What Is Correspondent Banking and How Does It Work?

So what is correspondent banking?

A correspondent bank is a financial institution that offers services to another financial institution, usually in a different nation. It operates as a middleman or agent for another bank, arranging wire transfers, performing business transactions, receiving deposits, and gathering documentation.

Domestic banks will most likely use correspondent banks to service transactions that originate or are completed in other countries. In addition, domestic banks use correspondent banks to access international financial markets and serve international clients without having to operate branches abroad.

What Is a Correspondent Bank?

A correspondent bank is a bank in one nation permitted to provide services to a bank or financial institution in another country. Currency exchange, processing business transactions and trade documentation, and money transfers are the most frequent services provided by a correspondent bank.

How Does a Correspondent Bank Operate?

Correspondent banking is based on a deal between a foreign and a domestic bank to open a correspondent account, also known as a Vostro or Nostro account, at one bank to benefit the other. Correspondent banking generally includes the concept of reciprocal accounts that link two banks. These accounts are set up so that a domestic bank can make payments or money transfers on behalf of a foreign bank.

These correspondent accounts allow banks to manage international financial transactions for their customers that involve foreign currency exchange, such as those that often occur between an exporting business in one country and an importer in another.

What does the process look like?

A bank customer in one country must pay for goods from another country’s suppliers. The customer’s domestic bank determines the necessary foreign currency exchange transaction to permit suitable payment in the seller’s currency.

It deducts the necessary amount from the customer’s account. Then, it notifies its correspondent bank in the supplier’s nation to pay the matching amount to the supplier from the domestic bank’s correspondent account with the foreign bank in the supplier’s currency.

Third-party banks are referred to as correspondent banks. They bridge the gap between various financial institutions. As a result, they provide Treasury services between sending and receiving banks, particularly those located in different countries—for example,

  • exchange of currencies
  • make sure everything is in order
  • settlement
  • transfer of funds by wire
  • transfer of money

When clients travel abroad, correspondent banks may act as agents to handle local transactions for them. For example, correspondent banks can receive deposits, process documents, and act as money transfer agents locally.

What are Nostro and Vostro Accounts?

Nostro and Vostro accounts are the accounts held between correspondent banks and the banks for which they offer services. The holding bank refers to an account held for another bank as a Nostro account. The counterparty bank refers to the same account as a Vostro account, which means “your account on our records.” Generally, both banks in a correspondent relationship maintain accounts for each other to track debits and credits between them.

Correspondent banks are an essential aspect of the financial industry since they allow domestic banks to continue to operate when they can’t create branches in another country. For example, a small local bank with clients in many countries can form a partnership with a correspondent bank to suit its clients’ foreign needs. They have access to the international financial market as a result of this. As a result, the correspondent bank will charge a fee for this service, usually passed on to the customer by the local bank.

Nostro vs. Vostro Account

The terms “Nostro” and “Vostro” refer to the same bank account. The phrases are used when one bank has money on deposit with another bank, usually in the context of international trade or other financial operations.

Both banks in the partnership must keep track of the amount of money held by one on behalf of the other. The phrases Nostro and Vostro are used to distinguish between each bank’s two sets of accounting records.

The Latin words Nostro and Vostro are variations on the words “ours” and “yours,” respectively. The origins of modern retail banking may be traced back to the 13th and 14th centuries in Italy, where depositors and retail banks kept track of their account balances. The depositing customer held the Nostro ledger, while the bank kept the Vostro ledger.

Account Nostro

A Nostro account is a term used by Bank A to refer to Bank B’s “our” account. Nostro is a colloquial expression for “our money on deposit at your bank.”

The Nostro account records a bank’s money on deposit with another bank. These accounts are frequently used to streamline commerce and foreign exchange settlements. In contrast to regular demand deposit bank accounts, Nostro accounts are usually held by financial institutions and are denominated in foreign currencies.

Account Vostro

Bank B refers to the money on deposit at Bank A as “vostro.” The word “vostro” means “your money” and refers to “your money on deposit at our bank.” A Vostro account is similar to any other bank account. The account is a record of money due to or kept by a third party, most commonly another bank, although it can also be a firm or an individual.

A bank in the United Kingdom or the United States holds a Vostro account on behalf of a foreign bank. The money deposition happens in the currency of the country where the Vostro account is present.

Example of Nostro vs. Vostro

Consider the following scenario. GTBank, a Nigerian bank, receives a large amount of money in the form of remittances from its customers in the United States. Because GTBank does not have a physical presence in the United States, it enters into a contract with Citibank to have a U.S. dollar account opened for it remotely. One will place money received from American clients and businesses sending money to GTBank account holders in Nigeria in GTBank’s Citibank account.

Citibank will send the funds to GTBank’s US dollar account in Nigeria via SWIFT. The Society for Worldwide Interbank Financial Telecommunications, or SWIFT, is a member-owned cooperative. It provides its members with safe and secure financial transactions. Following the completion of the transfer, GTBank receives the dollar-denominated monies, translates them to the local currency (the naira), and puts them into the receivers’ local accounts.

GTBank’s Citibank U.S. dollar account is a Nostro account in GTBank’s eyes. In addition, Citibank maintains a Vostro account for GTBank in US currency.

Cash assets are Nostro accounts with negative balances. On the other hand, Vostro accounts with a credit balance are termed liabilities. Computerized accounting makes it simple to reconcile Nostro and Vostro accounts by simply entering “+” or “-” indications in the respective accounting systems of the banks.

How do International Wire Transfers work for Correspondent banks?

International wire transfers frequently happen between banks with no prior financial relationship. A bank in San Francisco, for example, that receives instructions to wire funds to a bank in Japan cannot do so without first establishing a working relationship with the receiving bank.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) network handles the majority of international wire transfers. The originating bank does not have a functioning connection with the destination bank. So, it can search the SWIFT network for a correspondent bank that does. Then, the originating bank sends the transferred funds to its Nostro account maintained at the correspondent bank after selecting one with agreements with both sides of the transfer.

