EXCLUSIVE: ‘Squaring the PSP circle’ – Michel André, Banking Circle in ‘The Paytech Magazine’
The ‘super correspondent bank for the new economy’ has been signing up PSPs so fast that it’s now settling six per cent of all Europe’s B2C e-commerce transactions. We asked Banking Circle’s CIO, Michel André, what’s attracting them.
Realising improvements in settlement times, reconciliations and processing is a business imperative for payment service providers (PSPs) facilitating cross-border transactions on behalf of their clients. But delivering it via a network of rails and a shrinking international correspondent banking system where every foreign exchange (FX) conversion and handling charge erodes your margin, is challenging – and diverts resource from more profitable endeavours, such as data insight and enrichment aimed at increasing conversion rates and improving efficiency for clients.
Which probably explains why PSPs have been forming a queue to join Banking Circle’s ‘super correspondent bank for the new economy’. Among them are an increasing number that lift and shift payments for e-commerce marketplaces – including muscular outfits such as Alibaba and Shopify and, recently, the Dutch Online Payment Platform (OPP), which currently serves more than 170 such consumer sites across Europe and is looking to expand its geographic reach.
Having access to real-time local settlement in 25 currencies, via one bank that has eyes on the ground in terms of compliance in every territory, is a compelling proposition for such businesses. It’s certainly helped to build Banking Circle’s transaction volumes considerably over the past two years. Now working with more than 150 financial institutions and looking to process $250billion of payments by the end of 2021, it already settles six per cent of Europe’s B2C e-commerce payments on behalf of banks, fintechs and PSPs.
Payments has always been a scale business – more so since mobile pay, various contactless payment regulations, a pandemic and a growing trend towards spreading larger transactions over buy now, pay later agreements has considerably increased the number, and lowered the individual value, of transactions. Banking Circle Group’s CEO Anders la Cour made clear, at a panel discussion hosted by Paris Fintech Forum at the start of this year, that building volume was a priority for businesses like his. And it’s achieving it. As fast as Banking Circle onboards banks and fintechs – it has no direct relationship with individual SMEs and corporates – it is also making technology links with central banks and local settlement schemes to attract more.
In addition to SWIFT, Faster Payments, CHAPS and SEPA, in July 2021, through a partnership with SIAnet, the low-latency fibre optic network provider, the bank launched a new instant payment service, connecting to Europe’s TARGET Instant Payment Settlement (TIPS) service. It means its European customers can execute instant payments in less than 10 seconds, up to a maximum of €100,000 per transaction, 365-days-a-year, 24/7. While TIPS currently only settles transfers in euros, other currencies can be used for settlement if the central bank concerned is connected to the platform and is willing to add its currency.
This year, Banking Circle also joined the Nordics’ soon-to-launch cross-border payments network, P27, saying that it saw membership as ‘a crucial piece of the jigsaw to remove the cost and time currently experienced in domestic and cross border payments to and from the region’.
“Banking Circle specialises in this specific segment, building a super-correspondent network, allowing you to connect to local payment rails in a seamless way by easily integrating this into your core payments system,” says Banking Circle CIO Michel André. “It can help banks and PSPs meet their client demands, based on a Cloud-based, decoupled architecture, built for driving low-cost, real-time, cross-border payments. That’s its sole purpose.
“Instead of going through the old correspondent banking network, where a cross-border payment might take three days to go from you to the final destination, because it jumps through multiple hoops, if you partner with Banking Circle, it takes one jump and reaches the destination almost immediately, via a single API. And it’s our clients’ clients – the merchants – that are the ultimate beneficiaries of that.
That was certainly front-of-mind for the Netherlands’ OPP.
“The marketplaces we support are used by thousands of merchants who make and receive numerous payments in and from several countries, and in different currencies, every day. It is therefore crucial that buyers can withdraw funds to marketplace sellers as quickly as possible, and that traders’ profits are not reduced by fees or FX costs. By working with Banking Circle, we are capitalising on its ‘real-time’ payments proposition, which cuts out cost and time,” Maurice Jongmans, CEO of Online Payment Platform, commented following the deal. In other words, merchants get their money faster and pay less for the privilege, and, as marketplaces are where many of them congregate, such tie-ups serve Banking Circle’s long-held ambition of empowering the world’s SME economies.
Supporting global SMEs
Anders la Cour has described his company as being on a mission to improve small business’ access to global financial services, and to give firms the freedom to trade wherever they see opportunity.
“We believe it’s our duty to help make this a reality,” he said. “We have built a solution that allows businesses like Online Payment Platform to give their marketplace customers access to transparent local payments and collections across borders, without the need for a physical presence or a relationship with a correspondent bank in that region. And that means increased speed of settlement as well as reduced cost.”
Smoother, faster reconciliation is achieved through dedicated multi-currency virtual IBANs in multiple jurisdictions, which the bank promises will improve reconciliation, consolidation, risk management, operational efficiency, transaction processing and liquidity management. Other notable new PSP clients over the past 12 months are PPRO, the UK-based payments infrastructure provider; Paymaster24, the full-service, multi-channel gateway for local e-payment solutions; Safenetpay, which provides its customers – mainly UK SMEs – with a single platform that offers multi-currency accounts, FX, card payment processing and merchant accounts; and mobile payments solution provider HIPS Payment Group.
All of the above cited the ability to access local clearing through one connection, and improved internal efficiency, as key reasons to partner. And, as they grow, Banking Circle’s Cloud-based architecture will flex with them and respond with bespoke solutions, says André.
“Since we have purposely built our payment infrastructure and payment rails in the Cloud, in a decoupled, event-driven manner, we can cater for flexibility, build new services and make those available for our downstream clients. You might hear that a primary driver for building something that’s Cloud based is cost, but I think the most important thing you gain is the flexibility to build things on a higher level than when you start with your own servers and networks. You can focus on building services on top of a secure, state-of-the-art technology base, which you have in a Cloud environment, from the get-go. And, because you start at a higher level, you can move faster and experiment.” With an increasingly competitive – not to say predatory – payments landscape, PSPs need to create the headspace and resources to differentiate themselves with added-value services, putting Banking Circle in a sweet spot.
Not even a global pandemic could stop the growing tide of global transactions – total volumes fell nowhere near as far and recovered much quicker than the World Bank predicted. The logic of using one utility to process them all is hard to refute.