e-Commerce Solutions for Transactional Business
Analyst reports indicate that the global e-commerce market is projected to grow to over $2 trillion by next year. Currently, there is around 10% growth in domestic/local e-commerce compared with that of cross-border e-commerce, where buying, selling and online transactions are made from or with businesses in other countries, which is now growing at over an incredible 20% annually.
Admittedly the above figures predominantly look at the retail, private client side of things, but there are hundreds of millions of investors and shoppers that don’t use credit cards. This growth in cross-border e-commerce is a huge opportunity for many businesses to expand internationally, but certain friction points remain, and one of those friction points could be online payments.
While over three quarters of a billion people have gained access to online transactional-based accounts in the last five years, there are still about 2 billion potential investors in the world who lack access to such accounts offered by companies regulated by the financial services.
The increased role that these service providers play in financial services, particularly in the payments arena, has contributed to making them available and useful to a widespread audience, including those who were previously unable to access financial systems. However, this route is not without its own set of issues and barriers with the main ones identified relating to the potential impact of operational risk, competition issues, customer protection aspects and the risks that might emerge if outsourcing of payment services is concentrated in one or multiple service providers.
With the growth of e-solution cash products and the accumulated value of funds stored in online accounts, regulatory authorities are paying closer attention to the risk of misuse or loss of customer funds, which tend not to be covered under depositor compensation or guarantee schemes. India and the US for instance have implemented measures to protect customer funds if the issuer of pre-paid payment instruments becomes insolvent.
The fees, terms and conditions associated with transaction account services and/or individual payment instruments can be quite complex. Jurisdictions across the European Union, including Turkey, have introduced specific requirements for the comparability and transparency of account fees and payment services. This is to avoid confusion and ensure smooth, efficiently run processes and a quality-driven customer experience.
Latin America, particularly in Brazil, has also made transaction account service points significantly more available throughout the country through agent banking/correspondents. As far back as the late 1990s the Central Bank of Brazil started developing its current model, which has now become a permanent part of its agenda. Today, correspondent outlets exist in all of Brazil’s municipalities, and they account for more than half of all financial service access points in the country. As a consequence of these developments in the industry other countries across Latin America and the Caribbean, Russia and India are now following suit.
The Isle of Man and Jersey/Guernsey are now fully incorporated into the Single Euro Payment Area (SEPA) in order to be in line with European standards. SEPA is a payment-integration initiative of the European Union for simplification of bank transfers denominated in Euros. Companies like the Capital International Group via Capital Treasury Services were ahead of the chain back in 2013 by being both SEPA and more recently SWIFT members whilst discussions were still under way in the Crown Dependencies.
Being outside of Europe is often seen as a contentious subject, but as a truly independent, international organisation, Capital Treasury Services is able to provide flexible, cost effective online solutions to streamline payment processes for clients around the world. With a payment solution that not only facilitates standard payment and receivable transactions via BACS, CHAPS, Faster Payments and SWIFT, but also gives clients access to SEPA payments, via segregated clearing accounts within the Single Euro Payments Area.
To support the offering of payments and receivables there needs to be active involvement across the financial services, including the regulators. It is not just a case of having the knowledge or a piece of software and running a payment provider solution from an office anywhere in the world. There are key components that go into ensuring that such a business solution is water-tight and robust:
- The regulatory bodies, codes of conduct and any legal frameworks need to effectively address all relevant risks whilst protecting customers, and at the same time allowing the free-flow of innovation and competition.
- Financial and IT Infrastructures must be robust, secure and efficient as well as being effective for the provision of transactional-based accounts, any associated services, and support the delivery of full-scope financial services.
- Transactional-based accounts and payment solutions must effectively and cost-effectively meet a broad range of operational needs for its target market.
- The usefulness of transactional -based accounts is supported by a broad network of access points that achieves wide geographicalreach whilst being able to work with ease alongside/with other systems, solutions or products.
Bridge, the aptly named online payment system, is one such solution that takes these and many other regulatory and operational factors into account. It provides low cost domestic transactions across the 32 member countries of the Single Euro Payment Area as well as in some other foreign jurisdictions. By building on the success of Cash Management and Foreign Exchange services Bridge provides clients the ability to immediately and directly manage their cash online, make payments and track receivables on one easy to use Internet based interface.
With the flexibility and ability to innovate has meant that the Group has been able to embrace SEPA, without having to wait for the Isle of Man SEPA membership to be incorporated. The Group realises that it won’t be long before all electronic payments throughout Europe, and the world, will be as easy and cost-effective as domestic payments are today, but why wait when there are low cost international payment mechanisms which you can benefit from today.
This article has been prepared for information purposes only and does not constitute an offer or an invitation, by or on behalf of any company within the Capital International Group of companies or any associated company. Opinions constitute our judgement as of this date and are subject to change.