Intermediary Bank vs. Correspondent Bank

Although there are some parallels between the correspondent and intermediate banks, such as the fact that they both function as third parties for other banks, there is a significant distinction between them. An intermediary bank completes transactions involving a single currency, whereas correspondent banks generally handle transactions involving numerous currencies. They’re essential for domestic banks that aren’t big enough to manage these transactions.

An Overview of Correspondent vs. Intermediary Banks

Beneficiary banks utilize correspondent and intermediate banks as third-party banks to enable international fund transfers and transaction settlements. The beneficiary bank is the receiving bank where a person or company has an account.

A person or corporation would have an account with an issuing bank in both circumstances. The procedure of transmitting funds from the issuing bank to the beneficiary bank is then completed by that bank using a correspondent or intermediary bank.

There are inconsistencies in the explanation of correspondent vs. intermediary banks. For example, correspondent banks can be separate from intermediary banks, or they can be a form of the intermediary bank that is indistinguishable from intermediary banks. It all depends on where the account holder is located in the world.

Banks as Correspondents

A correspondent bank acts as a middleman between the issuing and receiving banks, providing services on behalf of the latter. Domestic banks frequently use correspondent banks as their agent abroad to complete transactions that begin or end in another country. On behalf of the domestic bank, the correspondent bank can carry out a variety of transactions. These services include completing wire transfers, taking deposits, acting as transfer agents, and arranging papers for another bank.

Banks that act as intermediaries

The role of intermediary banks is comparable to that of correspondent banks. An intermediary bank is a link between an issuing and receiving bank, which may be located in separate countries. There is a frequent requirement for an intermediary bank when international wire transfers take place between two banks. This is especially when both banks are in different countries with no prior financial relationship.

Important distinctions

There is sometimes a distinction between the unique functions that intermediary and correspondent banks play in the United States and other nations.

One distinction is that correspondent banks are frequently in charge of multi-currency transactions. For example, a correspondent bank would be liable for all transactions from the US dollar to the Danish Krone. This is if the person initiating the transfer is based in the United States. Moreover, it’s applicable while he is sending money to someone in Denmark.

Correspondent banks are often located in the nations where the two currencies are local. However, a bank may be based in a separate country occasionally.

Intermediary banks transfer cash to complete international transactions, but only for one currency. A domestic bank is usually too small to handle international payments in this situation. Therefore, it turns into an intermediary bank.

Particular Points to Consider

All banks accept wire transfers, an electronic method of delivering money to another person or entity. However, international wire transfers are more expensive and complicated to complete.

Intermediary banks deal in foreign transactions in particular parts of the world, such as Australia or EU member countries. There is no distinction whatsoever between the correspondent and intermediate banks.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) network handles the majority of international wire transfers. Suppose the issuing and receiving banks do not have a working relationship. In that case, the originating bank can use the SWIFT network. It will help them to find a correspondent or intermediary bank that has agreements with both financial institutions.

Contact Capitalixe for correspondent banking solutions

At Capitalixe, we specialise in helping small, offshore, and emerging market banks obtain payment and banking solutions.

Our job is to match your company with the most appropriate and beneficial financial solution from our extensive network of over 100+ reputable payment and banking providers we work with worldwide.

By understanding your business goals, payment requirements, and market positioning, we take the time-consuming pain away of going to market and provide you with the solutions that are best suited to your needs.

The best part of all is our services are free of charge.

Feel free to reach out to us for a complimentary consultation. We will be more than happy to help you.

 

By Lissele Pratt

COO & Co-founder of Capitalixe

The Future of Cross-Border Payments: What Will it Look Like?

The cross-border payments landscape is constantly evolving. New technologies and approaches are always emerging, making it difficult to predict what the future will hold. However, some clear trends suggest where the industry is headed.

So, what are these trends? And how will they shape the future of cross-border payments? We’ve created a complete guide to answer these questions.

In this guide, you’ll learn about:

  • What are cross-border payments?
  • How cross-border payments work today
  • The benefits of cross-border payments
  • The future of cross-border payments
  • What is SWIFT and how can it help?

Read on to find out everything you need to know about the future of cross-border payments.

What are cross-border payments?

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Cross-border payments are electronic money transfers between two countries. The majority of these payments consist of a sender and receiver who do not share a common ledger, and the transactions between the two countries will involve a series of intermediary transactions.

They can be used for a variety of purposes, including:

  • Paying suppliers in other countries
  • Receiving payments from customers in other countries
  • Transferring money to friends and family members in other countries
  • Making investments in foreign companies or securities

Let’s say you’re a CFD broker. You have clients in the UK, Europe, and the US. To settle trades with these clients, you need to be able to send and receive payments in all three currencies. 

Types of Cross-Border Payments 

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SWIFT

The society for Worldwide Interbank Financial Telecommunication (SWIFT) is a system that allows for cross-border payments to be made in any currency via a swift code. It’s used by businesses all over the world and is considered to be extremely secure. 

SEPA

The single Euro payments Area (SEPA) is a system that allows for cross-border payments to be made in Euros. It’s used by businesses in the European Union (EU) and European Economic Area (EEA).

Credit card payments

These are cross-border wire transfers made with a credit or debit card. 

Alternative methods of payments

E-wallets, apps, and cryptocurrencies. These are all new methods of making cross-border payments that are becoming more popular.

How cross-border payments work today

Cross-border payment options are typically made through banks or other financial institutions. The sender will initiate a transfer through their bank, and the recipient’s bank will receive the payment and credit it to their account.

In most cases, cross-border payments take several days to complete. This is because the banks involved need to convert the currency, process the payment, and then send it through the international banking network.

The process can be further complicated by things like different time zones, holidays, and weekends. All of these factors can delay payment and add to the overall cost.

The benefits of cross-border payments

Despite the challenges, there are a number of reasons why you might need to make cross-border payments. In many cases, they offer a number of advantages over traditional payment services. Some of the benefits include:

Achieve a greater ROI

With cross-border payments, businesses can save on operational costs and improve their bottom line. That’s because they can take advantage of better foreign exchange rates and avoid costly bank fees.

