Bank of Ireland has launched a digital cross-border payments service to gain a foothold in the increasingly competitive global payments market and extend its reach to U.S. businesses.
For the payments service, which launched in mid-September, the bank worked with London-based fintech company WorldFirst for the backend technology. Customers can transfer funds through a smartphone, through online banking, or through an phone call and they aren’t charged service fees for the transactions. The bank makes money from derived from the exchange rate, not service fees.
“If we can start to develop a relationship with [businesses], they can become a [longer-term] customer and we have other products to fit with their strategy,” said Darsh Mariyappa, head of global markets at Bank of Ireland U.S.
The bank is growing its U.S. operations, which include business product offerings, including lending products, treasury services, interest rate hedging and foreign exchange. The foray into digital global payments is an entry point to offer small businesses other products as they grow internationally, the bank said. In addition to growing relationships with U.S. client businesses, the bank is also supporting efforts of Irish tech companies to expand to the U.S. through its New York-based Startlab.
The market for cross-border payments for businesses has become a hotly contested space among banks and startups, with major incumbents like Bank of America, JPMorgan Chase, Wells Fargo and TD Bank all getting in the game. PayPal has also expanded its offerings for business clients seeking cross-border payments services through its recently-launched concierge service for U.S.-based businesses.
“Banks have always been in the space through money wires overseas; fintech has come in and there’s a lot more companies in Europe and Asia offering tech solutions,” Mariyappa said. “Some banks have decided to build, some have decided to buy [startups] and we’ve decided to collaborate.”
Along with Bank of Ireland, WorldFirst works with other financial services companies on cross-border payments solutions, including Virgin Money and Harrods Bank. The company has been able to get in on a space where many incumbents are wrestling with ways to update the technology.
But paying fintech companies to build tech for cross-border business payments is a smart move for the banks, because businesses have a degree of trust for the incumbents that they may not share with an upstart player.
“A lot of the fintech startups have not done a great job when it comes to moving money from a corporate basis,” said David Pierce, director of business development at GPS Capital Markets. “In the larger corporate space, the fintech companies haven’t made a big dent in that market, the reason being that when you’re dealing with millions of dollars, transactional security becomes a much bigger issue.”