Monday, June 24, 2024

EXCLUSIVE: “Fast Bucks!” – Abdul Naushad, Buckzy in ‘The Fintech Magazine’

Why can’t all international transfers be as cheap and instant as sending a text? They can, says Abdul Naushad, CEO & President at Canada-based payments challenger Buckzy

Ask any company treasurer what would be their payments Holy Grail and they’d probably reply as one ‘instant, secure, transparent and anywhere in the world’.

But here’s the thing: despite being the pioneer of so much of the technology that has revolutionised our lives, North America is something of a laggard when it comes to real-time payments (RTP). It was only in 2017 – years after much of the rest of the world – that The Clearing House, which is owned by the biggest operators in the US financial ecosystem, set up its first real-time domestic payments network (simply known as RTP) so that banks could send, receive and settle payments instantly, 24/7, 365 days a year.

For the first time in US history, the banking system never slept – no more cut-off times for processing, no more weekends and national holidays, waiting for cash to clear. It was the first new payments system to be introduced in the US since the automated clearing house (ACH) for batch-processed debit and credit transfers emerged as an alternative to cheques more than 40 years ago. RTP, the ACH – and, indeed cheque image clearing – all now run alongside The Clearing House’s wire transfer service, a fast-if-expensive, same-day settlement process for larger transactions.

At last count, 29 banks, representing more than half of demand deposit accounts in the US, were connected to RTP, and 130 financial institutions were in the process of implementing real-time payments, many of them, especially the smaller ones, connecting indirectly through platform technology providers. It won’t be until 2023 that the Federal Reserve’s FedNow real-time payments system comes into being, providing users with an alternative network. Neighbouring Canada won’t see its first real-time payments system launched – Payments Canada’s Real-Time Rail (RTR) – until next year, either. Which is why a disruptive young Canadian cross-border paytech that’s building out a network technology platform to enable frictionless, fast money movement between banks and third-party wallets for remittances, bill payments and B2B commerce payments globally, is experiencing such huge demand.

Buckzy currently runs payment corridors with 80 countries, facilitating mutual instant payouts and deposits in more than 40 of them. It handles 30-to-40 million transactions a day across North America alone.It recently opened an office in Europe, joined forces with API infrastructure company M2P to make cross-border transactions easier for exporting/importing companies in the Middle East and North Africa (MENA), and has been ramping up its presence in Latin America (LATAM).

But Abdul Naushad, CEO and president of Buckzy, is keeping a particular eye on how the real-time cross-border payments landscape in Canada and the US is developing – because the countries enjoy one of the largest trading relationships in the world, doing more than $1trillion of bilateral trade in goods and services in 2021. Even when it comes to e-commerce, Canadian consumers are more likely to buy from their neighbours than anyone else, according to Statista. More than half their online shopping is with the States.

The impact of being able to move funds in real time across the 49th parallel is huge. And the weight of expectation among businesses in Canada is evident. According to a report by PYMNTS and Mastercard, 37 per cent of large-market firms (more than $1billion in revenue) would be interested in using the RTR.

“Organisations like SWIFT will have to look at other models, like partnering with fintechs and ecosystems”

Naushad sees potential for spectacular growth in the use of all RTP solutions – for international B2B transactions in particular. But he’s critical of how long it’s taken for the big infrastructure players in North America to catch up with the rest of the world.

“The Clearing House RTP can, technically, do cross-border, but hasn’t aggressively moved on that,” he says.

Buckzy, which offers cross-border payments with real-time currency exchange as part of its banking-as-a-service offering, as well as an API-enabled marketplace of fintech-as-a-service solutions, is galvanised by what seems to be – despite war and cost-of-living crises – an unstoppable tide of international business payments. Juniper Research in 2021 forecast B2B transactions would exceed $42.7trillion by 2026.

Meanwhile, the value of global trade rose to a record $7.7trillion in Q1 2022, an increase of about $1trillion from Q1 2021, according to UNCTAD (the United Nations Conference on Trade and Development). It notes that growth is likely to slow due to geopolitical events. But, in that environment, demand for fast, transparent payments is only likely to increase.

“B2B payments account for something like 96 per cent of the transactions going across borders and they are poised to grow at somewhere between 14 and 15 per cent, year-over-year, so B2B is a pretty healthy environment to be in,” says Naushad.

There is clearly huge demand from banks and fintechs looking to overcome the legacy barriers (internal and external) that make sending money overseas so opaque, expensive and slow. Their business customers want to see cross-border payments settled as fast as domestic ones, so that they get a real-time view of cashflow.

With that come all sorts of management accounting bonuses, like knowing whether you can pay a supplier in Toronto because you’ve just been paid for an order in Tasmania. A disbursement from account to account in real time is the ultimate form of control for a business. Not only do real-time payments improve cash flow, but the remittance data that comes with each transaction provides accounting and finance teams with greater insight into each payment. Processing times go down: liquidity goes up. What’s not to like?

“Cross-border has been moving from three-to-four day settlements, to next-day and now real-time, or near-real-time payments, and that will continue,” says Naushad. “It’s just a matter of embedding realtime into the domestic ecosystem in the US, and cross-border to other parts of the world. Canada is one step behind the US, but it’s getting there.”

Buckzy integrates with payments infrastructures worldwide to facilitate bank-to-bank payments outside of the conventional correspondent network. It’s among a number of challengers nibbling at the behemoth presence of SWIFT which, for years, has underpinned the international transaction network for most of the world’s leading banks.“In the old days, SWIFT was the centre of the network for cross-border. It has its own position. It works very well with the banks, and especially for large-value payments, so it’s still a relevant network, and still has a place in the ecosystem, but I think that is changing,” says Naushad. “It has shifted for many reasons [but] I think organisations like SWIFT will have to look at other models, like partnering with fintechs and ecosystems, to make themselves valuable and continue to sustain themselves.

“Even big banks are partnering with us to deliver some of the most innovative solutions out there in cross-border payments. For tier two and tier three banks, I think their best bet is to work with a fintech like Buckzy that can deliver the same level of service, the same solutions, as the big banks are doing.”

He’s encouraged to see that banks are focussed on customer experience now.

“I think they know that’s going to make a difference, because there is so much choice out there, with the rise of neobanks in the market. Banking is getting more competitive, so whoever provides the best customer experience wins the day.“

And, if you can make a payment 24/7 and get the same experience of instant settlement in another country, across the globe, regardless of whether the bank is open there or not, that makes a huge difference. It becomes pretty much like texting somebody. You expect it to get there in a matter of seconds and it should be the same for payments.

“There are tonnes of opportunities in cross-border payments, too, including options like charity payments, gift payments and international tuition payments,” says Naushad. “Banks can innovate with any type of use case. What has been holding them back is the lack of a platform and infrastructure that can deliver that in a short amount of time with less cost. That’s what Buckzy has built, an infrastructure to enable that to happen.”


This article was published in The Fintech Magazine Issue 25, Page 48-49

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