Leave No Customer Behind

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A decline in international payment services leads to a poor customer experience. Image: Shutterstock

Today’s payments infrastructure is far from ideal for meeting global transactional needs. The current system was designed for high-value payments to be processed in batch, creating a lack of information exchange and often requiring manual intervention, meaning that each leg of settlement between correspondents creates risk, cost and delays in payments.

As a result of these technological limitations, more banks cannot efficiently service cross-border payments and are choosing to cease international services entirely. The Royal Bank of Scotland Group Plc (RBS) elected to exit transaction banking outside of the U.K. and Ireland due to the high cost of reforming its infrastructure and a lack of adequate returns. By deciding to opt-out, RBS must work with about 7,000 customers in 32 countries to find alternative banks before the end of the year.

RBS is one of many banks that has made the difficult decision to withdraw global payment services: according to a report by the Financial Stability Board, three-quarters of large banks surveyed have reduced their number of correspondent accounts in the last three years, with most local and regional banks also seeing a decline in access.

A loss in correspondent banking services is detrimental to economic growth, as an increase in financial exclusion affects people in developing countries who rely on remittances as a key source of funds.

Industry experts agree that a better approach is needed to reinvent corresponding banking:

  • The Bank for International Settlements (BIS) states that cutting correspondent accounts further fragments cross-border payment networks and threatens the range of available banking services.
  • Global heads of transaction banking from Deutsche Bank, Standard Chartered Bank and Bank of America Merrill Lynch join other noted speakers to discuss the future of correspondent banking at the Sibos conference in Geneva next month.

Distributed financial technology, such as Ripple’s enterprise blockchain solution, interoperates payment networks to enable real-time cross-border payments, serving the global transaction needs of both institutions and their clients. It removes friction, lowers costs, increases automation and opens up new revenue opportunities while drastically improving customer experiences.

Contact us to join our growing, global network to improve cross-border payments.