial institutions and businesses to reduce the risks associated with cross-border payments. They can immediately check that customers are able to afford the transaction, for example, and set precise limits. FinTechs using APIs are also likely to have stronger cybersecurity measures in place compared to dated legacy systems. Competition Open banking means financial institutions and businesses can stay flexible and meet evolving customer demands, with APIs allowing them to offer exceptional customer experiences. As a result, there is increased competition, encouraging innovation and giving customers more choice over the companies and services they use. Open banking and cross- border payments today Open banking is already making waves in the cross-border payments sphere, with many companies already responding to the clear benefits APIs can bring. Some exciting services to have emerged include API-driven live FX pricing and API-based currency hedging automation, while many big names in the financial services sector (including Visa, Mastercard and Western Union) have teamed up with forward-thinking FinTechs in order to use open banking to improve their cross-border payment services. Themost exciting part of this is that open banking is still in its relative infancy and is continuing to evolve. With new tools regularly launching to accommodate various markets and purposes, financial institutions and businesses can take advantage of this phenomenon to provide the best possible customer experiences to anybody that needs to make a cross-border transaction. However, to do so, they must find the right FinTechs to support them as they strive to bring their financial services into the present day. “According to the Bank of England, cross-border flows are expected to grow significantly in the coming years, from $150 trillion in 2017 to an estimated $250 billion by 2027.”