Businesses can also save on costs associated with having a local presence in another country such as rent, salaries, and other overhead costs. Outsourcing services from emerging markets can also be a cost-effective way to get the same quality of work without having to pay high prices.

Suppose you’re an online gaming company that makes most of its revenue in US dollars. However, you have servers and other operational costs in Euros. With a cross-border payment solution, you can get the best exchange rate for your transactions and save money on every transaction. This can add up to significant savings over time and improve your bottom line.

Increase the number of buyers and affiliates

With cross-border payments, your high-risk business can expand its customer base and tap into new markets. That’s because you’ll be able to accept payments from buyers in other countries.

For example, let’s say you run an e-commerce store that sells products to customers in the United States. With a cross-border payment solution, you could start selling to customers in Europe and Asia as well. This would open up a whole new revenue stream for your business.

Comply with international tax and regulations

Cross-border payments can also help businesses stay compliant with international tax and regulatory requirements. This is because they provide a paper trail of all transactions. This can be helpful in the event of an audit or investigation.

For high-risk businesses, cross-border payments can also offer a number of other benefits. For example, they can help businesses avoid chargebacks and fraud.

The future of cross-border payments 

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Despite the benefits, there are still a number of challenges with cross-border payments. 

But the good news is that things are changing. With the advent of new technologies like blockchain, the future of cross-border payments looks promising.

Here are some of the ways that cross-border payments are expected to change in the future:

Cross-Border Payment methods will continue to evolve

There’s no doubt that payment methods will continue to evolve and in turn enhance cross border payments. In the past, cross-border payments were typically made through banks or other financial institutions. But this is changing. SWIFT GPI, SEPA Instant, and other innovations are making it possible to make cross-border payments in real-time.

Cross-Border Payments will be instant

One of the biggest changes to cross-border payments is that they will become instant. This is possible with the use of blockchain technology. With blockchain, payments can be processed in real-time, without the need for intermediaries.

Suppose you’re a high-risk business. In the past, you may have had to wait days or even weeks for your payments to clear. But with blockchain, your payments will be processed immediately, giving you the working capital you need to keep your business running smoothly.

Cross-Border Payments will offer differentiating features

Another way that cross-border payments are expected to change is that they will offer differentiating features. This is because the market is becoming increasingly competitive. As a result, businesses are looking for ways to stand out from the crowd.

One way that businesses are doing this is by offering unique features that appeal to specific niches. For example, some cross-border payment solutions are designed for businesses that need to send large amounts of money. Others are designed for businesses that need to make frequent payments. 

Each of these solutions offers differentiating features that appeal to a specific group of customers. This is expected to continue in the future as more and more businesses enter the market.

Cross-Border Payments will be more transparent

In the past, there’s been a lack of transparency with these payments. However, cross-border payments are evolving and APIs are playing a big role in this.

With APIs, businesses will be able to connect to a network of central bank and financial institutions. This will allow businesses to compare prices and find the best deals. It will also allow businesses to track their payments and receive notifications when the funds have been received. This increased transparency will help businesses to avoid hidden fees and charges.

Cross-Border Payments will meet every business’s needs

In the past, cross-border payments were often seen as a niche product. But this is changing. As the world becomes more connected, there is a growing need for this solution. 

This is because businesses are increasingly doing business with partners in different countries. By tracking international payments with a single, ubiquitous standard, businesses can streamline their operations and save money. Plus, transparency on fees, remittance and FX information will help businesses to avoid hidden charges and improve the customer experience.

Final Thoughts

The future of cross-border payments looks promising. With the advent of new technologies, the process is becoming more efficient and transparent. This means that businesses will be able to save money and conduct transactions more quickly and easily.

SWIFT payments Can Help Your Medium or High-Risk Business:

One of the most popular methods for making cross-border payments is SWIFT. 

SWIFT is a global network that connects banks and financial institutions. It allows businesses to send and receive money quickly and securely.

SWIFT is an ideal solution for businesses that need to make large or frequent cross-border payments.

At Capitalixe, we offer SWIFT-enabled cross-border payment solutions that can help your medium to high-risk business save time and money. It’s designed for businesses of all sizes and can be customised to meet your needs.

Interested in learning more about our solutions? Contact us today!

How do virtual IBANs enhance the growth of B2B cross-border digital businesses?

How do virtual IBANs enhance the growth of B2B cross-border digital business?

Digital merchants and online marketplaces are here to stay and are rapidly expanding. However, having a solid payment infrastructure is critical to their success.

Businesses must provide secure payment choices to their customers while balancing compliance and regulatory constraints. Adding virtual IBAN to your financial toolset streamlines and simplifies the process in this case. A virtual international banking account number (virtual IBAN) is a bank-issued reference number that enables payments to be routed to a (non-virtual) IBAN/bank account.

Virtual IBANs are addressing many of the inefficiencies between traditional banks and internet payments by modernizing transaction processes. In addition, they are assisting merchants in untangling the difficulties of conventional worldwide banking connections and overhauling their payment systems.

What exactly is a cross-border payment?

Cross-border payments occur when the payee and transaction recipient are located in different countries. Individuals, businesses, and financial institutions wanting to move payments across borders can use this service. International merchants must be able to accept payments in all of the countries they are targeting.

We developed a guide about cross-border payments so you can learn more about the global payments ecosystem and how to grow your business by choosing the proper payment partner for your international payments.

How to send money internationally?

To conduct an international bank transfer, you’ll need the recipient’s information, including their International Bank Account Number (IBAN) and Bank Identifier Code (BIC). However, a consumer making a payment to an merchants’ site in another nation will have to do very little to complete the transaction because the merchant and their payment service provider will handle most of the work.

Merchants can make SWIFT payments to their consumers or other businesses. In addition, Visa Direct and Mastercard Send will likely become more extensively used in the future, enabling secure and quick payments to be sent directly to a card.

How does virtual IBAN work for B2B trading across borders?

Accepting and sending foreign B2B payments might result in massive transactional fees for businesses. Virtual IBANs provide companies with the same features as a standard settlement account but without the costs of opening and maintaining a physical account.

