Being the largest remittance receiver globally, India is at a cross-roads in the transformation being witnessed in the global payments industry. Hank Uberoi, CEO, Earthport Plc shares his views on the evolving trends in cross-border payment industry. Earthport recently received RBI’s nod to offer outbound cross-border payment services to banks in India. Excerpts:
What are your views on the current cross-border payment industry?
There are many segments within the cross-border payments industry today but at this moment, we’re seeing the most far-reaching and complex set of changes we’ve witnessed in the past 40 years. This is largely attributable to a confluence of a number of factors and trends, the majority of which will come together to form an improved, more modern and effective payments regime.
What are these factors?
At the root of this scenario is the growth of people moving across boundaries along with increased cross-border commerce and trade. Add to this the acceleration of e-commerce, which brings down the average value of transactions but also drives volumes to unprecedented and occasionally unmanageable levels. This also serves to highlight that the existing payments ecosystem is not only cumbersome but certainly outdated and largely embedded within large banks across multiple locations, platforms and hundreds of departments.
This is an environment that appears to have hampered efficiency and is operating against a backdrop of increased regulatory demands around transparency and reliability.
The current landscape is ripe for change and is one that is creating challenges for many organisations but equally, it’s delivering huge opportunities for those payment providers who can adapt, innovate and understand their customers’ needs.
What differentiates Earthport from other cross-border payment providers?
We feel Earthport is uniquely positioned in the market because nobody really offers the same type of service we do.
This is a very competitive and dynamic market with many — existing and new — players trying to carve out a niche or construct and serve a vertical or corridor that solves a specific problem for a particular set of clients. Where Earthport is clearly different is that we’re not going head-to-head with the market but are bringing to the table a set of capabilities for the industry as a whole, an efficient infrastructure for people to plug into and incorporate within their own business model.
In effect, we are building a cross-border payment utility for clients such as banks, money transfer companies, e-commerce companies and large corporates, depending on the regulatory framework in any given country.
We are partnering with these clients and enabling them to benefit from greater efficiencies across many levels.
Our extensive network includes global payments capabilities in more than 190 countries with local ACH options in excess of 60 markets. And it’s a network that is broadening all the time.
You refer to transparency in and faster delivery of money internationally. How do you ensure it?
Any organisation that plugs into our network knows from the outset exactly how much will arrive in local currency and when. We do this by leveraging the local clearing network, while eliminating the unwieldy correspondent network system which has constrained innovation and offered a sub-optimal user experience for years.
In the existing correspondent banking structure there are too many links or stopping-off points that have to be endured in transferring money. There’s a lack of precision in this aged structure.
Our solution provides direct settlement via our network, a validation database and clear visibility into payment status, reliable settlement timing and no landing charges or deductions.
Why is India critical to you, as a market?
India is very attractive across multiple dimensions. Firstly, it’s the largest receiving country for remittances and we have tailored our offering to provision for that. Secondly, India, according to the International Monetary Fund, is the world’s fastest growing economy and there is a fair amount of outbound trade that is constantly growing, something which the international community has not focused on a great deal.
Further, we want to be equipped for the rising Indian banking sector, which is expected to have assets of around $28 trillion by 2025.
In conjunction with local banks and regulators, we’ve created something with a high level of efficiency for cross-border payments to be delivered for India. We’re the first company to do this, so we’re very excited about the growth potential of India – and over the next five years, we expect the country to be an important market for us.
Our streamlined model, along with our deep market and regulatory expertise, enables us to offer compliant and commercially competitive services that will play a pivotal role in shaping the cross-border payments industry in India in the coming years.
How supportive has the RBI been for your foray into the Indian market and what are your challenges?
We’ve had tremendous backing and goodwill from the Indian community, and were the first non-bank financial institution to receive Reserve Bank of India approval for outbound cross-border payments. We’re extremely proud of that and grateful for the support we’ve received. Bringing cross-border payments into the Indian market had to be handled sensitively and fit within a very specific and exacting regulatory framework. We worked not only with the Reserve Bank of India but also with the Indian Bankers’ Association, along with the banks and regulators, and when we shared our model we found the entire ecosystem was very enthused. They could see that our offering for banks in India helps every link in the chain, including consumers, corporates, banks and regulators. It’s transparent, efficient and predictable.
What are the regulatory impediments in India compared with other markets?
India has a more developed payments infrastructure than many emerging and developed markets. Much of this is down to the work of the National Payments Corporation of India, led by Mr A.P. Hota, who has been the driving force behind many innovations and efficiencies created for the domestic payments infrastructure. So, India’s regulatory environment has not prevented us from making strong progress in an important, growing market.
What are Earthport’s plans in India?
Throughout the Asia Pacific region (and other emerging markets), we have a unique opportunity to leverage our global network and this is underlined by the number of contracts and memorandums of understanding signed in India and other countries. Our confidence in the opportunity we have in Asia and India is further underpinned by a substantial deal pipeline.
More specifically, we aim to provide a world-class service for cross-border payments for India’s banking community. As a consequence, our offering will broaden and become more visible and this will undoubtedly evolve into Earthport having a significant physical presence in India.
Are banks and regulators supportive of Earthport’s cross-border payment model?
Very much so. This is demonstrated by top regulators interacting successfully with Earthport – from the U.S., U.K. and India, among others – and six of the world’s ten largest global banks, despite having networks of their own, signing up with Earthport. This has all been achieved after the banks conducted extensive due diligence that included close examination of our technology, compliance and infrastructure. We have incredibly positive traction with the regulators and with our clients, and are very excited about the prospects of building our franchise in India.
