By Ajay Pandey
As the global economy becomes increasingly interconnected, the need for a swift, secure, and efficient cross-border payment system has never been more paramount. Cross-border payments, also known as international transactions, involve the transfer of funds across diverse countries and currencies. The cross-border payment landscape encompasses various transaction types such as B2B, B2C, C2B, and C2C (or P2P). Traditional methods for processing these remittances include SWIFT/correspondent banking, Rupee Drawing Arrangement (RDA), and Money Transfer Service Scheme (MTSS), serving as integral components of this ecosystem.
In recent years, card networks have started to realise the possibilities of using card numbers to deposit funds into card accounts and enable cross-border payments between individuals. This has helped transform cross-border payments by offering various benefits. For example, utilizing near-instantaneous or real-time payment processing, a 30-minute time limit, and ensuring confidentiality through standard or virtual card numbers. In managing transactions involving multiple currencies, access to a smooth and efficient conversion system, encompassing over 21 currencies from more than 150 countries, is already accessible. Moreover, the current Point-of-Sale and e-Commerce transaction settlement procedure is leveraged, negating the need for an alternative settlement system. Because of these facilities, people can send money back home using card rails like Visa Direct and Mastercard Send to transfer payment to their family member’s debit card.
Today, leveraging established card networks such as Visa, Mastercard, RuPay, and others offers an enhanced approach to managing cross-border transactions for authorized dealers, small finance banks, and Fintech companies.
While technological advancements have facilitated the ease and speed of cross-border payments, several challenges still exist in this area. Fintechs and other new-age firms are upending the existing industry with their technological innovations and using digital platforms to send quicker, safer, and less expensive remittances. However, they only make up a minor portion of international payments and there is still room for more innovations in this domain.
This is where new-age FinTech businesses offer highly flexible and feature-rich technology that complies with the regulatory environment while bringing their expertise and subject knowledge to the table. FinTech entities today serve as Technology Service Providers by forging partnerships with payment card network processors such as Visa, Mastercard, and RuPay. In collaboration with banks, they aim to enhance and streamline processes by leveraging the distinct features offered by these payment network processors:
- Global Presence: Fintechs can leverage the global presence helping facilitate seamless cross-border transactions for both Indian businesses and individuals with recipients across various countries.
- Established Infrastructure: The established payment infrastructure and networks, specifically tailored for cross-border transactions, ensure a streamlined, efficient, and reliable process that Fintechs can adopt.
- Security: Fintechs get the benefit of card payment networks such as Visa, Mastercard, RuPay, and others which maintain exceptional security standards, employing advanced fraud detection and prevention mechanisms to safeguard users’ financial data. This is especially critical in the context of cross-border transactions, where there exists heightened exposure to fraudulent activities and unauthorized intrusions.
- Interoperability: Fintechs get to leverage the global interoperability that Payment card network processors have successfully achieved with various other payment systems, consequently facilitating the seamless transfer of funds across numerous platforms. This advancement enables users to effortlessly conduct transactions between diverse payment networks, eliminating the necessity for intricate integrations.
- Convenience: Ultimately, utilizing payment networks such as Visa, Mastercard and RuPay offers a high level of convenience for users, due to the comprehensible and efficient nature of the transaction process.
Specific to India, although card networks possess the capability to facilitate remittances into and out of a country, current Indian regulations impose stringent limitations, permitting only inbound remittances. The prospect of outbound remittances remains under regulatory review. If authorized, the utilization of card rails for cross-border transactions would effectively address the absence of a domestic-style international payment infrastructure. Fintech entities with state-of-the-art technology can then help authorised dealers, small finance banks and others leverage their tech to further expand and grow their business.
(The author is Ajay Pandey, CEO and Co-Founder, CARD91, and the views expressed in this article are his own)
