Lync Multi-rail payments strategy

The lifeblood of any modern business is the smooth flow of transactions. However, many enterprises remain unaware of the intricate pathways that power these exchanges: payment rails. These fundamental infrastructures, the networks enabling money transfers, have transitioned from a mere operational detail to a vital strategic consideration. In an era of rapid technological evolution and shifting consumer demands, a deep understanding of diverse payment rails and implementing a well-crafted multi-rail strategy is no longer optional. It’s a necessity. Businesses that neglect to adapt to the evolving payment landscape risk stagnation and missed opportunities.

This article will illuminate the critical role of payment rails and the innovative potential of a multi-rail payments approach. We will explore how this strategic shift can unlock avenues for expansion, optimize financial efficiency, and ultimately pave the way for sustained business prosperity in today’s competitive market.

What are payment rails?

Payment rails are the backbone of money movements. Think of them as railways, the path for trains. A railway is specifically designed to pass a unique type of train. Payment rails allow the flow of money, domestic or international. For this article, we will focus on international/cross-border payment rails.

What is the difference between a payment rail and a payment gateway?
A payment gateway allows the secure transfer of payment data from a customer to a payment processor (Visa, Mastercard, American Express, etc.), while a payment rail is an infrastructure (think railway) that powers the movement of money between banks, merchants, and customers.

The six most popular payment rails and how they work

SWIFT
SWIFT is an acronym for the Society for Worldwide Interbank Financial Telecommunication. It is a global messaging network that financial institutions use to exchange information primarily for wire transfers. SWIFT does not transfer money but acts as a communication platform that facilitates the transfer process by transmitting standardized messages between participating institutions. With SWIFT, businesses can pay to any bank worldwide as long as they are a part of the SWIFT network. Payments on SWIFT take 3 to 5 business days.

ACH
ACH is an acronym for Automated Clearing House, which processes financial transactions in the United States (US). It is the infrastructure for peer-to-peer (P2P) payments, bill payments, and direct deposits in the US. ACH payments are settled in one to three business days and cost between $0.20 and $1.50 per transaction.

Card Rails
These are also known as card schemes and card networks, power card transactions such as credit, debit, and prepaid card payments. The major card networks are Visa, Mastercard, American Express, and Discover. Card rails connect the individual issuer’s bank to the merchant’s acquirer’s bank through the card networks. Card payments typically settle in 1 to 2 business days at a $1.5 to $3.5 charge per transaction.

SEPA
SEPA stands for Single Euro Payments Area. SEPA allows businesses and government entities to make and receive payments between Euro bank accounts. SEPA aims to create a single market for electronic payments in euros, making cross-border transactions as easy as domestic transactions. SEPA streamlines cross-border transactions for customers and businesses, boosting economic integration, competition among payment service providers, and regional trade.

Fedwire
Fedwire, also known as the Federal Reserve Wire Network, is a system for electronically transferring funds managed by the Federal Reserve in the United States. It enables the electronic movement of significant amounts of money between participating financial institutions, such as banks, credit unions, and other qualified entities. The Fedwire system is mainly utilized for large, urgent transactions.

Stablecoins and Blockhain
Stablecoins are digital currencies that can be programmed and are typically pegged at a 1:1 ratio to fiat currencies such as the USD. Mainly created on blockchain networks like Ethereum and Tron, stablecoins merge the advantages of blockchain technology with the financial stability required for the practical application of cryptocurrencies. Cross-border payments and remittances represent some of the most dominant applications for stablecoins. They offer a quicker and more affordable option than conventional remittance services, which frequently entail high costs and lengthy processing times. For example, sending a $200 remittance from Sub-Saharan Africa is about 60% cheaper using stablecoins than traditional fiat-based remittance methods.

What is a multi-rail payment?

A multi-rail strategy means the availability of different payment rails to power a single transaction. For example, if a Nigerian business needs to pay its supplier in Germany, it can use SEPA or SWIFT. The decision on the preferred rail is based on the cost and the estimated time to settlement. If that same business needs to pay two different suppliers, one in Germany and another in Birmingham, it has the option of SEPA, SWIFT, and FPS (Faster Payment Service in the UK).

What are the advantages of multi-rail payments in emerging markets?

Multi-rail payment integrates various payment methods and channels, offering a versatile and robust solution for modern businesses.

  • Increased flexibility and choice: Multiple payment rails allow businesses to offer their partners and suppliers a broader range of payment options, catering to individual preferences and needs.
  • Improved transaction speed and efficiency: Different payment rails have varying processing times. A multi-rail strategy allows businesses to choose the most efficient rail for each transaction, optimizing speed and minimizing delays.
  • Managing currency risk: Fluctuating exchange rates can make international transactions unpredictable. A multi-rail strategy can offer access to tools and services, such as forward contracts or multi-currency accounts, that help businesses manage currency risks. These tools and services allow businesses to lock in exchange rates and protect their bottom line.
  • Enhanced security and reliability: Relying on a single payment rail can create vulnerabilities. A multi-rail approach diversifies risk, ensuring that transactions can still be processed even if one rail experiences issues or outages.
  • Reduced costs: Different payment rails have different fee structures. Businesses can minimize processing costs and maximize profitability by strategically selecting the most cost-effective rail for each transaction.
  • Better cash flow management: Faster payment processing through specific rails can improve cash flow by reducing the time it takes for funds to settle.
  • Increased global reach: Different payment rails cater to different regions and currencies, such as SEPA for Europe and ACH for the US. A multi-rail strategy can facilitate international transactions using rails optimized for specific countries or currencies.

For businesses in emerging markets dealing with international payments, a multi-rail strategy isn’t just a nice-to-have; it’s often necessary. It helps them overcome the hurdles of cross-border transactions, save money, speed up payments, manage risk, and ultimately build stronger relationships with their global partners.

Pay globally with Lync’s multi-rail payments strategy

Imagine a Nigerian business owner who needs to pay suppliers in Germany and London. Traditionally, this would be a logistical and financial nightmare. Think hefty transfer fees, confusing exchange rates, and slow processing times. But now, picture this:

With Lync, this business owner opens not one but two accounts—one in Euros and one in British Pounds—all managed from a single, easy-to-use platform. It’s like having a local bank account in both countries without the hassle. When it’s time to pay the German supplier, they simply use their Euro account to send a SEPA payment. It’s fast, affordable, and straightforward. There are no more complicated wire transfers or hidden fees.

For the London supplier, they use their Pound account to send a Faster Payment (FPS) transfer. Again, it’s quick, easy, and transparent.

The best part? They manage all of this using their local currency, the Naira. Lync handles the currency conversion seamlessly in the background, so they always know exactly how much they spend.

Lync isn’t just about making payments; it’s about simplifying global business. It’s about giving businesses in emerging markets the same financial tools and flexibility as their counterparts in developed economies. It’s about leveling the playing field and empowering them to compete globally. It’s about making international payments feel local, no matter where your suppliers are.