Banking Circle Whitepaper Examines Opportunities, Challenges for Cross-Border Trade

In their latest white paper, ‘Payments without barriers: Focus on Denmark’, the team at Banking Circle has looked into the opportunities and challenges for cross-border trade in the country.

Although slow settlement times and high costs are a barrier for firms wanting to trade in smaller markets, “improved direct clearing via the Danish National Intraday Clearing System is allowing businesses to tap into the market opportunities in Denmark and benefit from faster, lower-cost payments and collections.”

However, Banking Circle pointed out that there are still certain barriers when it comes to trading with companies and consumers residing in Denmark.

Findings of the paper include:

  • The total cost of payments in Denmark is around 0.8% of GDP, according to the Danish Central Bank
  • Business-to-business transactions account for 27% of that total, or Danish Krone (DKK) 4.2 billion
  • Denmark has the second-highest electronic payments penetration rate in Europe, and the total volume of digital commerce grew by almost 30% in 2020 alone
  • However, 37% of companies transacting in and out of Denmark are looking to improve their trade settlement times – 10% higher than the average across Western Europe

Going on to address a question about how can payments businesses, banks and marketplaces support clients that plan to sell in Denmark, the update noted:

“As a tech-first Payments Bank, Banking Circle has added direct clearing capabilities for DKK. By connecting to Denmark’s national intraday payment system, we are reducing friction for Payments businesses, Banks and Marketplaces by giving them access to faster, cheaper collections.”

The Banking Circle team also shared:

“Through the Banking Circle Payments On Behalf of (POBO) and Collections On Behalf Of (COBO) solution, our clients can offer their customers payments in their own name rather than that of the Financial Institution used to send the payment. This allows for scaling of accounts, while delivering faster on-boarding, improved payment infrastructures, more ownership of payments, and smoother reconciliation.”

(Note: you may access the whitepaper here.)

Anders la Cour, CEO at Banking Circle Group, stated:

“Our new white paper suggests there are a number of barriers to trading with businesses and consumers in Denmark, despite the obvious potential of the market. And the challenge is not isolated to Denmark alone. Across Europe, many markets are experiencing low cross-border transaction volumes in their domestic currency due to high costs and slow settlement times.”

He added:

“However, there is a clear opportunity available for organisations that want to tap into the market opportunities in Denmark – the Danish National Intraday Clearing System: Intradagclearing. This enables non-Danish Banks, PSPs and marketplaces looking to do business with Denmark to pay out and collect payments faster and at lower cost.”

As mentioned in the update, Banking Circle joined the scheme in 2021 “to help non-Danish Banks, Payment Service Providers and Marketplaces increase access to the Danish market for their e-commerce customers.”

Transactions occur as if they were local payments, “reducing friction and delays.” Cutting out the traditional reliance on the slow and costly international correspondent banking network, the new solution is “helping cross-border e-commerce businesses to accelerate their growth within Denmark.”

Anders la Cour also mentioned:

“The combination of our Danish Central Bank account and direct clearing access, integrated into our cloud-based payments infrastructure will make payments into and out of Denmark faster and cheaper for all kinds of companies”

The Banking Circle Payments on Behalf of (POBO) and Collections on Behalf of (COBO) solutions allow businesses “to deliver payouts and collect payments in their own name, offering lower costs than traditional cross-border payments in Danish Krone as well as 24 other key currencies.”

As noted in the announcement, these products can “improve customer relationships for Financial Institutions, processing payments in their name, as well as making it possible to collect funds into virtual bank accounts using their name.” They also make it easier for individual businesses “to better manage their payments reconciliation and increase payments acceptance.”

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