Wise Connect 2024: building a shared vision for the future of cross-border payments

For banks to win back the low value international payments segment, now worth $12 trillion in cross-border payments outflows, they should cultivate five core capabilities.

On 14 May, the second annual Wise Connect conference in London brought together more than 150 international payments leaders from over 50 top-tier banks and businesses spanning 13 countries. Participants engaged in a series of lively, quick-fire sessions exploring the future of international payments and how banks can capitalise on the rapidly growing commercial opportunity in low-value cross-border payments.

During the event, experts from Raiffeisen Bank International, Lloyds Banking Group, Bank of America, BIS Innovation Hub Singapore, Natwest, McKinsey and Wise unpacked the five core capabilities that banks must implement to offer their customers a world-class cross-border payments experience.

The big opportunity in low-value payments
In an increasingly globalised world, the need for consumers and small-to-medium businesses (SMBs) to send money internationally is rapidly evolving. As a result, the market for low-value retail payments (under $100,000) is experiencing exponential growth, with cross-border payment outflows now accounting for $12 trillion globally. In response to this surging demand, traditional financial institutions and fintech companies are building out a host of cross-border payment solutions that are faster, more transparent and cost-effective.

At Wise Connect in London, Wise's Co-founder and CEO, Kristo Käärmann, addressed the evolving international payments landscape and the increasing opportunity for banks to leverage tech-driven partnerships. These bank-fintech collaborations, he suggested, can enable banks to innovate and regain the low-value payments segment.

Although low-value payments make up just 8% of cross-border payment flows, they generate around one-third of total revenue.

Explaining how Wise Platform is empowering banks to provide faster, more efficient cross-border payments services to their customers, Käärmann added that “Wise is developing the next generation of infrastructure which is now available to banking partners through correspondent channels.”

Wise's Co-founder and CEO, Kristo Käärmann, addressed the evolving international payments landscape.

In a presentation drawing on the in-depth market research conducted in the 2023 McKinsey Global Payments Report, McKinsey's Senior Partner, Alessio Botta, revealed that although low-value payments make up just 8% of cross-border payment flows, they generate around one-third of total revenue. This is largely due to extensive retail networks and higher profit margins on these transactions. Botta also added that banks should adopt a fresh perspective, reset their operating models to increase productivity and build new digital businesses that can be scalable in order to compete in this rapidly evolving landscape.

The ‘Big Five’
Echoing this sentiment, Wise's Chief Product Officer, Nilan Peiris highlighted that banks should focus on five critical capabilities in order to reclaim market share in the low-value cross-border payments segment: network, sophisticated treasury management, operational automation, compliance at scale and an exceptional customer experience.

Nilan Peiris, Wise's Chief Product Officer, suggested that banks should prioritise developing five critical capabilities.

Network
Starting with the first pillar of the ‘Big Five’, speakers emphasised that banks should take advantage of the opportunity to build a robust, high-quality network with substantial reach to enable real-time payments for their customers.

In a fireside chat with Maha El Demachki of the BIS Innovation Hub Singapore Centre, Diana Avila, Wise Platform's Global Head of Banking and Expansion, explored how banks can leverage local payment rails to their advantage and the critical roles that central banks and payments innovators will play in building robust bilateral and multilateral global payments connections. El Demachki and Avila also touched on the need to make emerging currency services more accessible and efficient for customers.

As an innovator in this space, Wise Platform has extensive experience in driving successful partnerships with banks and leveraging collaboration. Wise’s global payments infrastructure provides banks with direct access to payment systems and a network of over 90 banking partners. This includes five direct connections such as Faster Payments Service (FPS) in the UK, Fast And Secure Transfers (FAST) in Singapore and the New Payments Platform (NPP) in Australia.

Sophisticated treasury management
Building the necessary infrastructure for cross-border payments is just one part of the equation. In a discussion on liquidity and emerging currencies, Bhupen Velani, Bank of America's Head of Transactional FX Trading, and Wise’s Product Director, Jacintha Love, emphasised the importance of treasury management and the constant threat of geopolitical risk and volatility that can affect the value and accessibility of currencies.

Bhupen Velani, the Head of Transactional FX Trading at Bank of America, and Jacintha Love, the Product Director at Wise, discussed the topic of emerging currencies and accessibility.

Over the last decade, banks have scaled back their global footprint in emerging currencies. As Velani and Love observed, banks now rely more heavily on correspondent banking partners to deliver cross-border payments in these currencies for retail customers. “This shift in the delivery model has made emerging currencies less accessible and more costly. And while the demand for emerging currency cross-border payments is growing, the current infrastructure makes it challenging to deliver a fast, affordable and reliable customer experience,” Love explained during the discussion.

