Giving small businesses a global cash flow

Large multinationals have access to a huge range of banking facilities, suited to their size. As smaller firms are increasingly able to access global markets, their needs look more like those of the corporate giants. The lower value of the pound, following the Brexit vote, has made UK businesses more attractive as exporters. However, restricted access to banking facilities could hold them back.

Nick Pedersen, managing director at global payments provider EQ Global, says: “I am of the view that progress in financial technology can overcome any of the challenges around Brexit, as UK companies become attractive as exporters. If you can manage payments online through a third party, it suddenly becomes incredibly attractive to start selling overseas.”

The growth of e-commerce has transformed supply chains and customer bases, allowing small and medium-sized enterprises (SMEs) to hook up with counterparties and clients anywhere in the world. Yet while it has become easier to find suppliers in China and relatively straightforward to then start selling to people in Brazil, managing payments and collections is more complex.

Using current banking facilities, it is relatively simple for a small business to open one bank account with a high street bank and set up payment terms with around five major currencies. Going beyond that is tricky. The ease with which a small business can transact and engage with suppliers globally has not really kept pace with real-world business.

We build Virtual Bank Accounts on top of global banking giants’ account networks to enable companies to open bank accounts in 24 hours

The frustration is increased when platforms do exist, which support payment across borders for retail transactions, such as eBay or Amazon, yet enterprise-scale business is seen as a laggard.

Such limitations can damage businesses. Paying a supplier in a small market, for example Malaysia, is not only complex to arrange, it carries hefty charges, a significant amount of time and the foreign exchange charges from a local bank are likely to be considerable.

In addition, where a business tries to open multiple bank accounts, it usually takes at least six weeks per account. To open bank accounts in multiple currencies exacerbates this. EQ Global has developed a Virtual Bank Account (VBA) to overcome these challenges.

“We build Virtual Bank Accounts on top of global banking giants’ account networks to enable companies to open bank accounts in 24 hours,” says Mr Pedersen.

Using the global banks’ account network, reaching across 26 countries, EQ Global is able to collect payment on behalf of a customer from a local account in the United States, for example, then enhance the process for the user by providing a solution on top of that banking infrastructure. It reduces the risk of missing payment, ensures its timeliness, and speeds up the delivery and the acceptance of the payment.

“You no longer have to wait three or four days just for your bank to confirm that a payment has or hasn’t arrived,” he says. “You should be able to do that in almost real time. And what we are certainly seeing is customers these days are expecting payments to as close to real time as possible, if not instant.”

Tackling the frustration of a missing payment, which in a multi-stage international transaction can be very challenging to resolve, brings the SME user into a 21st-century level of service and efficiency without significantly increasing their costs.

“Money doesn’t really go missing, it just gets lost in legacy banking networks,” says Mr Pedersen. “What we try and do is build technology solutions to reduce that as much as possible.”

World map lights

To fully support SMEs, the EQ Global platform is not only directly offered as a service to them, but can be used to underpin online marketplaces and e-commerce by embedding its payment infrastructure and e-wallets into their operations. Online businesses have thrived by white-labelling technology provided by payment service providers and embedding it within their front end. As EQ Global’s system develops, customers will be able to pay businesses directly using the platform.

“If you look at large digital firms, they didn’t have the opportunities to build in payment infrastructure at a very early stage, but that’s wildly different to the current versions of Airbnb, Google or Amazon.”

By starting out with EQ Global’s infrastructure, SMEs will be able to grow rapidly, unburdened by the administrative and regulatory burdens that direct bank engagement requires. Users will receive an International Bank Account Number, which will allow them to send and receive payments via their VBA.

From January 2018 onwards, under the European Commission’s Revised Payment Services Directive, UK banks will be opening their systems up so that third parties can, with permission, access customer data and effect client transactions, making the use of financial technology providers more common for banking services. The open banking initiative will change the way people bank, but for a crucial detail.

“The trust that SMEs have in their bank hasn’t and won’t go away,” says Mr Pedersen. “People believe that their bank will hold their money safely, but could be quite sceptical if a third party pulls funds out. And the flip side is that banks don’t necessarily have a great platform or customer service.”

Consequently, by providing a strong service offering, on the top of a global bank’s operations, EQ Global believes it can match the right user experience with the digital business model firms need.

“Customers are very demanding around user experience – that’s where we have an edge, not only in how our platform looks and feels, but the functionality it has around it,” Mr Pedersen concludes.

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