In 2011, the famed economist Tyler Cowen published a book entitled "The Great Stagnation," where he concluded that America, along with other high-income countries, was experiencing a slowdown in technological progress, leading to stagnation in economic growth. Cowen predicted that it would take 20 years for the "great stagnation" to end.
Today, it's clear that the world turned the corner far ahead of Cowen's schedule. Cowen himself
However, there is one sector that seems to have
It doesn't take much prodding to get CFOs to open up about their frustrations with international payments — "Stuck in the Stone Age" is a sentiment I heard more than once. After speaking to numerous CFOs and finance leaders, I can tell you that while the market is uniformly frustrated and dissatisfied, the challenges orient around five clear themes.
The first theme is frustration around disconnected systems. There's a profound lack of integration between external bank portals and enterprise resource planning software that require logging into separate systems every time you want to make a cross-border payment. The absence of connections between these platforms not only complicates transactions, but introduces room for error, inefficiencies and a lack of real-time data syncing. It also compounds the difficulty of understanding the expected delivery time of the payment, which is already opaque due to variances between each country.
Secondly, international payments are highly correlated with chasing vendors. Any time you want to pay an international vendor, you find yourself hunting for bank details and country-specific documents — part of the challenge of differing regulatory environments and documentation requirements. The time and effort expended on back-and-forth discussion to secure essential information, especially from vendors in multiple countries that each have their own requirements, significantly extend the payment processing time, hampering business agility and potentially straining vendor relationships.
The third glaring pain point is the lack of transparency into foreign exchange rates. Do you actually know the rate you're paying? Your bank usually doesn't make it easy to find out. This undermines the ability of businesses to accurately forecast costs, manage budgets and ensure financial compliance. It also erodes trust in the system, making international dealings more of a gamble than a calculated business operation.
Fourth, the flip side of the FX rate blind spots is the anxiety associated with constantly scouting for the best exchange rates, only to still leave money on the table. The volatile nature of foreign exchange markets coupled with the lack of real-time rate visibility creates a scenario where businesses are continually on the hunt for better rates. It wastes time and creates yet more uncertainty.
Federal Reserve Gov. Michelle Bowman said some limitations and frictions in the payments system are by design and cannot be swept away by tech innovations.
Finally, there are major information gaps in international payments. What is more frustrating than toggling back and forth between different systems to view vendor information, purchase details and other relevant data? This fragmented access to critical data extends the time taken to process payments, and hinders the holistic view necessary for effective management and audit of international transactions.
The frustrations above were related to me by CFOs and financial leaders. But they're also an experience I've witnessed firsthand: I work at a software company with offices in multiple countries, and we frequently have to move money between offices and pay vendors across borders.
Our transactions aren't trivial amounts. When we're transferring funds in the ballpark of hundreds of thousands, even a small fluctuation in the exchange rate can mean an extra few thousand dollars paid. For a medium-size business like ours, this isn't just a line item; it's potentially a monthly salary, a marketing campaign or the development of a new product feature.
The unpredictability is maddening. It leads to second-guessing, and traps our finance team in a cycle of "what-ifs" and "if-onlys." Do they take the offer now, or do they wait and hope for a better rate? It's like playing the stock market, but the wrong decision doesn't just hit your pocket; it reverberates through the entire company's cash flow.
Economics is rife with theories about the "right" price, but in practice, it's a psychological battle. It reminds me of something I learned about job interviews: At some point, you have to stop interviewing the endless parade of candidates in search of that rare diamond, because if you wait too long, you might be left with coal — or, in this case, with a much worse exchange rate.
What may be most staggering is the complacency. Most finance leaders are resigned to the belief that there is no alternative. When choosing international payment providers, if they put any critical thought to the process at all, it will be directed at systems integration or ease of use. If they were to focus on the rates — as costly as they are — the perception they have is that the opportunity cost will be higher.
But why can't we have both: a system that eliminates the usability headaches and gives you control over the rates?
As innovation in other domains accelerates, the inertia plaguing our international payment systems is a critical bottleneck, stifling U.S. businesses that choose to engage in global commerce. This isn't a minor inconvenience; it's a significant barrier to global commerce, one that could mean the difference between a lucrative month and a disappointing one.
