Inside the Payments Boot Camp – Global Payments
Last year we expanded our Payments Boot Camp program to include a series of one-day workshops that give us an opportunity to dive a little deeper into a topic to share our experience and insights in a more interactive forum. And no topic has as much “real-world” demand as Global Payments. It’s a broad area to explore, and I wanted to share how we’ve structured the narrative.
The story starts at the beginning, as all good stories do, with a look at the global payment “building blocks”. We start with the country payment systems themselves. Global payments are about moving money between domestic payment systems, but the system of origin and destination are always a key component of the equation. We look at how different countries run their payment systems — and the commonalities and differences one finds on a country-to-country basis.
From there we move on to look at international wires and how money moves bank account to bank account across country borders. We lay out how correspondent banking works, introduce the SWIFT messaging system, and explore the ins-and-outs of foreign currency exchange. The irony here is that international wires don’t necessarily involve wires! We start at this level of abstraction because you can’t appreciate the value proposition of Western Union, PayPal, and the global card networks unless you understand international wires as a starting point.
In stark contrast to the complexity of international wires, we then shift the story to the power and flexibility of cross-border card processing. We’ll explore how the basic model works, the fundamentals of dynamic currency conversion, and multi-currency pricing. There are some real subtleties here, especially for global merchants attempting to eliminate currency conversion friction in cross-border purchases.
We finish our exploration of the “building blocks” with Global ACH, an under-appreciated way to link the major bank transfer systems around the world. Our partner Elizabeth McQuerry is the newly appointed CEO of the International Payment Framework Association (IPFA), which is the industry association chartered with improving cross-border payments exchange for ACH payments (and soon for exchanging instant payments between countries).
After lunch we explore the four major cross-border use cases:
- Cross-border Supplier Payments
- Global eCommerce
- Global Payouts
- International Remittances
In the realm of cross-border supplier payments we’ll be examining how businesses pay suppliers across border, their requirements, and the challenges they face. We’ll also look at cross-currency and same-currency supplier payments, as well as the attitudes enterprises have towards both bank and non-bank solution providers.
For global merchants working online, we’ll look at the various PSP models, their value propositions, and their general approach to domestic payment methods. Understanding the variation in these models is a key consideration when evaluating domicility issues.
As we start to wrap up the workshop, we’ll examine the global payout alternatives for enterprises that need to pay employees, contractors, developers, and advertising affiliates in multiple markets. Special attention will be devoted to the problems associated with reaching developing countries. This is especially important for companies that want to think and act globally.
Our exploration of the four major use cases finishes with a look at international remittances, which is the cross-border transmission of funds between family members. We’ll look at the major corridors for workers remittances, and the differences between formal and informal remittance systems. We’ll finish with a special look at the emerging role that mobile wallets play in international remittances.
In describing our narrative it’s as important to mention what we left out, as it is to talk about what we included. We went back and forth about whether to directly address the challenges faced by global marketplace providers such as Airbnb, Uber, etc. In the end, we decided to leave it within the discussion of global funds-in (the global eCommerce use case) and global funds-out (the global payouts use case.) We’ll see how that works out and might adjust it going forward.
All in all, it’s a full day of interaction and I’m proud of the agenda we’ve been able to develop. If you are interested in global payments, I urge you to consider attending our Global Payments Insights Workshop. The next session is October 15th, 2015 in Palo Alto, California as a standalone workshop or as a companion day to our next Payments Boot Camp on October 13th and 14th.
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This post was written by Glenbrook’s Russ Jones.