Goldman Sachs taps Visa for cross-border payment upgrade

Dive Brief:

Card network giant Visa and investment banking behemoth Goldman Sachs are teaming up to give the bank's corporate and commercial clients access to Visa channels for sending payments to businesses and consumers worldwide.
The two companies are improving Goldman's business-to-business, business-to-small-business, and business-to-consumer payments, they said in a press release Monday.
“There is an immediate need for modernization of global money movement to help businesses around the world simplify and enhance how they pay and get paid across borders,” Visa's global head of new payments flows, Alan Koenigsberg, said in the release.

Dive Insight:

Cross-border payments have long been complicated, slow, and expensive for businesses, with a labyrinth of correspondent banks, compliance requirements and entrenched systems often bogging down the movement of money. Lately, digitization of services and new software tools have set off a race across the payments sphere to create a better 'mouse trap' for rising cross-border digital commerce.

The Goldman Sachs move shows it's focused on improving customers' cross-border payments experience. Goldman Sachs isn't getting a brand new Visa product but rather is signing onto existing Visa programs, including Visa's business-to-business network that reaches 97 countries and its direct payout push to accounts system for payments across borders to smaller businesses and consumers, the release said.

Of the $120 trillion in business-to-business payments annually, about $10 trillion are cross-border payments, according to Visa. In its pitch for B2B business, the card network company says its cross-border network provides predictability, consistency and transparency with respect to those payments, through known institutions using tokenized technology to protect sensitive information. The Visa B2B service was launched just two years ago and has tripled its reach since then.

Similarly, Visa says its direct payout product for payments to small businesses and consumers simplifies cross-border transactions by streamlining a process that otherwise includes multiple networks and many intermediaries.

Asked when the two new partners started working together, how they plan to overcome barriers that have stymied cross-border payments for decades and how the Visa process is different from competitors, a Visa spokeswoman offered this follow-up comment from Koenigsberg by email:

"Goldman Sachs Transaction Banking and Visa share a common goal to make B2B payments as simple and effortless as consumer payments are today," the follow-up statement said. "We came together to form a strategic partnership and re-imagine B2B money movement across borders – at scale – and according to unique needs and use cases for Goldman’s business clients of all sizes."

A Goldman Sachs spokesperson didn't respond to an email seeking comment. In the press release, the investment bank said its customers would benefit from the new Visa tie by having access to a simplified system right away that doesn't disrupt their current set-up but offers optionality for low and high value payments and provides better data.

“We believe paying someone halfway around the world should be just as easy as paying someone around the corner,” Goldman Sachs Global Head of Transaction Banking Product and Sales Eduardo Vergara, said in the release. With the Visa service, clients will have "fast and easy ways" to make global payments.

The Goldman Sachs move comes as a slew of payment providers and competitors advance on the cross-border payment front. JPMorgan Chase, the biggest U.S. bank, has also recognized the cross-border conundrum and need for advancing cross-border payments services. It recently teamed with two Asian companies to help address the issue and potentially bolster services.

There is growing corporate interest in cross-border payments, largely driven by U.S. and Chinese companies trying to sell goods in Africa, Latin America and the Middle East, said Charles Leinbach, a director with consultant AlixPartners who follows the payments arena. Increasingly, companies are seeking out a single vendor who can facilitate payments globally, he said, noting the Dutch payments processor Adyen as one example. Cross-border fraud and sanctions by countries aggressively policing cross-border payments are also issues, he said.

Big payments companies are scrambling to come up with cross-border services as fintechs roll out new competing tools to court the rising cross-border demand. Uses for cross-border payments include everything from migrant workers sending payments to home countries to shippers directing payments to foreign vendors to companies paying international gig workers to global companies seeking payment for goods sold continents away.

Among the fintechs fashioning new cross-border payment channels on an array of fronts are Payoneer, which provides cross-border services to online retailer Ebay; DLocal, which just raised $75 million in a first-time stock sale last week; Drip Capital, which finances cross-border payments for small and mid-sized businesses; and Tipaliti, and BlueSnap, which cater to mid-market companies.

Evolving alongside with the fintechs seeking to tweak the existing international payments system or partner with incumbents on new approaches are the digital currencies and central bank digital initiatives potentially offering more dramatic changes. For instance, the Federal Reserve said it would issue a white paper this summer to kick-start a conversation about the U.S. potentially issuing a central bank digital currency. Other countries are pursuing their own digital currencies in a trend that could further transform international payments.