Cross-border status: large banks expand direct payments abroad in foreign currency
The largest banks are expanding direct payments abroad in foreign currency. Russian businesses will again be able to freely send dollars, euros or yuan to any country. Sovcombank has already launched such a mechanism, and other players have a similar service at Sberbank. This expands development opportunities for domestic companies, experts say. Moreover, even the introduction of the 19th package of EU sanctions, which involves a ban on operations of Russian banks, including in foreign branches, will not change the situation. What options businesses still have for sending cross—border payments can be found in the Izvestia article.
Which banks launch direct settlements for foreign economic activity
Major Russian banks are launching new options for making cross-border payments in foreign currencies, including the dollar. For example, Sovcombank resumed direct payments on foreign economic activity for businesses. This was reported to Izvestia by the press service of the credit institution.
They clarified that companies can send payments in dollars, euros or yuan. The service provides payments to more than 100 countries at a cost of 0.3% with a deadline of two business days. Moreover, a business can buy currency for future payments in advance. This reduces currency risks compared to schemes where the conversion takes place at the exchange rate at the time of the transaction. The mechanism operates despite the sanctions, the financial institution noted.
Other domestic banks are also expanding cross-border settlement opportunities for businesses. Sberbank offers payments with a commission of 0.3%, but not less than 2.5 thousand rubles. There is a successful practice of transactions with more than 90 countries, according to the website of the credit institution.
Last year, the PSB launched the A7 infrastructure, which allows conducting foreign economic calculations regardless of the global market conditions and sanctions restrictions, the press service of the credit institution reported. They added: the turnover of this settlement mechanism today exceeds 7.5 billion rubles.
Recently, products have also become available to individuals. The commission for cross-border transfer is the rate at the exchange rate of the Central Bank of the Russian Federation + 0.36%. Transfers take place day after day. A7 also opened its first offices in Zimbabwe and Nigeria.
Direct payments are now possible to China, Turkey, Brazil, Vietnam, Laos, India, Thailand and the CIS countries, the BBR Bank said. The credit institution is constantly working to expand its payment capabilities, said Alexander Kiselyov, Director of the corporate unit.
He added that the bank works with a number of trusted payment agents. The cost of the transaction varies from 1 to 2.5%, depending on the direction, destination and size of the transaction.
After the withdrawal of international payment systems from the country, restrictions on transfers through the SWIFT system and the sanctioning of a large number of Russian banks, international transfers have significantly decreased, said Anna Shchetnikova, head of banking at fintech company Paygine. However, then banks and fintech companies began to look for alternative ways to resume transfers for individuals and companies. Now businesses already have many opportunities to make calculations on foreign economic activity.
— There is a market for international payments in Russia, it lives. Any large financial institution already has the opportunity to send a payment abroad. Many players work through agency schemes. In addition, businesses continue to pay from OTP Bank or Raiffeisenbank accounts anywhere in the world in foreign currency. Now it is easy to send payments in yuan, dirhams, partly in euros and even in dollars," said Alexey Poroshin, CEO of First Group JSC.
The 19th package of EU sanctions
The EU announced the 19th package of sanctions against Russia. It will cover the energy, finance and trade sectors, said the head of the European Commission (EC) Ursula von der Leyen. In the field of finance, they proposed to impose a complete ban on the operations of domestic banks, including financial organizations operating in third countries, as well as restrictions against the Mir system and cryptocurrency platforms. In addition, the EU will soon formulate a proposal on how to use frozen Russian assets to help Ukraine.
However, the new EU restrictions will not affect the domestic financial sector, Alexey Poroshin is sure. In 3.5 years, a huge infrastructure has already been created for sending cross-border payments, in addition, new schemes are emerging. Even the possibilities for conducting direct transactions are expanding, despite the sanctions. This is important because there are some European structures that refuse to work with agents, primarily from the field of crop production and animal husbandry.
The new measures will not even lead to a decrease in trade volume, the expert stressed.
— The ban on the operation of Russian banks in all countries generally smells like an encroachment on the sovereignty of countries and an attempt to put pressure on the domestic economy of foreign countries. In essence, such a measure will not work, as escape routes will be invented immediately," Ekaterina Kosareva from VMT Consult is confident.
As soon as one player starts making direct payments, and with a small commission and practically no restrictions by country, for example, like Sovcombank, other financial organizations will use a similar scheme, Ekaterina Kosareva is sure.
The main effect of the return to normal direct transfers for the Russian economy, despite the sanctions, is a reduction in the cost of raw materials and consumables for the manufacturer and finished goods for the importer, as well as a reduction in the price of the final product for the end consumer. This will have a positive effect on inflationary processes and the growth of foreign trade turnover, the expert explained.
How does a business settle accounts abroad
Banks are currently building direct transfer systems on their own, said Alexander Abramov, head of the RANEPA Laboratory for Analysis of Institutions and Financial Markets. They can be based on both SWIFT services and alternative international payment platforms. Unlike agency schemes, such operations minimize the risks associated with intermediaries: the likelihood of loss of funds and fraud is reduced, the expert added.
However, calculations are also underway bypassing traditional correspondent chains, using alternative mechanisms, said Svetlana Frumina, Head of the Department of Global Financial Markets and Fintech at Plekhanov Russian University of Economics. Among them are "payment agents" who carry out transactions using various schemes for a commission; banks with branches in other countries; cryptocurrencies pegged to the dollar; direct transactions in foreign currency (including yuan); barter; offsets and netting system and the use of profits from joint ventures, as is practiced in Vietnam., listed the expert. According to general estimates, 10-15 different tools are used. However, most of them function in fragments, she added.
Previously, companies often resorted to cryptocurrency transfers using bitcoin, ethereum and other digital assets for cross-border settlements, recalled Finam analyst Alexander Potavin. The media also reported on the possibility of payments through the systems of developing countries — Chinese UnionPay, Indian platforms and the Russian Mir with international integration. In addition, barter schemes were used, when some batches of goods were exchanged for others with offsetting, as well as settlements through letters of credit and collection (write-off of funds according to submitted documents) of banks, the expert added.
— Direct transfers are preferable, since each alternative scheme requires remuneration of intermediaries — commissions and hidden transaction costs. In addition, such payments usually involve a long chain of participants, which makes them less flexible and delays settlement times. Bilateral operations make it possible to reduce the number of external intermediaries, reduce costs and risks of technical failures," Svetlana Frumina added.
In addition, it is important to be able to send transfers in a foreign currency, not just in rubles. For businesses, this is primarily an economic necessity related to risk management, liquidity maintenance and fulfillment of obligations, Svetlana Frumina noted. Today, international trade is focused on stable, freely convertible currencies, mainly the dollar and the euro.
The ability to convert and settle in foreign currency allows you to independently manage the exchange rate and this can be another source of income for the bank, added Anna Shchetnikova, Head of Banking at fintech company Paygine.
Indeed, settlements in foreign currency can reduce risks, Alexander Potavin from Finam agreed. The counterparty receives money in its national or stable global currency, without encountering fluctuations in the ruble, which can fall in price by 5-7% in a week, he noted.
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