This article originally appeared in the Australian Financial Review on 12 March, 2019.
Cross-border payments, once a stable and unglamorous financial services niche, is one of the fastest-growing financial services markets as businesses look to ecommerce to grow, and expand into global markets.
The globalisation of commerce – hand in hand with advancements in technology – is reshaping the payments system.
A PwC report, Future of Payments in Australia, says technology companies are moving quickly to exploit what they see as a slow-moving, antiquated payments infrastructure and as a result the “[payments] ecosystem is evolving rapidly”.
“The world of payments will look very different in the next five years,” the report forecasts.
“Disruption across the payments industry is still in its early stages: what seem like small shifts now are set to result in a drastically changed landscape by 2020.”
As always in business, change presents both challenges and opportunities.
Says PwC: “Proliferation of trade and commerce across borders is creating new challenges for business, and in turn opportunities for payment-chain participants to find innovative solutions.”
The report shows that mobile commerce is the dominant factor driving strong digital commerce growth, due to rising smartphone adoption, an increasing shift towards online shopping and improvements in network bandwidth.
Mobile commerce is expected to reach 70 per cent of global digital commerce sales by 2022.
Retail cross-border ecommerce sales totalled $US300 billion ($428 billion) in 2015 and are poised to exceed $US900 billion ($1.28 trillion) by 2020.
These trends are music to the ears of Skander Malcolm, CEO of online foreign currency exchange and international payment services company OFX Group.
“With the growth of online marketplaces ecommerce merchants are using digital to expand and to access global markets,”Malcolm says.
“Solutions that support global business are on the rise and OFX is enabling ecommerce merchants to be globally active.”
ASX-listed OFX is based in Sydney and has offices in London, San Francisco, Toronto, Auckland, Hong Kong and Singapore.
Although technology is reshaping global consumer trends, and fintechs like OFX are disrupting the payments industry,Malcolm says that OFX is much more than a digital payments platform.
“Service is the differentiator in OFX’s business model,” he says.
“OFX combines a streamlined digital experience and expert personal service so that customers can transact across borders when, where and how they want.”
Their client base comprises three core groups: Individuals (accounting for 50 per cent of OFX’s business), SMEs and mid-tier corporates (45 per cent) and large enterprises (5 per cent).
OFX’s business model includes a focus on locally-based support centres. The biggest centre is in Sydney, staffed by 80 “customer service agents”, followed by San Francisco (25), London (25), Toronto (15) and Hong Kong (10).
“Any SME will tell you, when it comes to service providers, they need to be able to talk to someone that knows their business and is quick to provide guidance,” he says.
The SME sector is proving responsive to the OFX offering, with the sector’s share of OFX revenue growing from 30 per cent to 45 per cent over the past five years.
Malcolm says new product innovation is another critical component of OFX’s business model.
OFX’s flagship Global Currency Account is a case in point.
The Global Currency Account has been designed to simplify cash-flow management for online sellers trading internationally. Online merchants can manage multiple currencies including euros, British pounds,US dollars, Hong Kong dollars, and Canadian dollars in one convenient place, while saving money on exchange rates.
“Historically, it has been difficult to obtain a local bank account without being physically present in a country, making it challenging to do business in another currency,” Malcolm says.
The Global Currency Account helps businesses better manage their global revenue as well as efficiently manage every account, balance and transfer from multiple marketplaces in multiple currencies. Account users can hold balances and make secure payments to their global suppliers and even pay taxes directly from the account.
“The world is moving to new ways of making money that require new ways of moving money securely and easily.We are excited to be a part of creating efficiencies in the global economy for our ecommerce customers,” Malcolm says.
“And we are just getting started.”
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IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. UKForex Limited (trading as “OFX”) and its affiliates make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.