Many traditional suppliers will try to sell new customers comprehensive packages that include services they don’t need, such as credit cards, worldwide payment services, and insurance. As a result, the entire process may become a significant burden for businesses, requiring them to devote a substantial amount of time and attention to a straightforward procedure.

A virtual bank account with IBAN provides payment services without the expense and complexity of a traditional commercial bank account. The usage of virtual IBAN accounts further reduces potential administrative costs. The entire system strives to simplify the reconciliation process, allowing enterprises to conduct business with ease worldwide.

FX and payments companies, as well as their consumers, can benefit from virtual IBAN accounts. FX and payments companies can utilize these accounts to manage a master IBAN account from which they can establish and allocate segregated virtual IBAN accounts to each of their customers, making settlement and reconciliation easier.

A virtual IBAN or virtual bank account with IBANis a multi-currency, multi-jurisdictional banking solution for payments businesses that eliminates the need for several banking partnerships.

Below listed are some of the primary reasons that you should know about:

Changing B2B Requirements

Firms are conducting business abroad and in the digital industry are constantly seeking methods to improve their cross-border B2B payment procedures to be competitive and stay ahead of their competitors in their target market niche.

The issue in this complex undertaking is finding efficient and available solutions and adequately executing them to perform flawlessly for all parties involved, including core business, partners, suppliers, and customers.

Determining which technologies are most suited to the payment demands of specific organizations and their international partners is critical to helping them survive and grow once the present worldwide epidemic stops.

Closing the Gap in Technology

Virtual IBANs, like harmonizing international financial regulatory systems, technically bridge barriers between enterprises and markets. Virtual IBANs in B2B cross-border commerce close this gap and reduce the capital overlay needs familiar with traditional banking solutions.

This is mainly due to business and payments’ increasingly global and borderless nature. However, there are also administrative efficiencies to consider (which are growing by the day) and the enhanced capital allocation that such systems enable. This is essentially the basis behind Visa’s new B2B connect service.

Regardless of the size or location of your company, there are several growth prospects outside of your current market. Visa’s job as a payments network is to handle payments between banks on behalf of their buyers and sellers.

Global Financial Regulatory Harmonization

When dealing with various financial regulatory systems worldwide, the most significant hidden benefit of virtual IBANs in B2B cross-border payments comes into play.

Because virtual IBANserves as a single clearing account for international transactions, there is no need for a company to maintain a banking relationship with a local bank to conduct business with local companies.

Furthermore, domestic industries in that country are authorized to transmit payments to virtualIBAN accounts. Therefore, that country’s rules and regulatory regimes have no bearing on the company’s capacity to do business.

In other words, corporations do not have to be concerned about local events and can instead concentrate on the big picture to grow their business.

What are the different types of International or cross-border transactions?

Cross-border payments include credit card transactions, APMs, and bank transfers. So naturally, customers prefer to pay most conveniently for them. However, they also want customized options and assurance that their payment information is secure and managed well. As a result, merchants must cover all bases and provide several payment options for international customers.

eWallet

An eWallet, sometimes known as a digital wallet, is a software-based electronic APM that enables clients to pay for online and in-store transactions. eWallets, which are commonly available as apps for smart devices, allow users to safely keep their preferred payment cards so that they may pay for goods and services. Alipay, Apple Pay, Google Pay, Neteller, and Paypal, are just a few examples of popular eWallets.

Consumers can use some eWallets to transact in several currencies and conduct overseas orders. Although you cannot term wallet-to-wallet typeas proper cross-border transactions, they make the entire process easier overall. The process is not classified as a cross-border payment until the funds are withdrawn from the eWallet and transferred to the merchant’s bank account.

Transfers between banks

Another long-standing method of making a cross-border payment is through international bank transfers. Most larger banks will keep a range of currencies on hand, but they will only be able to accommodate a few at a time.

As a result, when a UK customer wants to send money to a place where they don’t have the currency in stock, they’ll have to rely on their international banking associates to complete the payment. Smaller banks frequently lack foreign currency reserves. Therefore they rely on large banks to handle cross-border transactions.

This is simply a glimpse of cross-border payment processing; many more parties could be involved, causing the transaction to be delayed. SWIFT GPI is an attempt to speed up cross-border payment operations, which we will examine further below.

Payments by credit card

Credit cards are a popular choice for many people when making cross-border payments. Consumers submit their credit card information and wait for the transaction to be validated. However, there’s more going on behind the scenes. Because they must convert between two distinct currencies, cross-border payments necessitate greater effort from the credit card networks and acquiring banks involved. In addition, increased fees are transferred down the payment chain due to the increased workload.

Contact Capitalixe for custom banking solutions

At Capitalixe, we specialise in helping medium to high-risk clients obtain payments and banking solutions.

Our job is to match your company with the most appropriate and beneficial financial solution from our extensive network of over 100+ reputable payments and banking providers we work with.

By understanding your business goals, payments requirements, and market positioning, we take the time-consuming pain away of going to market and provide you with the solutions that are best suited to your needs.

Feel free to reach out to us for a complimentary consultation. We will be more than happy to help you.

 

 

 

How to find the best banking provider for your crypto exchange business

How to find the best bank provider for your crypto exchange company

So, you’re a crypto company wanting to expand your business, but you need to secure the right banking partner. How do you go about finding the best bank account for crypto? And how can you tell which is the best for your needs?

The world of crypto is still facing a lot of challenges, not least because it has a tendency to be volatile and unregulated. Despite this, there is a huge interest from various companies in cryptocurrencies and blockchain technology – especially considering the possible benefits that they could bring to businesses all over the world.

In recent years, there are now some banks that have been trying to establish themselves as leaders in crypto-related services and some of them have already entered the crypto sphere – but not all of them are suitable for every crypto business. 

This means that crypto companies need to make sure they choose the right banking partner for their particular needs. However, this isn’t as easy as it sounds. But don’t fret. We’ve put together a comprehensive guide that will help you choose the right partner and explain what you need to look out for.

