Study: Global Payment Grows Despite Hurdles

Opportunities for multinational payment systems are increasing as banks and businesses pursue global growth, but regulations and insufficient payment infrastructures remain challenges in the global economy, according to a white paper published in January by Visa International.

The Visa-commissioned report, written by George Washington University financial expert Yoon Park, examined issues related to cross-border payments, which the paper describes as "slow, inefficient and costly for banks and businesses." Cross-border payments represent about 8 percent of the total volume for the payment industry.

The paper points out that the emergence of mega-banks—such as the combining of Bank of America and NationsBank, or JPMorgan Chase and Chase Manhattan Bank—is reshaping the global payment landscape, as the large international banks can route payments within their systems without having to differentiate between domestic and cross-border payments. As a result, corporations can meet global needs with a handful of banks rather than a bank for each location, and transaction costs are cut down, which ultimately can lead to more of a rebate opportunity with payment tools such as travel and entertainment cards.

In addition, single-currency, multinational payment channels are on the rise, as is the global scope of multiple currency systems supported by such payment networks as MasterCard or Visa.

In the global economy, however, banks are hindered by a complex series of regulations that "have cost billions of dollars for banks, but produce little, if any, incremental revenues," according to the paper. What's more, payment systems from country to country lack standardization, which the paper noted creates obstacles to accessing data for both banks and corporate customers.

Improving the efficiency of cross-border payments, according to the paper, will require bigger investments from both the banks and payment systems themselves as well as by the corporations in their own systems and processes for managing these global payments.