Banks need to revamp their cross-border business as competition emerges in cross-border payments space; Boston Consulting Group (BCG) has said in a report.
Card networks, fintechs, and infrastructure providers outperform banks in speed, pricing, API integration, and overall customer experience.
Card networks, fintechs, and infrastructure providers such as Ripple and Earthport have entered the cross-border payments space in recent years, it said.
To stay competitive, banks will need to change their approach, the report said.
Innovation is one requirement.Many banks have introduced SWIFT gpi to improve the speed and tracking of international payments.
“But with challengers providing convenient solutions like “request to pay” that facilitate remittance and reconciliation, banks need to continue refreshing their own offerings,” the BCG report said.
Structural changes are also needed. Banks should align their correspondent banking network along core trade and payments corridors to ensure that they can provide customers with support in the regions where they trade.
Offering competitive pricing is another must, it said.
To support these changes, banks need to lower their cost base. Increasing operational efficiency, especially in core transaction processes, and modernising IT infrastructure are vital.
Banks may also wish to explore fintech partnerships in order to serve more exotic trade and payments corridors effectively.
In addition, as part of their correspondent banking realignment, BCG said wholesale banks should consider rationalising the number of correspondent banks in high-risk jurisdictions in order to minimise the compliance risks and costs.
They should also consider applying global standards for know your customer (KYC), sanctions screening, and transaction monitoring to identify money-laundering and terrorism-financing attempts.
“These steps can help wholesale banks defend their cross-border business and deepen high-value customer relationships,” Boston Consulting Group said.