Breaking down borders for marketplace payments

Anders la Cour, co-founder and CEO of Banking Circle, explains why the PayTech award-winning Banking Circle Marketplaces solution was created, and how it empowers global trade by helping payment service providers (PSPs) that support marketplace merchants to access fast, affordable cross border payments.

You have an idea for a new product or business. You research your new market, competitors, customers, suppliers. You create a brand name, design a logo and packaging, put together a detailed business plan and seek investment to get off the ground. But where do banking and payments fit in? Usually quite low on the list of priorities, and a new business will typically manage its payments through a familiar and trusted bank, rather than invest significant time in researching alternative options.

Find out why the PayTech award-winning Banking Circle Marketplaces solution was created

However, small and medium-sized enterprise (SME) banking charges can be prohibitive, especially when looking to expand internationally. Cross border payments are slow and expensive through traditional banks, as they use the correspondent banking network, with each bank in the chain carrying out anti-money laundering (AML) onboarding, monetisation and sanctions screening as well as charging a landing fee.

The fact is, the legacy systems of traditional banks cause inflexibility for their own operations, so they struggle to provide the best payment solutions for SMEs.

Hitting the marketplace

Online marketplaces are an increasingly popular avenue for smaller businesses and start-ups to rapidly grow their customer base, but when a customer in another country places an order, profits and cash flow take a hit as the funds make their way from buyer to seller. Payments businesses have stepped in to bridge this gap and provide a faster, more cost-effective transactions solution, but changes introduced under the Second Payment Services Directive (PSD2) have brought an end to online marketplaces being exempt from payments regulations.

For marketplaces to remain exempt, the flow of funds must bypass the marketplace. To meet this new need and address pain points identified in our extensive market research, using our innovative financial infrastructure we were able to build a new solution with the needs of the industry right at the heart: Banking Circle Marketplaces.

Banking Circle is a new fully licensed bank, free of legacy systems. The company is committed to building and delivering accessible and affordable solutions to help businesses of all sizes compete and prosper. The suite of innovative Banking Circle solutions is increasing financial inclusion by providing previously excluded businesses with access to affordable and compliant payment solutions.

The award-winning Banking Circle Marketplaces solution enables PSPs to accept payments from marketplace buyers into a virtual IBAN account in the name of the marketplace seller and settle the funds back to the seller’s house account in the currency of their choice, allowing them to take control of the foreign exchange conversions.

Online sellers join marketplaces to get instant access to global markets. Some marketplaces require their sellers to have local currency accounts in the country from which they are receiving funds. Addressing this issue, Banking Circle Marketplaces provides sellers with local IBANs in the country to which they wish to sell – typically in British sterling, euros and US dollars – that are in the seller’s name.

The virtual benefit

In 2017, Banking Circle became the first non-bank to offer virtual IBAN accounts, with the launch of Banking Circle Virtual IBAN. This unique solution gives payments businesses the ability to issue multi-currency IBAN accounts in their customers’ names and in multiple jurisdictions giving them access to a reliable and fully flexible cross border payment system which was previously only accessible through larger banking institutions. As such, merchants can make and accept payments, cross border, in different currencies, in a way that traditional banks are unable to facilitate.

In 2018, Banking Circle Marketplaces was launched, specifically designed to support payments businesses servicing online marketplaces, and their sellers. Banking Circle Marketplaces uses virtual IBAN accounts to give payments businesses serving online marketplaces a genuine added value, without any requirement for upfront investment in systems or process changes. Accounts deliver full transparency and faster settlement, enabling payments businesses to offer marketplaces and their sellers a full transactional service.

Improvements are experienced across payments acceptance, screening time, reconciliation/settlement times, and customer experience. Payments are made and received at low cost per transaction, delivering a valuable competitive advantage previously unavailable to smaller sellers.

Banking Circle has created a financial infrastructure for banking and payments that meets changing market needs, giving financial institutions the ability to offer clients access to affordable, flexible, low-cost, real-time payments, but without having to make significant investment in their own infrastructure. The result is solutions that are fit for purpose – tackling the financial exclusion often faced by SMEs and adding value to the customer propositions for banks and payments providers.

Financial inclusion

Banking Circle was launched to give the organisations supporting small and medium sized businesses the ability to help them transact more efficiently – opening up international trade by providing fast and affordable payment solutions for businesses previously unable to expand internationally due to the high cost of cross border payments. The suite of innovative Banking Circle solutions is increasing financial inclusion by providing previously excluded businesses with access to essential lending, banking accounts and cross border payments.

Anders La Cour, Banking Circle

As well as many banks pulling back from offering correspondent banking because of risk and compliance concerns, setting up the necessary relationships in separate countries adds considerable administrative and regulatory burden. However, financial institutions need bank accounts in order to send and receive payments and they need to be able to transact in different currencies.

Banking Circle allows them to do just this without the traditional high costs and slow transfer times. Banking Circle gives financial institutions the unique ability

to offer their merchants the facility to pay suppliers and partners directly from a web interface delivered by them, in their name, but without the need for investment in in-house infrastructure. This is done without any loss of time or cash, breaking down barriers and borders, empowering global trade.

Banking Circle is the winner of this year’s “Best E-commerce Initiative” PayTech Award. Click here for more on this year’s winners!

For more information about Banking Circle, visit https://www.bankingcircle.com/