In payments, the future looks bright. Image: Shutterstock
Professional services giant KPMG and venture capitalist database CB Insights published a report called “The Pulse of Fintech,” looking back over the biggest moments in Q3 of 2016. Most of the report focuses on trends and highlights in fintech funding during this action-packed quarter. However, the report also makes some forward-thinking points on the fintech use case in cross-border payments, pointing out that Ripple is poised to “revolutionize” this space that is clearly so ripe for reinvention.
KPMG: the future of cross-border #payments is bright. Tweet This
Citing a trend in funding specifically for corporate and B2B cross-border payments, the report acknowledges that the current processes for these payments are fraught with friction and subject to manual intervention across the value chain. KPMG asserts that open API systems and an ever-increasing demand for data-rich digital payments are driving interest in this arena.
Ripple Insights has previously discussed the specific needs of the new corporate; companies like Uber, Facebook, and Amazon who engage with a bilateral marketplace and must accept and disburse high-volume, low-value payments at an unthinkable rate. Chinese e-commerce juggernaut Alibaba reported a single day’s sales at $17.8 billion in gross merchandise volume, at 175,000 transactions per second. Corporates with volume like this will ultimately drive market adoption of payments solutions that can keep up.
Similarly, cross-border payments are called out in the report as costly, inefficient and lacking in the transparency demanded by both individual consumers and vigilant regulators. Ripple’s distributer ledger based solution is mentioned as one of the fintech contenders aimed at this pervasive problem, with the potential to “revolutionize this space.” Ultimately, however, a myriad of fintech solutions will only compound the problem of competing, siloed networks. KPMG points out the importance of developing a standard for interoperability, like Interledger, and the coming changes compelled by PSD2 (the European Union’s Payments Services Directive).
“In Europe, PSD2 promises a significant impact and a number of major benefits for fintech companies, merchants and consumers alike, and opens up the payments area to new competitors who can use aggregated data to create ancillary payment services. In contrast, US regulatory bodies are attempting to balance the needs of fostering competition and promoting standards but the tendency is to let the market forces play out. That said, there has been a recent push to modernize the payment system in the US, which includes the development of a Real-Time Payment system that leverages the ISO 20022 global message standard.”
As each of these messaging and payment systems evolves, the struggle for a future-proof network only becomes more important. A standard and a focus on interoperability are not luxuries; like cross-border payments that serve corporates and individuals well, they are a necessity.
Read the full report here.