Challenges Facing Crypto Companies

Before we get started, let’s take a quick look at some of the challenges facing companies who choose the wrong bank account for crypto merchants:

Chargebacks and fraud 

Chargebacks and fraud are a huge concern for any company accepting and operating with cryptocurrency. The right banks will be able to mitigate this risk and protect you from fraudulent activity and chargebacks.

Compliance and regulation  

Banks that specialise in cryptocurrency tend to work closely with regulators, ensuring they’re aware of the business you’re doing and helping to maintain compliance. Banks that do not specialise in cryptocurrency will often struggle with regulation, leaving you exposed.

AML and KYC 

There are some banks and financial institutions out there that don’t comply with Anti Money Laundering (AML) and Know Your Customer (KYC). If you choose one of these banks, it will put your business at risk of unlawful activities. Banks and financial institutions that specialise in cryptocurrency are fully compliant with AML and KYC.

Choosing the Right Banking Provider for your Crypto Company

When it comes to choosing a banking partner, there are a few different things that you need to consider. The right choice depends on your profile and what your business is looking for in a bank.

You’ll also want to determine which features are the most important for your particular business model. This will help you find an institution with the appropriate infrastructure and expertise while also ensuring that you get a positive banking experience.

Here are five steps you need to take when choosing a banking partner for your crypto company:

Step 1: Do your research and make a list of potential banks and financial institutions 

The first step is to compile a list of potential banking partners – and this is very important. Make sure you include all the relevant institutions that might be able to help your crypto company grow.

You’ll also want to do some research around each prospective bank, such as reading reviews from other businesses using them and checking their latest news online (you can find more information in addition to what’s provided on their website).

You’ll want to pay special attention to:

  • Regulation: You’ll need to ensure that your bank is compliant with relevant regulations so they are able to handle crypto transactions. 
  • Security of funds: You’re going to be trusting these bank providers with your money, so they must have high levels of security in place. Make sure the funds are held in segregated accounts away from their own company funds, protecting your funds in the event of insolvency or bankruptcy.

Once you’ve compiled your list of potential partners, it’s time to move on to step two in our guide.

Step 2: Figure out which bank is the best fit for your company

After you’ve drawn up your list of potential businesses, you’ll need to evaluate how each one can help your digital currency business move forward. You should look at the available features that they offer and compare them against your requirements. For instance, virtual IBANs for crypto in multiple currencies are essential when it comes to doing business internationally, so if your top priority is simplifying the virtual currency transaction process then this feature should be high on your list.

Step 3: Consider how easy it is to open a virtual account with the bank

In order to do business with a digital currency company, banks will need to set up a virtual account. This makes it possible for your business to transfer virtual currencies and deal with fiat currencies as well – something that might be important for your digital currency exchange.

Make sure to assess how easy it is for digital currency companies to open virtual accounts with your prospective bank and if they’re willing to do this in a timely manner. 

Step 4: Check if your cryptocurrency company is being treated with good customer service

Even though banks are generally very responsive when it comes to meeting the requirements of their customers, some institutions have more experience dealing with virtual currency-related issues than others. These banks generally offer dedicated services for businesses that work with cryptocurrencies – so it’s important that you find an institution that is willing to help your digital currency business thrive.

Step 5: Determine how easily you can transfer funds and open IBANs (or other payment channels)

Once you’ve established which bank offers the services you need, it’s important to find out if there are any fees or restrictions involved with transferring currencies – such as setting up an IBAN for crypto. You should also check if there are certain rules that affect how you can pay your suppliers and customers.

There might be certain banking procedures and actions associated with your business type – so you’ll need to work out whether they’re appropriate or not. For example, if you deal with a lot of small-scale transactions, then it’s likely that different rules will apply compared to taking large sums across borders.

Final Thoughts

It’s important that you do your research and seek advice from other cryptocurrency companies and people in the industry when choosing a banking provider for your business. 

As crypto is still a new industry and widely unregulated, there’s going to be a large portion of financial institutions that won’t work with any sort of crypto companies, but don’t get disheartened. This is where we can help! 

At Capitalixe, we specialise in helping crypto companies obtain high-risk merchant accounts, bank accounts in multi-currency which includes both SWIFT & SEPA, and banking solutions for crypto. 

Our consultants are more than happy to discuss your banking options and give you all the information you need before making any decision.

Contact us today!

Digital Payment Trends Dominating 2022

Digital Payment Trends Dominating 2022

The Covid 19 pandemic has resulted in a rapid increase in both the volume and value of digital payment options. In fact, according to Statistica, the total transaction value in the digital payments segments is projected to reach $7,860,739m in 2022 and $10,715,390m by 2025.

Mobile wallets, cryptocurrency and voice-activated payments – it’s all changing so quickly that it’s hard to keep track. But at Capitalixe, we’ve got your back. 

Below are some of the biggest trends in digital payments today and what the future holds for them. So grab a pen and paper (and a lovely hot cuppa) because here are the trends you’ll be discussing at your next dinner party…

Mobile Wallets 

Now one of the most used digital payment methods by consumers, mobile payments use will continue to rise with 26.93% of CAGR projected between 2020-2025.

These services offer customers convenient, instant payments with no need for cash or PIN numbers. And they’re changing more than just the shopping experience, they’re even revolutionising how we make utility bill payments and send money abroad.

Today, we can use our mobiles to pay for groceries and petrol or even delve into the world of digital currencies by transferring Bitcoin and other cryptocurrencies between wallets. And we can do it all with just a tap of our phones.

However, there’s still room for improvement in this sector as many retailers are still reliant on cards as an alternative to cash. This is mainly due to the fact that not everyone has a mobile wallet and some customers still don’t trust them.

BNPL Schemes

Buy Now Pay Later schemes are quickly becoming the preferred payment method, especially with millennials and Gen Zs. StudentBeans found that 42% of UK shoppers aged 16 to 24 used a BNPL service for big-budget fashion items and expensive tech purchases. 

These schemes allow users to spread the cost of expensive purchases over time. Let’s say you want to buy a product for £200. You can split this purchase into three or four monthly instalments with zero interest.

