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Cryptocurrencies are the key: How global businesses can bypass rising cross-border transaction fees?

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By Anthony DiMarsico, CEO at Banxe

Cross-border transaction fees are slowly rising, but as cryptocurrencies continue to grow in prominence, they are increasingly showing their value in overseas payroll solutions. Cross-border transaction fees are necessary for larger global companies who must negotiate paying teams and partners who are based in different countries. Cross-border fees are largely dependent on credit card operators, and their fees often range from country to country, adding further hurdles to the payroll process. For instance, American Express charges a cross-border fee of over 0.40%. While some companies have accepted cross-border transaction fees as part of the payroll process, this can quickly become very costly, but there are ways to avoid rising transaction charges.

Cryptocurrencies will have a significant role to play in the international payroll industry, providing companies with a way to pay employees around the world without being subject to huge costs. The use of crypto in the payroll industry will only become more commonplace, with companies turning to digital currencies as a way to avoid charges, pay staff quickly, and negate the need for conventional currency conversions. Crypto-transfers are currently the fastest currency transactions in the world. For example, Bitcoin transfers typically take 40 seconds to be sent to a recipient, compared to 2-3 working days with traditional bank transactions.

Payroll teams have recognised the benefits of crypto, but the question now is; how will this impact the wider global adoption of cryptocurrencies in payment solutions and overseas transactions?

Modernising traditional payroll solutions

The payments industry has remained relatively traditional in recent years, with employers sending employees online bill payments and payslips. But as cross-border transaction fees continue to rise, global companies are needing to find alternative methods to pay employees to avoid slow transaction times and mounting fees.

Using crypto is the key. Companies using cryptocurrencies to pay global teams are able to quickly pay employees, rather than waiting the standard 2-3 working days. This allows for quicker payment times, leaving payroll staff with less need to pre-pay staff ahead of the traditional end-of-the-month‘ payday’. This can help optimise payroll solutions and streamline payment systems since cryptocurrency payments can be received the very same day, sometimes instantly.

However, speed is not the only benefit of using crypto within payroll solutions. Cross-border transaction fees typically range from 0.4-1.2%, often leaving companies with substantial transaction fees which are easily avoidable. Companies using cryptocurrencies within payroll solutions can evade these higher fees, which can significantly lower payroll expenses.

This wider adoption will allow companies of all sizes to reap the benefits of crypto cross-border transactions. For micro enterprises and SME companies, large transaction fees can cause substantial internal expenses, which larger global companies may be able to cope with. So smaller businesses and SMEs can benefit greatly from using crypto within payroll systems saving them both time and money when paying multinational staff teams.

There are considerable benefits to using cryptocurrencies within corporate payroll solutions. However these must be executed properly to avoid errors in payment and currency exchanges.

Global companies embracing crypto for the future

More companies, such as Microsoft, PayPal, Visa, and Mastercard, are beginning to accept cryptocurrencies as payment for products and services. As the race to accept cryptocurrencies accelerates, the wider adoption of crypto will begin to permeate all areas of payroll solutions.

This wider adoption will gradually begin to impact global business payment schemes. Currently, the top online payment methods for small businesses are via PayPal, Stripe, and Worldpay but using cryptocurrencies allows companies to bypass unnecessarily additional fees and utilise new digital currencies for employee payroll.

Cryptocurrency leaders have identified the wider adoption of cryptocurrencies for consumers and individual users, but now it is clear that crypto is beginning to enter the business payment industry, indicating the gradual global shift to accepting cryptocurrencies in many more payment forms.

Crypto revolutionising the payments industry

Companies are constantly seeking new ways to save both time and money, and crypto is the answer to their payroll solution issues. Using digital currencies allows smaller businesses to save costs for paying multinational staff and exploit new payment innovations, such as hourly payments in real-time.

