What Next for Cross-Border Payments?
An Interview with Ebru Pakcan, Head of Payments, EMEA, Treasury and Trade Solutions, Citi GTS
Citi recently conducted a survey amongst over 250 companies across Europe, Middle East and Africa (EMEA), which aimed to re-assess some of the challenges associated with cross-border payments. Making cross-border payments efficiently and cost-effectively remains a basic need for companies operating internationally, so Citi was keen to understand the challenges which exist today and how the bank can help. Some highlights of the survey results are illustrated below, but in addition, we are delighted to talk to Ebru Pakcan, Head of Payments for the EMEA region at Citi.
Were you surprised at the results of the survey?
Whilst not on the whole surprising, I was and continue to be fascinated to see that some of the basic payment needs never seem to change. I was particularly interested to see that so many treasurers said they continued to experience often considerable challenges in cross-border payments, perhaps unaware of the opportunities that exist to resolve these issues. For example, 34% of respondents indicated that they did not have visibility of the FX rates used for currency conversion, and 49% of companies hold non-resident accounts simply to make payments to offshore beneficiaries. These statistics alone illustrate that for a large proportion of firms, cash management has considerable complexity and a lack of visibility over important information required for benchmarking and accounting purposes.
As a result of this complexity, it is perhaps less surprising that such a large proportion (68%) of respondents indicated that they are intending to rationalise the number of accounts and currencies that they maintain, with 38% emphasising that this is a very important consideration. Some currencies create more challenges than others, particularly in Eastern Europe and Russia, and parts of Asia such as Korea. While regulations are changing in regions that have traditionally been more difficult from a payments and cash management perspective, significant challenges still remain.
Are there specific industries or business sectors for which cross-border payment needs create a greater business imperative
The reality is that most multinational corporations will have cross-border payment needs to cover supplier, distributor, expense payables, insurance, freight and duty payments, amongst others. Specialist operations will also have cross-border needs, such as dividends, stock options and employee compensation schemes. These issues extend not only to commercial enterprises but also to public sector bodies. Consequently, we see cross-border payments as a universal need for all types of organisations.
What about specific geographies? Do you see companies based in certain countries having more complex cross-border payment needs than others?
Multinational corporations headquartered in North America and Western Europe have had to support payments in multiple jurisdictions for many years. Over the past 10 years, however, and particularly over the past 3-4 years, companies based in emerging markets, and therefore without EUR or USD as their base currency have become multinational in their scope, and therefore have some common, and some unique challenges associated with cross-border payments. For example, we are seeing growing cross-border payment needs amongst non-bank financial institutions and corporates in the Middle East.