Klarna is one of the leaders in this field, with an impressive 90 million users utilizing their services. They are quickly replacing traditional credit cards, especially for internet shoppers. Last year, the company announced it had raised $639 million in funding rounds, bringing the company valuation to $45.6 billion.

Voice-Assisted Payments

If you own an Alexa, Google Home, or Siri device, you probably use it to get the weather report or book a cab. But did you know that these devices can also make your shopping easier?

Statista found that 35% of users use smart speakers for buying products like home care, groceries, and clothing.

So how does voice-assisted shopping work? You simply tell your digital assistant to order you a new pair of shoes, and they do it for you – there’s no need to type in any payment details as they are already logged into your account!

Cryptocurrency Payments

The future of digital payments is undeniably crypto. And with mainstream providers like PayPal, Stripe, and Square now accepting Bitcoin as a form of payment, it’s easier than ever to use these new currencies.

40% of large corporations in the Americas, Middle East, and Africa are considering using digital currencies for purchases over the next year. Plus cryptocurrency is helping a number of our clients who have high-risk merchant accounts. 

This includes the online gambling industry which has been completely revolutionised by cryptocurrency. Our Co-founder Lissele Pratt discussed how in Fintech Times

Named one of the biggest trends in the payments industry by PYMNTS, crypto is becoming an increasingly attractive payment option. If you’ve still got doubts about them, here’s why more and more companies are looking into crypto payments.

Artificial Intelligence & Machine Learning

AI is already changing the way we live, and now, it’s also revolutionising digital payments.

Machine learning algorithms are helping to identify fraud and prevent them, as well as providing real-time security measures against hacking.

AI can also help companies personalise the customer experience. Algorithms can identify a user’s shopping habits, preferred payment types, and any special requests – all in real-time!

As people become increasingly reliant on AI to provide a better user experience, these technologies will continue to gain in popularity.

AI Banking

As well as improving the user experience, AI is also starting to take on some of the back-end tasks that are traditionally handled by humans.

For example, AI can now provide automated financial advice based on individuals’ spending habits. Meanwhile, chatbots are also helping customers manage their accounts and complete simple transactions – without ever having to speak with a human being!

In the future, we may even see AI-enabled financial advisors replacing some of the roles of human advisers. For example, rather than recommending a specific assortment of products to invest in, an AI system would be able to provide financial advice based on individual circumstances.

Final Thoughts

So there you have it. Our top digital payments trends for 2022.

As technology continues to advance, we can expect to see more innovative payment technologies – particularly in the fields of artificial intelligence and cryptocurrencies. These could all become integral parts of our daily financial routines over the next year, from voice-assisted purchases to chatbots.

Capitalixe

At Capitalixe, we leverage the latest in financial technology solutions to help high-risk companies like those in the gaming and cryptocurrency sectors. We can help attain high-risk merchant accounts, multi currency IBANs or even bank accounts for financial institutions and the latest payment solutions. 

Contact us today to find out how we can help your business grow!

Women in Fintech: YAP Global, Cake DeFi, Xero, the Access Group, TPAY MOBILE, Capitalixe

This October at The Fintech Times we are championing the fantastic females in the fintech industry. Around 30% of the fintech workforce are women, and we want to spotlight those who have not only made it to the top, but those who have overcome hurdles, bulldozing a path for the women to follow.

Here we hear from Samantha YapBettina HospAnna CurzonAndrea DunlopSahar Salama and Lissele Pratt as they share how they paved the way for others to follow.

Samantha Yap, CEO and Founder of YAP Global

Samantha Yap, CEO and Founder, YAP Global

“Actions speak louder than words, and I believe by staying focused on building up my firm, I am paving the way for women and minority groups to do the same in the DeFi, Crypto, and PR space. While stereotypes exist in varying degrees, I have never let my race or gender limit what I am able to achieve, and I feel others should not as well.

“Although it is not an external ironclad policy, my team and I will always go the distance especially for panel discussions and press coverage, to ensure that deserving speakers get equal opportunities to shine as thought leaders. This is often more challenging as it takes more time, as we want to weigh all factors and select by merit, but also want to take the chance to elevate those who are underrepresented.

“Internally, for hiring and training employees, we at YAP Global have a zero-tolerance policy for discrimination, and recognition is given fairly based on effort and achievements. I also embrace global diversity by leveraging the different skills sets and experiences of team members, which is a big part of how I’ve been able to expand from five to 20 plus employees from Australia, the UK US, Singapore, Malaysia, Hong Kong, Germany, and India in just one year.

“In essence, let the quality of your work and accomplishments, and your values as a person define you rather than your race or gender, and you will steadily and surely empower underrepresented groups.”

Bettina Hosp, VP, Operations of Cake DeFi

Bettina Hosp, VP, Operations of Cake DeFi

“I think it’s difficult to take credit for something like this. In an ideal world, every employer is a fair employer — one that ensures that hires are made based on the person’s ability to do the job, and not because of their race, gender or religious beliefs.

“At Cake DeFi, our ‘rope ladder’ consists of progressive initiatives and policies that enable a safe, friendly, and highly flexible work culture. Everyone at Cake DeFi has the opportunity and the right to express their opinions and they are encouraged to share them openly and often, which enables us to understand ways in which we can improve to better support them. We also like to think that we empower our people to forge their own paths to leadership, not simply by working hard and smart, but also by expressing unique ideas that have the ability to positively impact their team and the company. You could say that we operate on a meritocratic basis, with zero tolerance for any work-based discrimination and prejudice.”

Anna Curzon, Chief Product Officer, at Xero

Anna Curzon, Chief Product Officer, at Xero

“One of the biggest challenges many women in technology face is the unconscious gender bias that comes with being a minority in your field. In my early years, I often struggled to connect with my colleagues because I was a single mother and everyone on the leadership team was male. I often didn’t see people like me around the table. Relationship building and business was done in the evenings over drinks and it was inaccessible to me. “As I learned more about the importance of diversity and inclusion and the evidence published about the benefits, the more confidence I grew. I realised the lens I was providing was really important and that being the odd one out in the room meant that you were probably the most valuable because of your unique perspective. It’s irrefutable that having a gender balance leads to better business outcomes, greater profitability and value creation so I do everything I can to ensure my team realises the same thing and can reap the benefits of being afforded equal opportunity.“One of the biggest challenges many women in technology face is the unconscious gender bias that comes with being a minority in your field. In my early years, I often struggled to connect with my colleagues because I was a single mother and everyone on the leadership team was male. I often didn’t see people like me around the table. Relationship building and business was done in the evenings over drinks and it was inaccessible to me.

