Earthport re-envisioning cross-border payments

Hank Uberoi liked Earthport so much he joined the company.

Mr. Uberoi is the CEO of Earthport, a company remaking the process of cross-border payments by providing clients with access to a global payment network. Through a series of local banking partnerships client business is directly settled via local clearing through banked beneficiaries in more than 65 countries.

Mr. Uberoi first joined Earthport as an investor in 2010 before becoming more involved, the last six years as CEO.

“What we were doing was ambitious back then,” he recalled. “We wanted to revamp cross-border payments not just for one vertical, but to create a system across verticals.”

Hank Uberoi

The international payments system is inefficient, expensive and not transparent, Mr. Uberoi said. It is heavily regulated but not in a uniform fashion across jurisdictions, leaving globally minded players to navigate a myriad of different climates.

Yet the solution isn’t a hard one, Mr. Uberoi explained. Most local banks have relationships with each other so they can move money back and forth with relative ease. That worked great a half-century ago when most business was completed within borders or regions but as millions more companies operate globally, the flood of transactions in search of a more efficient path to faraway places has increased exponentially. As more money flows across borders, more attention is paid to the fees charged and time it takes to send those funds. The efficiency of the entire system is questioned.

Mr. Uberoi said the ideal situation is a hub and spoke model where international payments can flow into a single central area. That would make the process both cheaper and faster. The key is satisfying regulatory requirements while developing a new system unlike the standard central network where a central counterparty assumes the risk.

“We navigated that by creating a structure that reduced inefficiency without creating a central counterparty with credit risk,” Mr. Uberoi said.

Earthport could easily have failed, Mr. Uberoi admitted. A small company navigating an industry whose incumbents were notoriously change-resistant was not an easy process. Luckily they signed up some key early adopters and have seen their business model widely accepted as a viable and good model, he said.

Over the past three years the industry has warmed to new approaches to cross-border payments for several reasons, Mr. Uberoi said. As volumes rise inefficiencies becoming more glaring and significant. The e-commerce ecosystem has grown, allowing remittance companies to bypass banks. Around the world, legislation such as Dodd-Frank and PSD2 have forced parties to increase their transparency.

Compared to most other industries the pace of change for banks is glacially slow, Mr. Uberoi said. That has left them as one of the few remaining areas that have tried to do it all by themselves, a tall order when you are talking about adapting legacy infrastructure across multiple countries. Better to adopt best of breed solutions from external providers and through partnerships with other creators.

Earthport provides the solutions while financial institutions maintain their clients and avoid costly infrastructure spends, Mr. Uberoi said. That is especially crucial at a time when banks aim to reduce the number of counterparty relationships even though most businesses increase their international reach.

In addition to offices in the United Kingdom and the United States, Earthport also has locations in Singapore and Dubai. That local presence has been a crucial factor in the company’s ability to deliver payments in 67 different countries, a number expected to rise in the coming months. As global banks reduce international responsibilities some clients are left with more options than others. In the U.S. and UK there are more than in a country such as India, where Earthport is the first and only non-banking entity licensed to deliver payments on behalf of local banks.

“We have a very healthy pipeline there,” Mr. Uberoi said.

Brexit’s biggest impact on cross-border payments will be a regulatory one, as UK-based institutions previously passported into the EU now have to negotiate access to the mainland while those seeking the reverse have the same task.

Best leave it to an experienced hand, Mr. Uberoi suggested.

“Our core expertise is figuring out the regulatory environment. It is something we are very used to.”

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