Innovation in payments: Where to next?

The payments industry has arguably been the focus of equally significant amounts of investment and speculation over the last few years.

Even just a few years back, most people’s experiences of sending money overseas would be the low-value/high-cost remittance services available on the High Street or facing endless queues at their bank to fill in a slew of forms to move their cash.

Innovation within the payments industry has been a long time coming and is much needed to better service the requirements of international microbusinesses and SMEs in an increasingly globalised world.

Blockchain takeover

One of the more recent innovations that has received copious amounts of media attention in the last year – both positive and negative – is blockchain.

As soon as people hear the phrase, thoughts immediately turn to Bitcoin, volatility, the dark web and financial scams but this should not be the case.

Whatever your stance on cryptocurrencies, the technology underpinning them could serve the payments industry well by enabling payments to bypass more traditional banking infrastructure.

In theory, payments from one party to another via the same blockchain system could see transmission of funds and the requisite confirmations be completed essentially instantaneously.

Learning from the incumbent

However, payments do not operate in a bubble. Hundreds or thousands are created, processed and confirmed across the world every second of the day and current blockchain systems lack the capacity to take over from the existing infrastructure in place.

At present, Bitcoin’s blockchain system is able to process three or four payments a second, whereas international payments company Visa suggests that their network can handle up to 56,000 payments a second.

Clearly there is still some way for blockchain to go if it is to truly compete with the big boys in the industry.

The privacy challenge

Similarly, blockchains are dependent on each active member of a chain affirming and recording the details of every transaction that takes place upon them.

In a world of a data protection, GDPR and privacy, this means the success of blockchain rests heavily on the sharing of private or sensitive information.

Ultimately, integrating these systems into the current payments architecture will continue over the coming months and years.

Multi-currency miracle

Another innovation that has come to the fore in the last year or so is the multi-currency account.

Historically, these were only available to large multinational companies, usually with offices or infrastructure based in foreign countries and subject to high monthly management fees.

Multi-currency accounts, in effect, enable international businesses to act, trade and grow like a local company in a foreign country without the need for a local office or the accompanying infrastructure.

They enable businesses to pay local costs and collect profits, while providing visibility over their currency needs and exposures, all from one centralised platform.

While this may sound too good to be true, for the businesses using them to overcome the barriers that previously prevented them from trading overseas, they are a very real reality.

For the most part, transfers between such accounts and the rest of world are a hybrid of distributed ledger technology (the foundations of blockchain) and the classic SWIFT network – thus bringing together speed, reliability and low costs for SME customers.

So, what next?

While both blockchain and multi-currency accounts have been around for some time now, both propositions will benefit from continued development as their features are refined and customised for individual subsets of the international business community.

Combined with newer technologies such as APIs, real-time payments, mobile processing and biometric keys, we expect to see an irreversible change in the way businesses access international markets and transact within them over the coming decade. And we, for one, are very excited about this change.