There are considerable benefits to using crypto within payroll solutions. Many new companies are using crypto payments and benefits as incentives and a tool to make a company more attractive to younger talent. With the modern workplace constantly changing with younger people entering the office, companies are making sure to use crypto incentives and other benefits to retain young talent and attract new employees.Crypto is not just the future of payment solutions but also a means to attract future talent to the office. So, cryptocurrencies can open a world of new possibilities for global companies.

 

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How can businesses boost employee experience for finance professionals?

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By Martin Schirmer, President, Enterprise Service Management, IFS

Over the course of the last year, The Great Resignation has seriously impacted organisations across the globe. Staff are quitting in huge numbers, leaving companies unprepared and struggling to fulfil their workloads. In fact, mass departures are happening at all levels of the labour market, as employees attempt to adapt to the hybrid working model and growing socio-economic uncertainty.

In light of this, optimising the employee experience (EX) to attract and retain talent has become a top priority for employers. Organisations have come to understand the necessity of taking immediate steps to drive employee engagement and reshape workplace culture.

The financial services (FS) industry is no exception to this trend. From increasing employee burnout to growing career dissatisfaction, the pandemic has exacerbated the need for transformation across finance teams. This is exemplified by recent data from Spendesk, which found that approximately 40% of finance professionals are willing to leave their roles or already have concrete plans to do so.

Organisations looking to get ahead of the competition must put in extra efforts to retain their existing workforce. The fact is that employee expectations and requirements have irreversibly changed, with more workforces becoming increasingly distributed. Today’s hyper-connected workforce values flexibility and simplicity, and it is organisations which offer these experiences that will succeed in the long term.

As part of this process, finance companies must look towards the power of technology to create seamless user experiences across devices. From automating workflows to improving overall efficiencies, Enterprise Service Management (ESM) can help organisations to boost user satisfaction and go that extra mile for their employees.

How poor EXs are driving finance teams to quit

With over 40% of employees spending a significant proportion of their time carrying out mundane, manual tasks, it is not surprising that poor EXs are having a detrimental impact on job satisfaction. Finance teams in particular have been slower to digitise core processes, leading to a heavy reliance on manual tasks. This not only increases the amount of time spent on each task, but also impacts the engagement levels of finance professionals who cannot focus on more strategic aspects of their roles.

As a result of the pandemic, flexibility has also moved to the forefront of finance teams’ desires. Given the fast-paced nature of this industry, the conversation surrounding work-life balance has increased rapidly. Failure to offer flexible working policies, coupled with a lack of technology to facilitate this flexibility, has led to poor EXs across the board.

Most notably, the overarching move to omnichannel, digital-first approaches has dramatically reset both customer and employee needs. Finance is the third-slowest running corporate function behind legal and IT. Operating in a competitive environment, 73% of finance operations are facing pressures to speed up, improve efficiency, and prioritise automation.

Mitigating the problem using technology

ESM, an offshoot of IT Service management (ITSM), is the cornerstone of smart digital transformation for organisations. It can help finance teams to streamline and automate routine processes, such as monitoring the status of service requests, approving expenses, sending invoices, and tracking payments. In turn, this will free up employees’ time, reducing the burden of manual tasks and enabling them to focus on the more strategic tasks.

Another advantage ESM can offer finance teams is the ability to adapt to each department’s minimum requirements for data privacy. Accounting, for example, needs additional layers of compliance built into the system.

ESM can also facilitate cross-departmental collaboration, helping finance professionals to communicate with the wider business and perform tasks more effectively.  Organisations can use ESM to incorporate all internal services into a single platform, offering employees a well-rounded view of the business and promoting a sense of community across all levels of an organisation. This will boost productivity, whilst enhancing visibility and control.

Ultimately, the current job landscape has brought with it a new set of challenges. Organisations in the FS industry looking to navigate the storm and retain top talent must refocus their efforts on bolstering the EX. Embracing a new era of technological innovation that empowers employees and boosts engagement is a critical step in this process.

 

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CBDCs: the key to transform cross-border payments

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Dr. Ruth Wandhöfer, Board Director at RTGS.global

 

If you work in finance, you’ll have been hearing a lot about central bank digital currencies (CBDCs) and the moves different markets are making towards using, regulating and evaluating the viability of moving to an economy based on digital currency.