Amid the challenges banks face in facilitating international payments in emerging currencies, Velani and Love agreed that increased collaboration is improving access to traditionally hard-to-reach currencies. For example, Wise Platform now allows banks to access local payments in remittance corridors and to offer instant payments in certain currencies. With over 65 licences worldwide, our global network extends from the US to Australia.

Operational automation
Driven by customer demand for quick and convenient cross-border payments, banks are increasingly partnering with technology providers to deliver an improved, automated payments experience. In their session ‘Correspondents 2.0: new metrics for your infrastructure,’ Oonagh McGrane, Lloyds Banking Group's Director of FI Commercialisation, and Julie Arnoux, Wise Platform's Head of Commercial - Europe, shared valuable insights on the evolving correspondent banking ecosystem.

McGrane and Arnoux explored a new set of metrics for banks to assess tech-driven correspondent service providers. They recommended that banks thoroughly question potential providers about their network coverage, service quality and ease of integration to ensure the collaboration will support the bank and their customers' requirements.

Compliance at scale
Technology is paving the way for the future of compliance in financial services. Nowhere is this more evident than within the cross-border payments space. Building on the theme of operational efficiencies, Tom Scampion, CEO of Global Screening Services (GSS) and Aaron Elliott-Gross, Global Director of Product Compliance at Wise discussed how banks can leverage real-time compliance to deliver fast and efficient payments, offering attendees a glimpse into the world of compliance automation and standardisation.

Wise screens each payment for fraud, checking it against hundreds of thousands of sanctions lists for cross-border transactions.

During their session ‘Speeding up payments with compliance in real time’, Elliot Gross explained how Wise screens each payment for fraud, checking it against hundreds of thousands of sanctions lists for cross-border transactions.This approach, when applied to Wise customers, has reduced processing time by over four times in the last year. Speaking on behalf of GSS, Scampion offered a sneak peek into how standards can help banks apply automation technology effectively, creating consistency and aligning with other banks' standards and controls. This approach allows banks to process payments in real time, ensuring compliance and security.

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Artificial intelligence is a crucial factor for banks to consider when creating compliance and operational efficiencies, too. In the presentation ‘Removing operational friction with AI’, Sonia-Carla Ciocirlie, Head of Business Operations at Wise Platform, explained how Wise is using generative AI to accelerate transaction speeds. She also noted that, through Wise Platform, banks can leverage Wise's improved network efficiencies to provide their customers with a better cross-border payments experience.

Customer experience
One of the resounding themes at Wise Connect was the significance of providing a world-class payments experience for customers. By harnessing a robust network, efficient treasury management, operational automation and scalable compliance, banks can deliver an exceptional payments experience for their customers.

According to Matthias Dekan, Ritu Seghal, and Roisin Levine - industry leaders in payments, transaction banking, and fintech - there is no universal solution for delivering exceptional customer experiences in banking.

While banks recognise the need to provide a cheaper and faster cross-border payments experience, a one-size-fits-all approach may not work for both retail and corporate customers. According to the 'Customer experience in banking - one size fits all?' panel, corporate customers tend to prioritise factors like foreign exchange rate, cost and predictability over mere convenience.

Debating over varying customer expectations for cross-border payment services, panellists Matthias Dekan, Head of Payments and Daily Banking at Raiffeisen Bank International, Ritu Seghal, Managing Director of Transaction Banking at Natwest and Roisin Levine, Head of UK & Europe at Wise Platform added that businesses prioritise a personal service model that emphasises transparency and security. In contrast, retail customers prioritise speed, price and convenience when selecting a cross-border payments provider.

Building a shared vision
According to Steve Naudé, Managing Director of Wise Platform, banks report that 30-40% of their customers, including retail, SMBs and enterprises, are using alternative providers for sending and managing their money internationally. “Banks have shared that when customers take their foreign exchange business to alternative providers, they also tend to move other services like current accounts, savings and loans. This is a problem that many in the industry are currently facing or expect to face in the near future,” Naudé added.

Closing the conference, Naudé highlighted that as established leaders in international payments, banks are well-positioned to regain their share of the growing retail and SMB cross-border payments segment. In doing so, banks are developing innovative partnerships that will enable them to build out the critical ‘Big Five’ capabilities, leverage agility and capitalise on the significant commercial opportunity in low-value cross-border payments.

Wise Connect London has once again inspired banks and innovators to rethink the future of international payments. This year’s discussion has underscored the need for banks to adopt a collaborative approach in building out faster, low-cost and more transparent cross-border payments solutions. Over the last year, we've witnessed significant changes in the international payments landscape, and we eagerly anticipate our upcoming events in San Francisco and Singapore later this year.

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