Digital payments have come a long way. They now facilitate rapid and cost-effective international payments, making it ever easier for small businesses to work with partners, suppliers and customers around the world. This has made the concept of payments without borders a reality in many parts of the world.
But one of the major challenges that remains is payments between certain geographic jurisdictions, most notably China and Russia. The growth of domestic payment systems has meant there has been little regulatory and technological integration, while there have also been political obstacles.
Russia, for example, has an alternative to the SWIFT network used by financial services institutions to transfer funds. The Mir payment system was established by the Central Bank of Russia in 2017, in a pre-emptive measure to protect banks that could potentially be denied services by the likes of Visa and Mastercard. In China, meanwhile, domestic payment methods have traditionally enjoyed a near-monopoly.
The way in which financial systems have evolved in these countries means financial transactions between them and other countries, even digital payments, are cumbersome and inefficient compared to other parts of the world.
Improving transactions in and out of these two major world economies would bring major benefits to numerous businesses (large and small), as well as to some consumers. It would give businesses better access to huge markets, whether for new customers, expanding the business or tapping into local talent.
There are signs of progress – particularly in China. Payment system operators – such as UnionPay – are now expanding beyond their domestic boundaries after realising their market share is limited and under attack from start-ups and large international players.
And in June, JP Morgan became the first foreign bank in China to offer a solution “that fully digitises and automates cross-border payments of goods”, with the launch of its E-Customs Payment Solution.
According to the corporate and investment banking giant, the solution “solves common pain points associated with the manual nature of such transactions”. The manual element refers to importers in China being required to provide supporting documents to their banks before making payments to overseas suppliers. This is both labour intensive and time consuming.
JP Morgan’s solution requires Chinese clients to simply send the payment instructions with a linked customer’s declaration numbers. Using API technology, the solution retrieves the relevant customer declaration details in real time from local authorities via the Shanghai International Trade Single Window and automatically processes the payments. Customers can keep track of their payments via the JP Morgan Access portal.
This ease of use and transparency is exactly what digital payments and virtual banks offer customers, and should be something that is equally true for payments to and from Russia and China.
While there have been less obvious signs of progress with Russia, ePayments has been working hard to improve transactions across the Russian border.
To start with, ePayments supports three digital wallets in use in Russia: WebMoney, Yandex.Money and QIWI. It also supports international SWIFT transfers in four major currencies, including Russian roubles. The Russian currency is also one of 13 currencies in which ePayments customers can make local transfers to bank accounts. In fact, ePayments enables customers to instantly send funds in more than 35 currencies to local bank accounts in any country.
With companies like ePayments doing their bit to make transactions with Russia quicker, simpler and cheaper, and others doing the same for China, businesses could soon find dealing with the two countries much more straightforward and productive.
Improving financial transactions with China and Russia is one of the next frontiers for digital payments, and could represent the next giant leap for payments without borders.