Advertorial: The challenges of cross-border payment in Latin America Advertorial: The challenges of cross-border payment in Latin America

Advertorial: The challenges of cross-border payment in Latin America
31 Jul 2017

As in other parts of the world, organisations looking to make cross-border payments into Latin America want to ensure their transactions are carried out in the most secure and efficient manner possible. But while transferring funds into developing and frontier markets can be fraught with difficulties at the best of times, Latin America stands out from other areas due to the levels of institutional complexity faced throughout the region.

It would, of course, be wrong to say that all payments going into Latin American are complex ones. But by and large, the region is well known for its foreign exchange controls and central bank regulations designed to help nations maintain some control over currency rates – which, in turn, means that processing transactions takes longer.

Brazil and Colombia have the most complicated regimes as each and every transaction is subject to regulations, phone calls, declarations and various levels of bureaucracy that require precise coordination.

In Brazil, for example, registering beneficiaries needs to be pre-checked and validated locally, while supporting documents for each transaction must be submitted to government authorities for recordkeeping purposes. Different reasons for sending money also trigger different sets of validation.

Colombia shares many of these requirements, including the need to notify beneficiaries of incoming funds and for conference calls to take place between beneficiaries, banks and payment providers for virtually every single payment. Needless to say, the region does not always enjoy the “click-of-a-button” foreign exchange and payment transactions that organisations are accustomed to in other parts of the world.

More cautious

As for compliance issues, banks are better aligned with US and European anti-money laundering rules these days, having successfully distanced themselves from the underworld activities that affected the region for the last 25 years. But as nations have cracked down on illicit activities, local banks have become more restrictive and are increasingly cautious about establishing relationships with outside institutions.

Put simply, as they have endured significant reputational damage in the past from associating with market participants who were less than legitimate, they are sometimes hesitant today to engage in international banking activities with foreigners looking to establish banking or foreign exchange relationships.

Integrating technology with local payment infrastructure can also prove an obstacle to compliance and efficiency. Some Latin American banking infrastructures are not designed to facilitate sizeable global payments, and the sheer breadth of European and North American regulations and compliance requirements make them difficult sometimes for local payment systems to support.

For example, the internal payment systems of some Latin American countries do not connect automatically to SWIFT, the financial messaging service used around the globe, making it cumbersome for local banks to complete transactions. In other instances, payment instruction requirements fail to align with western standards, which creates transactional inefficiencies.

Innovative solutions

Despite these challenges, there are innovative solutions that ensure safe and efficient cross-border payments throughout Latin America. For more than two decades, INTL FCStone Ltd’s (IFL) global payments division has been a pioneer in facilitating cross-border payments throughout the region.

The company’s agile business processes and IT infrastructure combined with its local expertise enable clients to execute payments in more than 175 countries and 140 currencies through its global network of approximately 300 correspondent banks. Members of IFL’s global payments’ team regularly liaise with global decision-makers and source proprietary intelligence to provide customers with unique insights into local market conditions, knowledge that is key to ensuring efficient and secure cross-border payments.

Moreover, it is well known that cross-border payment providers that maintain multiple, trusted relationships with local banks have an edge when it comes to dealing with foreign exchange rate matters. By creating competition among local players, IFL is able to access the best possible rates for its customer base and create price-discovery transparency in often-illiquid markets.

Globalisation has increased demand for payments to be made in Latin American countries and, while compliance and technology constraints remain, solutions now exist to help organisations overcome these hurdles. With more businesses taking advantage of these services, combined with expected growth in the region this year following four years of economic slowdown, such efficiencies will only help to boost economic development across the region.

 

Carsten Hils is global head of INTL FCStone Ltd’s global payments division, which he co-founded in 2003 and which under his leadership has grown significantly. He leads an international team that specialises in facilitating the transfer of funds in local currencies to the developing world and is an industry expert in institutional cross-border payments, international currencies and foreign exchange trading. Carsten also possesses deep knowledge of local money markets in developing world countries.

As in other parts of the world, organisations looking to make cross-border payments into Latin America want to ensure their transactions are carried out in the most secure and efficient manner possible. But while transferring funds into developing and frontier markets can be fraught with difficulties at the best of times, Latin America stands out from other areas due to the levels of institutional complexity faced throughout the region.

It would, of course, be wrong to say that all payments going into Latin American are complex ones. But by and large, the region is well known for its foreign exchange controls and central bank regulations designed to help nations maintain some control over currency rates – which, in turn, means that processing transactions takes longer.

Brazil and Colombia have the most complicated regimes as each and every transaction is subject to regulations, phone calls, declarations and various levels of bureaucracy that require precise coordination.

In Brazil, for example, registering beneficiaries needs to be pre-checked and validated locally, while supporting documents for each transaction must be submitted to government authorities for recordkeeping purposes. Different reasons for sending money also trigger different sets of validation.

Colombia shares many of these requirements, including the need to notify beneficiaries of incoming funds and for conference calls to take place between beneficiaries, banks and payment providers for virtually every single payment. Needless to say, the region does not always enjoy the “click-of-a-button” foreign exchange and payment transactions that organisations are accustomed to in other parts of the world.

More cautious

As for compliance issues, banks are better aligned with US and European anti-money laundering rules these days, having successfully distanced themselves from the underworld activities that affected the region for the last 25 years. But as nations have cracked down on illicit activities, local banks have become more restrictive and are increasingly cautious about establishing relationships with outside institutions.

Put simply, as they have endured significant reputational damage in the past from associating with market participants who were less than legitimate, they are sometimes hesitant today to engage in international banking activities with foreigners looking to establish banking or foreign exchange relationships.

Integrating technology with local payment infrastructure can also prove an obstacle to compliance and efficiency. Some Latin American banking infrastructures are not designed to facilitate sizeable global payments, and the sheer breadth of European and North American regulations and compliance requirements make them difficult sometimes for local payment systems to support.

For example, the internal payment systems of some Latin American countries do not connect automatically to SWIFT, the financial messaging service used around the globe, making it cumbersome for local banks to complete transactions. In other instances, payment instruction requirements fail to align with western standards, which creates transactional inefficiencies.

Innovative solutions

Despite these challenges, there are innovative solutions that ensure safe and efficient cross-border payments throughout Latin America. For more than two decades, INTL FCStone Ltd’s (IFL) global payments division has been a pioneer in facilitating cross-border payments throughout the region.

The company’s agile business processes and IT infrastructure combined with its local expertise enable clients to execute payments in more than 175 countries and 140 currencies through its global network of approximately 300 correspondent banks. Members of IFL’s global payments’ team regularly liaise with global decision-makers and source proprietary intelligence to provide customers with unique insights into local market conditions, knowledge that is key to ensuring efficient and secure cross-border payments.

Moreover, it is well known that cross-border payment providers that maintain multiple, trusted relationships with local banks have an edge when it comes to dealing with foreign exchange rate matters. By creating competition among local players, IFL is able to access the best possible rates for its customer base and create price-discovery transparency in often-illiquid markets.

Globalisation has increased demand for payments to be made in Latin American countries and, while compliance and technology constraints remain, solutions now exist to help organisations overcome these hurdles. With more businesses taking advantage of these services, combined with expected growth in the region this year following four years of economic slowdown, such efficiencies will only help to boost economic development across the region.

 

Carsten Hils is global head of INTL FCStone Ltd’s global payments division, which he co-founded in 2003 and which under his leadership has grown significantly. He leads an international team that specialises in facilitating the transfer of funds in local currencies to the developing world and is an industry expert in institutional cross-border payments, international currencies and foreign exchange trading. Carsten also possesses deep knowledge of local money markets in developing world countries.