Majority of UAE companies feel there is lack of transparency in traditional payment transfers
More than 70 per cent of the companies in the United Arab Emirates (UAE) feel there is a lack of transparency in traditional cross-border payment transfers, according to the latest international payment survey by cross-border payments network, PayCommerce.
The value and volume of cross-border transactions globally are growing steadily at eight and 10 per cent, respectively, every year, according to Boston Consulting Group (BCG) Global Payments. In addition, the value of cross-border transactions is expected to nearly triple to over $54.8 trillion by 2022, from $20.5 trillion in 2012 and the number of transactions will grow from 9.9 billion to 20.7 billion based on the BCG report. Despite these, certain factors such as high transaction fees, time lag and lack of transparency continue to remain as challenges for businesses.
“We always listen to the market and our customers. In fact, this survey underscores that more needs to be done to help traditional cross-border payment providers to evolve and address the industry’s points, particularly given the significant market impact. Weaknesses of traditional international transfers are already leading to a shifting of customer preferences as they become educated about the various models in the marketplace,” said Max Narro, Chief Executive Officer of PayCommerce.
In the UAE, many of the 122 companies surveyed by PayCommerce commented that the traditional payment transfers are very slow and very expensive.
The respondents said their pain points related to international wire transfers and 32 per cent said these were very slow and 44 per cent said these were very expensive. Ten per cent also said they were unable to get payment status and some regard it difficult to find correspondent banks in certain regions.
The average settlement time experienced for international transfers was between three and five business days, according to 49 per cent of the surveyed companies in the UAE.
More than 70 per cent did not know how much in transaction fees they were paying and 54 per cent said they were not able to track the status of payments or receivables through international bank transfers. This highlights the major lack of transparency in the transaction process.
Over 60 per cent of surveyed companies in the UAE said they were not aware as to how many banks or financial entities their payment has to pass through until it reaches the final recipient.
The scenario is changing worldwide as the newer, efficient and faster international payment networks offer enhanced value proposition. This brings the traditional correspondent banking model for cross-border payments under acute pressure from customers, regulators and competitors alike.
The PayCommerce survey revealed that 67 per cent of the companies are willing to opt for a more cost-effective and transparent method of sending and receiving international payments.
"The widening gap between customer expectations and effectiveness of traditional international payment systems are leading customers to look for innovative payment solutions such as PayCommerce's first ever instant cross-border payment. This will enable payees to receive remittances in real-time, eliminating costly clearing processes and reducing risk in settlement procedures. We are not very far from the time when majority of businesses would prefer real-time, digitally enabled cross-border payments," Narro concluded.