In an increasingly interconnected global economy, the landscape of cross-border payments and foreign exchange (FX) risk management has been undergoing significant transformation.
At the forefront of this change is Corpay Cross-Border, a Toronto-based firm with global operations that specializes in cross-border payments and FX risk management. Corpay Cross-Border is a division of Corpay, Inc., (NYSE: CPAY) a global leader in corporate payments.
Fintech.ca sat down with Mark Frey, Group President at Corpay Cross-Border, to learn more about the company’s evolution, the major trends shaping the payments space, and how technology is redefining the way organizations manage transactions both locally and internationally.
Frey also sheds light on the future of cross-border payments, highlighting the ongoing pursuit of efficiency, transparency, and technological integration in the industry.
First off, can we start with a bit of history. Can you walk me through the evolution of Corpay Cross-Border (previously known as Fleetcor)? What are some of the benefits of being part of Corpay?
MF: We are a cross-border payments and FX risk management firm based in Toronto. We were privately held and operated until we were acquired by Fleetcor, now Corpay Inc., in 2017.
Joining Fleetcor was an exciting opportunity for us. Our founders saw the value of their equity investment grow, and the existing executive team was committed to continuing to grow our business in line with our vision. I believe many businesses are looking for a partner who can help them achieve several goals: realizing the business’s value, granting the executive team autonomy to manage day-to-day operations, executing business strategies, and investing in future growth, such as pursuing M&A strategies to consolidate their industry position. Joining Fleetcor in 2017 allowed us to achieve these goals.
Over the past seven years, we’ve focused on executing our strategy, achieving consistent annual organic growth of more than 20 per cent, and building a highly profitable business. With Fleetcor’s (now Corpay Inc.) expertise, we’ve grown not only in size but also in profitability. This has uniquely positioned us in the market as a financially robust and client-centric team, delivering innovative solutions and redefining the cross-border payment industry.
Let’s turn to the current environment. Any major trends you’re seeing right now in the payments space?
MF: Our ongoing work with organizations across many sectors and financial institutions, including some of the world’s biggest banks, allows us to monitor and respond to emerging trends.
For example, we’ve noticed that streamlined virtual accounts are gaining popularity amongst corporate customers who are doing business beyond their domestic borders. Our corporate customers increasingly want access to virtual accounts that allow them to operate as local firms in various jurisdictions worldwide, all through a simplified platform. Instead of having bank accounts with different institutions all over the world, they rely on us for access to multiple currencies and jurisdictions, all in one platform. This opens up a lot of opportunities for us in cross-border payment and cash flow management.
The same can be said for localized global payments. Companies are looking to make global payments as locally as possible. Using in-country payment rails rather than SWIFT is crucial for cost-efficient cross-border payments. For example, when sending payments to Nigeria or Central Africa, they prefer originating the payment from a local bank account in local currency. Less than half of the international payments we handle go via SWIFT; most are now delivered through in-country channels.
Lastly, we’ve noticed a trend from the consumer world making its way into B2B, which is the expectation for instant or near-instant payments, especially in the gig economy or marketplaces. Organizations paying individuals or consumers are increasingly demanding expedited or near-instant fund delivery. This is new for the corporate space, but it is becoming a significant trend.
How does technology factor in? What role has it played in the changing payment landscape and how organizations do business both here in Canada and across borders?
MF: Technology has transformed everything, and the payments space is no exception. Years ago, transactions were done over the phone, via fax, and email, so it was still largely offline, but technology adoption and innovation have really taken off in recent years.
Today, most of our transactions and payments are done using some form of technology. We’re seeing more direct, real-time integration. For example, our corporate clients want us to integrate with their ERP systems so they can make payments directly from their ERP or accounting platforms instead of having to open a new tool. These payments then go through our system without needing to log into any Corpay software separately.
Another big advancement is that many payments are now fully embedded in the customer’s own user experience. Their clients can make transactions online through their web platforms, with any cross-border payments seamlessly integrated via API. This has led to a huge increase in the number of payments we process for our corporate clients, moving from just a few major transactions at a time to thousands every week.
Technology also enhances transparency by enabling real-time payment tracking. We’ve developed tools that allow our customers to see exactly where their payments are, no matter where they’re sending them globally, much like tracking a FedEx package. Historically, SWIFT had SWIFT GPI for this, but we’ve taken it a step further by offering the same tracking capability for all the in-country payment rails we process.
What’s next for the cross-border payments space?
MF: I think we’ll continue to see technology evolve rapidly, making trends like more localized payments, instant payments, and using in-country rails even more evident. The cross-border payments space is going to look very different in five years.
Like any other industry, we’re working hard to use technology to solve pain points for our customers. One major area we are looking to expand our services is helping businesses get local access to bank accounts in different countries, so their customers can pay directly to a local account. Imagine an international marketplace where a corporate customer sells products on platforms like Amazon worldwide. They need to collect payments in various currencies and local forms of payments in different countries because they’re selling internationally. This approach to local accounts is more efficient, streamlines the payment process, enables faster collection of funds, and reduces operational costs. It makes it easier for companies to sell globally without forcing their consumers to deal with foreign exchange – a win-win for both businesses and consumers.
Where are you seeing growth opportunities for Corpay Cross-Border and/or innovation within the industry?
MF: For us, there are growth opportunities in a few different areas. Geographic expansion is a big one. Our business has been expanding into new territories where our customers already look to us for payment solutions. We already help facilitate payments to over 200 countries in 145 currencies, but now we’re bringing in customers from even more ma. In the past year, we’ve moved into New Zealand, Luxembourg, and France. We’re also working on getting licensed in Mexico, India, and Hong Kong, and we see this as a growing part of our business.
Our business has also become more vertical- or segment-specific over time. We have built technology solutions for various verticals, addressing unique use cases for different customer segments. For instance, we provide solutions for intellectual property and law firms, charities and NGOs moving money internationally for aid, and financial institutions of all sizes. Smaller banks with less than $50 billion in assets also use us as their outsourced international treasury, while some of the world’s largest financial institutions rely on us for access to emerging and frontier markets like Nigeria, Central Africa, Brazil, Colombia, and Peru.
Another significant area of growth is the education market. We help facilitate payments for international students attending universities worldwide, covering tuition, room and board, meal plans, and other expenses. Universities in Canada, for example, have become increasingly dependent on international students for funding, and students come from all over the world. Making these tuition payments easier enables educational institutions to welcome more students with ease.
Are there any new products or other initiatives in the pipeline that you’re excited about?
MF: Yes, there are two products we’re really excited about.
First, we have a balance sheet hedging tool. This tool sits at the intersection of payments and FX risk management. It helps our corporate customers mitigate the risk of collecting and receiving funds in various currencies by automating the accounting processes involved in executing forward contracts. It allows customers to net all inbound and outbound flows and automate the accounting entries from their forward contracts, effectively managing the currency risk that sits on their balance sheet both in terms of cash and non-cash items.
The second product is our intercompany netting solution, designed for multinational firms. This tool is perfect for companies with subsidiaries or divisions around the world that conduct business in their local currencies and engage in intercompany transactions. These companies often have thousands of transactions each month, each with a foreign exchange element and payment fee. Our new solution aggregates all these transactions, nets them and produces a report at the end of the month or reporting period detailing a single settlement to or from each subsidiary. Each subsidiary either receives or pays their local currency to the combined network, resulting in just one FX transaction for each domestic currency.
Overall, we’re aiming to make cross-border payments and FX management as smooth and hassle-free as possible for all our clients and companies operating worldwide.
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