INTL FCStone has announced that the Global Payments Division (GPD) of its London-based subsidiary has introduced Automated Clearing House (ACH) connectivity, enhancing the company’s high-volume, low-value cross-border payments offering.
Low-value payments are the single largest driver of growth in GPD’s payments volumes, which are currently 60% up year-on-year, the firm says. In order to support this increasing demand, the firm launched an initiative to securely access a greater number of global ACH low-value clearing systems.
“In the past, how a payment was sent and what the cost of sending it was didn’t matter as much because the absolute value of that payment was usually relatively high. But today, as payments become smaller and smaller, it becomes more and more important to build networks that are cost effective,” Carsten Hils, the global head of GPD, tells Profit & Loss.
GPD maintains a network of approximately 300 local correspondent banks worldwide, providing its customers with access to local clearing in 140 currencies across more than 175 countries. It has leveraged these correspondent bank relationships to begin implementing ACH connectivity, and is looking to expand on its current ACH offering of 15 currencies by an additional 60 currencies over the next 12 months.
“Having been clearing locally in 175 markets for most of the last 30 years, it was a natural progression to start developing seamless STP links to the local ACH. This has been driven by the high number of low-value payments that our global banking customers are increasingly bringing to us, as we collectively look to meet new corporate demand to make payments all over the world, particularly in emerging markets. These companies want to make smaller cross-border payments more efficiently, and in response we will be rolling out a larger suite of currencies where this is achievable,” says Gregory Vincent, head of FX payments (EMEA) at GPD.
One advantage of sending a payment through a local ACH network is that the local bank charges associated with receiving that payment are usually lower.
In addition to the charge incurred when the payment is made by GPD, there is also a charge levied by the local bank to the recipient of the payment. The fee schedules vary from bank to bank, but Hils estimates that in about 80% of cases, the fee that these local banks will issue for an ACH payment is lower than what they charge for a wire transfer, and often it is significantly less.
Hils adds: “As the world becomes a more integrated place and there are more of these small payments moving around, we’re building out the infrastructure globally in many different countries through local ACH network to support these payments. The challenge with that is that every country has different infrastructure and technology in place, and some of the systems are not necessarily compatible with international standards.”
This is why GPD says that it has developed strong relationships with hundreds of global correspondents and its team members regularly liaise with these banks, government and regulatory bodies, and other market participants to source unique local intelligence that is critical to payments and foreign exchange.
Looking ahead, Hils says: “The focus for us is to allow our clients to make these payments in the most efficient way and lean really on the banks and the regulators of the ACH network and the countries to improve what the technology can do. We want to improve the infrastructure in local environment to bring it close to international standards.”