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Seize the big opportunities of a smaller world

American Express Raconteur Future of Payments

Uncertainty seems to be the big theme of current times. But behind the headlines about political or macro-economic volatility, positive trends are emerging. International trade in goods, for instance, is growing, up 2.4 per cent in value in 2017 from 1.3 per cent in 2016.1 The economies of every state in the European Union are forecast to grow over the next two years, the first time growth has been forecast across the whole EU in almost a decade.2 Globally, economic activity is picking up. In April the International Monetary Fund raised its forecast, estimating 3.5 per cent growth in 2017, up from its earlier estimate of 3.1 per cent.3 All this signals plentiful opportunities for businesses in terms of expanding their reach, acquiring customers and growing revenues.

Optimism reigns but inaction is rife

Businesses seem to sense the improving economic climate and small and medium-sized enterprises (SMEs) in the UK are a case in point. According to the recent American Express SME Global Pulse, they’re almost twice as likely to be positive (33 per cent) about the global economy than negative (19 per cent). Confidence about exporting is reflected in turnover projections. The number of UK SMEs generating 50 per cent or more of their revenues from exports will more than double from 21 per cent today to 44 per cent over the next three years.4

In this globalised world, trade opportunities may be bountiful, but some UK companies are simply not getting involved. This is despite a major push by the government, since 2014, to boost UK exports up to £1 trillion by 2020. The ICAEW found that the percentage of UK businesses engaging in international trade has remained stable for three years at 53 per cent since 20145 and of the 47 per cent of non-exporters, almost none (96 per cent) have plans to sell overseas in the next 12 months.

Dealing with the complexity of cross-border payments through innovation

Why the hesitancy? Naturally, there are challenges to trading successfully in a globalised world, including regulations, taxes, tariffs and language differences. Concerns around payments also create a barrier, both for sellers and for customers. In fact, payment security is among the top two barriers to cross-border trade.6 Reliable payments are critical to a business and, for exporters, there are several vital questions that perennially need answering: How and when will I be paid? How do I guarantee this payment? How do I pay a supplier? What about exchange rates?

The payments landscape was, until recently, relatively static. Banks dealt with more than 90 per cent of transactions and 69 per cent of international transfers were electronic.7 This is now changing with the emergence of new challengers in the form of non-traditional providers. These additional options give organisations more flexibility, although fragmentation of the payments landscape is a challenge in itself.

We aim to help companies gain the confidence to go out into the world and start trading, secure in the knowledge that any complex elements around payments are taken care of

Overall, the most problematic issue with international payments is sheer complexity, which doesn’t necessarily need to be the case as commercial payments companies such as American Express help to simplify processes and remove hurdles with seamless, end-to-end solutions. Based on our long history in business payments, we are targeting would-be and actual exporters with a barrier-free solution. We aim to help companies gain the confidence to go out into the world and start trading, secure in the knowledge that any complex elements around payments are taken care of. International payments shouldn’t be a hassle. And we are one part of an ecosystem that exists to support exporters. This includes organisations including the UK Department for International Trade and its Exporting is GREAT initiative.8

Firms large and small can benefit from end-to-end solutions

Bristol-based BrizTech9 is one such company seizing the opportunities that arise from globalisation. The firm is an international retailer of custom-branded Google Cardboard VR headsets under the brand BrizTechVR, selling both to retail and business customers. The aim is to carve out a slice of the booming augmented and virtual reality market, worth $3.9 billion in 2016 and expected to rise to an estimated $108 billion by 2021.10

Owen Carter, director at BrizTech, explains: “We’re a small business and everyone has to wear multiple hats; no one is dedicated solely to payments. We needed a simple solution like American Express International Payments that required as little admin as possible and helps us settle international payments to our suppliers swiftly. It allows a frictionless transfer between us and our overseas manufacturers, meaning our clients get their orders more quickly. It also helps us take payments from overseas clients which in turn helps our cash flow. Knowing that American Express is handling our payments for us, we’re able to focus on our core business, work on new products and expand into new areas.”

Larger firms with more complex payment arrangements also see benefits by reducing friction in terms of international trading. Marketing technology provider Performance Horizon operates in 215 countries with more than 215,000 marketing partners and affiliates on its platform. Effectively it is the glue that enables partner and affiliate marketing programmes to succeed, for example making sure a hotel comparison site is paid for referring a customer to a hotel brand.

Chris Blaxall, chief financial officer at Performance Horizon, says: “Our business is global so we need a global payments infrastructure. We make thousands of payments every day with billions of dollars crossing our platform every year and a traditional bank simply can’t give us the solution we need.”

Performance Horizon also opted for an American Express international payments solution, in part because of its currency pairing options where a base currency is compared to another and the resulting rate, for example GBP/EUR 1.17990, becomes a unit in and of itself. Delighted with the outcome after three years of dealing with an end-to-end solution, Mr Blaxall points out: “We have zero outstanding payments and our brand customers know that their partners have been paid, which is a very big plus.”

Concerns about payments shouldn’t impede cross-border trading

Paying people and getting paid is enough of a headache domestically let alone when it comes to different currencies and varying business cultures. However, it’s not something that should hold businesses back when thinking about trading internationally and seizing the opportunities of globalization. A smaller world makes it easier to get closer to more potential customers. That’s the message American Express wants to give the UK’s current and prospective exporters. Our goal is to reduce the barriers to trade and smooth the path to global success for tiny companies, giant enterprises and everyone in between.

 

1 World Trade Organization, April 2017

2 European Commission Winter Forecast, February 2017

3 Bloomberg, IMF’s 2017 global growth forecast is 3.5 per cent, April 2017

4 Oxford Economics and American Express, SME Global Pulse, April 2017

5 Institute of Chartered Accountants for England and Wales, January 2017

6 Export.gov, Barriers to Cross-Border Trade, November 2016

7 American Express, 2017

8 Export.great.gov.uk

9 Briztech.co.uk

10 Digi-Capital, The reality of VR/AR growth, January 2017


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