We are already seeing progress in the research, piloting and introduction of CBDCs into the financial system. The Banque de France for example, recently launched its second phase of CBDC experiments in line with the “triple digital revolution” unfolding in the financial sector. The infrastructures of financial markets and fintechs, however, are not prepared to accommodate their security, stability, and viability.

This could be an issue in the not too distant future. Each year, global corporates move nearly $23.5 trillion between countries, equivalent to about 25% of global GDP. This requires them to use wholesale cross-border payment processes, which remain suboptimal from a cost, speed, and transparency perspective. In fact, the G20 cross-border payments programme considers improving access to domestic payment systems that settle in central bank money, as one of the key components in facilitating increased speed and reducing the costs of cross-border payments.

The current state of cross-border payments

International transactions based on fiat are currently slow, expensive, and highly risky due to today’s disconnected financial infrastructure, messaging, and liquidity. Wholesale cross-border payment settlement can take 48 hours or longer, which is not practical in today’s digital world. Even if not every market moves to CBDCs, in an increasingly digital era, cross-border settlements between central banks will unavoidably involve dealing with CBDCs. So, not only will we have different currencies, we’ll have different technical forms of currency being exchanged – digital and fiat – as markets adopt CBDCs at different rates, adding another layer of complexity to cross-border settlements.

While there is much anticipation about the opportunities CBDCs can bring, the adoption of this technology will only be widespread if payment and settlement capabilities are overhauled to allow for new innovations in currencies.  This need for transformation represents an opportunity to redesign existing infrastructure to support cross-border CBDC transactions.

The current cross-border payments system involves correspondent banks in different jurisdictions using commercial bank money. Uncommitted credit lines used in cross-border transactions are a potential risk for any bank that relies on credit provided by a foreign correspondent bank. Interestingly, there is no single global payment and settlement system, only a complicated network of interbank relationships operating on mutual trust. While trust has allowed financial systems to function smoothly, when it begins to fail, as it did during the 2008 financial crisis, the result can be catastrophic.

Following the crisis, the Bank for International Settlements (BIS) implemented the Basel III agreement, which required banks to maintain additional capital against correspondent banking account exposures. These risk-weighted assets impose a costly capital charge on positions held by banks at other banks under correspondent arrangements. While this framework helps combat risk, it neglects to address the inherent problems in traditional correspondent banking that contribute to these risks.

Making the case for CBDCs

CBDCs can offer an improvement in settlement risks and are certainly thought to have potential benefits by the BIS. If implemented correctly, wholesale CBDCs can indeed accelerate interbank transactions while eliminating settlement risk. They can also encourage a more efficient and straightforward method of executing cross-border payments by reducing the number of intermediaries.

It is likely the evolution towards CBDCs will initially see the financial market supplement rather than replace existing payment instruments with new types of digital currency. CBDCs will coexist with current forms of money in a wholesale context, and their payment rails will also work alongside the existing payment systems. In simple terms, CBDCs will need to be linked to the broader capital markets ecosystem and applications such as securities settlement, funding, and liquidity.

If built with an innovation-first mindset, the future of banking infrastructure should provide full interoperability and convertibility between fiat, CBDCs, and any other type of digital money used in wholesale payments.

The future of CBDCs

To unlock the full potential of CBDCs, a ‘corridor network’ will need to be formed. This involves combining multiple wholesale CDBCs into a single, interoperable network under common governance agreed upon by all central banks involved. The legal framework of this platform would then allow for payment versus payment (PvP) or, where applicable, delivery versus payment settlement.

Practical wholesale CBDCs appear to be on the horizon, either as a supplement to existing financial systems or as part of a transition to a digital, cashless world. Looking ahead, central banks would benefit from collaborating with fintechs that provide innovative cloud native technology to enable seamless wholesale cross-border payments without interfering with the flow of funds. If wholesale CBDCs are to become a reality, fintechs must be prepared to accommodate them.

 

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