“I remember when one of our long-serving female product leaders came to me because she was so convinced that we needed to build a cash flow forecasting tool to help our customers. I backed her conviction, purpose-led drive and data-orientated proposal to make a real difference to the lives of our small business customers and as it happened, once the global pandemic hit, cash flow became even more critical for the survival of businesses. Because our product leader foresaw this need and we supported her in meeting it, we were able to provide the first iteration of our short-term cash flow tool to all our businesses and partners at no cost during the pandemic.

“We need to create business environments where everyone can thrive. This is particularly important in the tech sector, where women and people from culturally and linguistically diverse backgrounds have historically been shut out of this world. This means enabling people to think critically and understand their privilege and how they can actively use it to ensure everyone feels included. Today, over 60% of the global leadership team at Xero are women and I’m proud that 50% of my product leadership team are women. We have programs in place to foster an inclusive and equitable workplace and this changes everything. For example, it is a requirement for any leadership role at Xero to undertake unconscious bias training and this year we also launched our D&I Leadership training so that all our managers know how to create and lead diverse teams. This is one of the reasons why Xero is included in the 2021 Bloomberg Gender-Equality Index for the second consecutive year. I also believe it’s why my team is the most effective and highly performing team I have worked with in my career.

“Thinking of this important cause, I’m reminded of a quote from Michelle Obama‘s Mum in her book, Becoming – “Bullies are scared people hiding inside scary people” – and that’s why this year, I’m committed to offering everyone in my team the opportunity to undertake Ally Training so we can better understand our individual power and privileges – and learn how to use them for the benefit of others. We are all responsible for creating a safe environment for those around us and I encourage everyone to do an ally training course — it will not only change your life but also the lives of those around you.”

Andrea Dunlop, Managing Director of the Payment Division at the Access Group

Andrea Dunlop, Managing Director of the Payment Division at the Access Group

“I recognised that in my early career I had been focused on my own career, juggling the challenges, and learning and struggling to navigate the ever-increasing politics of senior leadership.  I started to look for help, and it was in that process of looking for help myself that I started to see the same themes come up time and again.  The types of experience that I was having were common among many women, I wanted to make a difference not only within my own company but much wider within the industry but just didn’t know how to affect that change.

“I talked through these challenges for women with Tony Craddock, Director General of the Payments Association and we determined that networking for women was a major gap.  We agreed to hold an event and invite several people from across the industry, both men and women, to attend with the purpose of asking women what they want out of networking events as a fact-finding mission. This started, I think, a process within me on how I could use my position to raise awareness of the challenges faced by diverse groups, not just within my own company but across the industry and make a difference. To a large extent, in the early days of this process it was about creating events focused around key areas to help develop people, and to promote mentorship and sponsorship across the industry.

“The events helped us to create on-going and self-supporting platforms which helped people build confidence, share knowledge and insight.  At these events, I became increasingly confident to talk about my own challenges and struggles and it opened a door to meet new people and to widen my impact on supporting others.  From that first networking event to now, I mentor men and women not only within my own organisations but across industry and even back to my old days of serving in the Military,  supporting  groups likes  Ex Military Jobs, Ex Military Careers, Jobs for Ex Military Personnel which is focused on helping servicemen and women to make the jump from the military into civilian roles. In fact one of my mentees is ex-military and he is doing so well in his career in banking now – it’s very inspiring.

“There is no doubt that the way in which I help to make a difference has evolved, and while I still do many gender-led initiatives and belong to many groups like European Women Payments Network (EWPN), I also act as a sponsor for many helping people helping navigate into new roles. I’m also a co-founder of Investfem helping women to raise funding for their businesses.  I have also used my experiences to help people through grievance processes in the industry, leveraging my own personal experience of being involved in grievances as a manager, and also my own experience of raising grievances.  These can be lonely and stressful situations for many people and I’m pleased to be able to listen and give pragmatic support to help people navigate very difficult situations.

“I do rather unashamedly leverage my network to help others, and there is nothing better than helping to lift others up and see people move on to bigger and better.

“I will always be grateful for those first steps I made and the people that helped kickstart my journey which in turn has enabled me to create my own power network of supporters. I have to say that I personally don’t feel I would be where I am today without all those people that have supported me and continue to support me today.  It has taken some time to create that rope ladder for others but it is definitely there in new networking organisations, support networks, and the skills and experiences that I share and I’m proud to do this every day.”

Sahar Salama, CEO of TPAY MOBILE

Sahar Salama, CEO of TPAY MOBILE

“There have been positive strides in the drive for workplace diversity, yet for both women and overlooked minority groups, there are still huge inclusion gaps. The question remains, how do we actively change this? How do we encourage a broader, more diverse demographic to show an interest in and enter the fintech world?

“In my experience, the latter is answered by not only focusing on attracting talent but on retention strategies for diverse backgrounds. At TPAY MOBILE, we work hard to promote an inclusive work culture, ensuring resources are purposely allocated to the recruitment of all groups to fill senior positions, and not only encouraging but empowering any group who faces pervasive disadvantage in the broader society to stand up for themselves and what they believe in.

“The lack of parity in the fintech space is partly driven by the belief of some that women, as well as racial and ethnic groups, lack the aptitude or skills to succeed in the fintech industry, particularly at a senior level. This underestimation can be extremely demotivating for those working in fintech and even lead to them walking away from their role, and indeed, the workforce.

“To overcome this obstacle, I have implemented anti-discrimination policies to endorse diversity (like training employees in implicit bias) and accountability practices (like implementing a formal reporting system for discrimination). TPAY MOBILE promotes a culture of effective policy compliance across the organisation. I also ensure that as a company, we offer diversity mentoring and professional development programs to help minority groups who want to gain more experience and move up the career ladder in fintech. It is important to have role models to look up to – but these are not always easy to find.

