The challenges facing today’s banks are myriad and already well documented. And at the heart of those challenges is still the L-word: legacy. Of course, it’s not our place to tell banks how to fix that problem. But as the business banking landscape shifts, with competition coming from new entrants as well as continued regulatory scrutiny, we believe there’s a clear opportunity for the Tier 2 and 3 banks to create their niche without legacy holding them back.</em></p> The cross-border payments space is where the opportunity lies. The e-commerce market is growing rapidly, with sales made from online purchases expected to reach 21% in 2022 and 24.5% by 2025¹</strong>. Tapping into that opportunity makes sense as long as inflexible infrastructure doesn’t cause roadblocks.</p> A small fish in a big pond</strong></p> But the infrastructure problem isn’t the only problem to be fixed. There’s another issue that has to be understood too. Many larger banks that serve the smaller Tier 2 and 3 institutions with correspondent banking services have found themselves with little choice but to de-risk entire regions, sectors or individual partners. The knock-on effect is medium-sized banks have seen their correspondent banking partnerships at threat. </p> Small fish in a big pond, the lack of buying power means they find it harder to create a competitive proposition they can confidently offer to their customers.</p> Research² we released earlier this year found over three quarters of Tier 2 and 3 banks had seen the number of their correspondent banking partners rise over the past decade. Almost two-thirds (65%) said they think they have too many banking relationships. We think this is a direct reaction to the de-risking trend, as they had to spread their own risk by working with a greater number of banks. </p> More relationships mean more internal resources to manage the banking partnerships. It also means additional costs which inevitably pass on to the end customer and undermine profitability. </p> When so many bank brands want to deliver societal benefits, anything that holds back that aspiration needs to be fixed. </p> Side-stepping legacy</strong></p> Banks that want a slice of the cross-border payments opportunity, but without having to worry about legacy infrastructure holding them back or the threat of being de-risked, need to be able to access solutions built from the ground up. A number of banks and non-bank financial institutions are already benefitting from innovation that is delivering access to fast, fairly priced payments services that can be easily integrated into their own platform, working with partners that support global finance – not de-risk.</p> ¹</strong> https://www.shopify.com/enterprise/global-ecommerce-statistics</p> ² https://www.bankingcircle.com/whitepapers/big-bank-de-risking-the-invisible-threat-to-financial-inclusion</p>