The competitive advantage of banks that adopt a multilateral model to process cross-border payments

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International banking has long operated on a cross-border payment processing model that is marked by transaction delays, high costs and a lack of transparency. The traditional model for processing cross-border payments was built on a foundation of sometimes excessive bilateral intermediation between correspondent banks, making it outdated and inefficient by today’s technological standards. This creates anxiety and headaches for financial institutions and their customers around the world. However, a new wave of innovative fintechs is revolutionizing the cross-border payments space as multi-lateral and intermediary-free platform models gain popularity and global scale.

One such solution is Visa B2B Connect, an innovative multilateral network how to get spain number for whatsapp that Visa launched to the market to process cross-border payments outside of its conventional credit card rails, and which is positioning itself as an effective alternative to eliminate the unpredictability and lack of transparency of the traditional intermediation model for processing cross-border payments .

In this blog post, we will take a closer look at the challenges facing the traditional model of bilateral relationships between correspondent banks and also discuss why a multilateral access model is necessary. We will also look in detail at the features and benefits of the Visa B2B Connect solution , and highlight what the advantages are for banks, financial services professionals, and their commercial/corporate clients.


Challenges of the traditional model of bilateral relations

The traditional model of bilateral relations between correspondent banks relies on intermediaries that facilitate cross-border payments . However, as with any intermediation model, friction increases as more intermediaries are involved in the process. This model has many unresolved challenges, including a lack of transparency, mistrust between intermediaries, hidden fees, slow transaction processing, and high costs.

This complex network of intermediary banks makes it difficult to quickly and efficiently identify errors that may arise in processes that are in different hands, such as fraud situations, the possibility of effective reconciliations, and direct interaction between the originator and beneficiary of cross-border payments .


Why is a multilateral model for cross-border payments necessary ?

A multilateral model for processing cross-border payments solves many of the challenges presented by the traditional bilateral intermediary bank model by using a shared multilateral access platform where financial institutions can find each other and communicate directly without intermediaries creating unnecessary friction. A multilateral model allows for a streamlined payment process, which translates into faster transactions, lower costs, and greater transparency.

Some successful examples of multilateral payment platforms in the financial services industry can be seen in the ACH and RTGS networks, which are largely used by regulators and financial institutions around the world for local payment settlements, and also for processing low-value cross-border payments . More sophisticated examples are the new payment networks that are being created using blockchain technology and that will eventually allow universal and multilateral access to the different participants in these networks.


Visa B2B Connect

The Visa B2B Connect platform is a multi-party network model for processing cross-border payments across more than 100 different countries and currencies, using distributed ledger technology (DLT) to tokenize payment instructions in a secure and efficient manner. The platform allows participating financial institutions to communicate directly with each other, eventually eliminating the need for intermediaries and improving the rationalization of nostro accounts .

In addition to processing payments in a faster and more efficient manner, it also allows for more appropriate management of the liquidity needed to process cross-border payments , the parameterization of transactions in accordance with the risk appetite and the prevention and money laundering policies of the participating banks, and automated reconciliation mechanisms and real-time payment tracking.


What are the benefits of Visa B2B Connect for banks and financial services professionals, and their business clients?

For banks and financial services professionals, Visa B2B Connect offers a more advantageous cost structure and faster processing times to more than 100 countries and currencies, enabling financial institutions to process a higher volume of payments in both traditional and non-conventional corridors and thus providing a better value proposition to their business clients.

Transparency and predictability, considered key factors when choosing a cross-border payment provider , are the norm rather than the exception on a multilateral platform such as Visa B2B Connect , which also allows critical problems to be identified quickly and avoid situations of fraud and operational errors, even before these events can occur.

By adopting new multilateral models for cross-border payments such as Visa B2B Connect , financial institutions can remain competitive in an increasingly digitalized and globalized world.

Visa B2B Connect represents a major step forward for the cross-border payments industry and is disrupting the paradigms of traditional bilateral intermediation models in a decisive and forceful manner.

If you are interested in learning more about B2B Connect and finding out how it can benefit your business, Click here and find out.