“At TPAY MOBILE, the message that I pass on to those below is to have confidence. It’s important for people who are breaking into the fintech market to believe in themselves and speak up for their ideas. Regardless of experience, each one of us always has something valuable to add and contribute.”

Lissele Pratt, Director and Co-founder, Capitalixe

Lissele Pratt, Director & Co-founder, Capitalixe

“This year I implemented entry-level traineeships at Captalixe, specifically targeted at young women who want to work in finance. Gender diversity is extremely low in this field, and these roles are still very much male-dominated. According to a study carried out by the Financial Conduct Authority, women only make up 17% of FCA-approved individuals. I think it’s imperative to give young women the opportunity to thrive in a finance career. Our first entry-level trainee starts this month, and I plan on making more traineeships available as we continue to grow and scale our business.  “Capitalixe does not require any of our recruits to hold a bachelor’s degree. I’m incredibly hands-on with training my team and believe that anyone can thrive in this industry through hard work and dedication. As a child, I moved around a lot. Before the age of 15, I had lived in Thailand, Spain and England. Because of this, I missed out on a lot of schooling. I wasn’t the biggest fan of school work and knew that university and the traditional schooling route wasn’t for me. Because of this, I understand that, regardless of what educational background you have, it’s still possible to succeed if you are passionate. If I wasn’t given the opportunity to work as a Junior FX Broker at the age of 18, I would likely not be where I am today.“This year I implemented entry-level traineeships at Captalixe, specifically targeted at young women who want to work in finance. Gender diversity is extremely low in this field, and these roles are still very much male-dominated. According to a study carried out by the Financial Conduct Authority, women only make up 17% of FCA-approved individuals. I think it’s imperative to give young women the opportunity to thrive in a finance career. Our first entry-level trainee starts this month, and I plan on making more traineeships available as we continue to grow and scale our business. 

“I’m also a huge advocate for mentoring. I hold monthly mentoring meetings with each and every one of my team, where we discuss their progress and whether they would like additional training. I also mentor two young women interested in entrepreneurship. At present, I hold monthly video calls with them to discuss their goals, ambitions, and I answer any questions they may have. Then, we set out monthly goals and work towards achieving them. These goals could be anything from creating user personas to confidence-building activities like writing down daily affirmations and also working on their needle movers in the business. Recently, one of my mentees launched her own business. It’s been brilliant to see her idea turn into a reality, and I’m excited to help her with its future growth.

“Finally, I recently launched a mastermind group for aspiring entrepreneurs on WhatsApp. Here, we focus on collaboration, brainstorming and peer accountability. People challenge each other to set strong goals and hold them accountable for achieving them. This has proven to be really successful in inspiring these young aspiring entrepreneurs.”

How can female leaders in fintech pave the way for the next generation of women?

The fintech industry continues to struggle with a gender gap that sees women making up just 30% of the fintech workforce.

Fintechs must do more for the next generation of women in the industry to follow

In recent years, fintech has been seen as an exciting and dynamic sector. There are plenty of opportunities for career progression, high salaries and even the chance to bring about significant social change.

Despite this, many female employees cite harassment or bullying at work. In their charter, InChorus revealed that 85% of harassment-related incidents in UK fintech were related to gender, and 84% of victims were harassed more than once.

This shows that fintech is still not an industry where women can feel welcome and safe enough to progress.

As more women fight for their place in this male-dominated industry, business owners, directors, senior leaders and managers must create a rope ladder for the next generation of women in this industry to follow. Here are five ways they can do this:

1. Gender-diverse hiring practices and implicit bias training

One of the most effective ways to ensure a more representative fintech workforce is, of course, by hiring women. However, female founders and managers must also go beyond simply hiring women – they need to seek out female talent across all levels of their company, from junior roles right up to director-level roles.

In addition to this, fintech leaders must tackle implicit bias in the industry head-on. Implicit biases can influence our behaviour without realising it, and 80% of CEOs interviewed in a recent survey recognised a need for diversity within their organisations.

With AI-assisted technology like training programs on unconscious prejudices, it becomes easier than ever before to step back from day-to-day operations, so we all have room.

2. Mentoring

Mentoring is a process of providing guidance to another person, especially by an experienced, more senior person or expert on how they can acquire skills and knowledge.

Women who work in fintech should actively be offering their time as mentors for women entering into the industry so that both parties get something out of it – the mentee gets valuable advice while having someone with insider connections guide them through their job search.

Meanwhile, this helps seasoned professionals learn what needs fixing when it comes down to recruiting new talent.

3. Adopting flexible working practices and parental leave policies

The demand for childcare services has risen sharply in recent years thanks to changing work lives. Offering flexible working and parental leave initiatives are fantastic ways fintech leaders can pave the way for the next generation of women in fintech.

For many women, flexible working hours are critical in allowing them to juggle the increasingly essential responsibilities of a career and motherhood. A recent study revealed that nearly half of mothers don’t get the flexibility they ask for in the workplace.

When applied to fintech, remote working is an effective way for many women to work without compromising their careers/ family life. Several firms have been praised for their open and flexible working environments, which has helped them become leaders in the industry.

4. Traineeships and apprenticeship programmes for women 

Many fintech companies are failing to offer women fintech applicants the chance to get their foot in the fintech door. By fostering female talent through traineeships or apprenticeship programs, leaders can provide women with an entry point into the industry by laying down their own framework as future applicants follow suit.

5. Creating digital communities for women in fintech to network

Fintech companies must create digital communities for women working in fintech – whether they are fintech founders or workers – to network with other like-minded professionals. These networks can be used as a platform for sharing advice and information about how to succeed, posting upcoming job roles and even advertising your services as a mentor.

There are plenty of networking groups fintech founders and workers can join to help them network with women fintech professionals. A quick Google search will help you find the best programmes that highlight the achievements of female fintech pioneers and offer advice and support on how other fintech leaders can encourage gender diversity.