By: Colin Canright, Principal, Canright Communications

One of the more arcane subjects became mainstream news in the United States over the past year, as changes and innovations in the way consumers pay businesses drew media attention. Last year also brought enhancements to electronic payment instruments to make it easier for U.S. businesses to make international payments.

New mobile technologies also captured media and consumer attention. Google launched a mobile-based payment system, called Google Wallet, which eventually will allow you to make payments by waving your smart phone over a payment device. The Chicago Transit Authority's new fare collection system will accept this technology in 2013.

At the same time, interest in making international payments more efficient and less costly increased. Indeed, the importance and use of cross-border, international payments are expected to grow, according to a March 2011 survey conducted by the Federal Reserve Banks. International payments are often difficult and expensive because of differences in bank messaging formats and networks, as well as foreign exchange considerations.

The survey of financial institutions shows that two-thirds of all respondents process cross-border transactions today, as compared to only one-third in 2009. Half of all cross-border payments are B2B, with most made by wire transfer. Lower cost automated clearinghouse (ACH) transfers grew at the fastest rate, with a 19% increase in usage.

The Federal Reserve Banks introduced a change to its wire transfer system to make wire transfers easier for businesses to track payments and the invoices they cover. The changes are also designed to more closely align U.S. wire transfers with SWIFT, the international system for bank and payments communication. In November of last year, the Fed introduced extended remittance information for wire transfers, allowing companies making payments to add remittance information to a wire transfer payment so that the recipient can see what the payment covers.

The new feature had been in the works for nearly five years, beginning with research that shows potential cost savings of 40% to 60% in processing, as the relationship between payment amount and invoices paid is easier to track and can be reconciled automatically. Originally intended for U.S. use, the inclusion of remittance information in wire transfers will help international payment identification as well. “We thought the need was unique to the U.S. but are seeing worldwide need for more remittance data in payment structures,” says Lauren Hargraves, senior vice president, Federal Reserve Banks.

The new remittance information is compatible with the international payment standard ISO 20022. International payment messages, including the widely used SWIFT payment messages and the developing SEPA instruments, are migrating to or are based on ISO 20022. SEPA refers to the Single European Payments Area, an initiative to harmonize payments throughout Europe.

SEPA will bring about changes in the way payments are made throughout Europe relatively soon, as the European Commission in November set a deadline for banks to migrate electronic credit transfers and direct debits to SEPA instruments by February 2014. The French National SEPA Committee Secretariat, citing statistics from the Association Française des Trésoriers d’Entreprise, expects corporations to move to the new formats over the next two years, while billers should complete their migration in 2012.

For U.S. consumers, the way payments are made continued to shift to debit cards from cash, check, and credit instruments. The 2010 Federal Reserve Payments Study showed that debit use increased at the expense of checks, cash and credit, accounting for 42% of retail payment transactions, a shift that other surveys show has continued.

In 2011, debit cards in particular came to the fore as debates over changes to debit-card fees, required under financial reform legislation called the Durbin Amendment, made national and local news. A 2011 debit-card study by payments research firm Mercator and technology company TSYS, targeted to bankers, notes that "awareness of current debit and checking account fees is high, with many trying to actively avoid overdraft-related fees by managing their balances closely." The controversy over the Durban Amendment's decreasing of the fees banks charge for debt-cards ultimately resulted in Bank of America and other banks removing compensating fee increases.

Consumer and retail payments will increasingly shift to mobile over the next several years, with nonfinancial institutions battling for turf with traditional financial institutions and credit-card issuers. Mergers and joint ventures between those firms picked up last year and will accelerate further in the coming year.

A host of new mobile payments methods have come on line for consumer and retail payments, both in the United States and Europe. Indeed, the rise of mobile payments is the biggest technology trend of 2011, with the greatest implications for 2012 and the future. The purchase of Motorola Mobility by Google and the introduction of mobile payment services by Google, PayPal, and others are some examples. As for Europe, bankers speaking at a SWIFT conference called for cooperation amongst major banks in developing epayments systems in Europe lest they be overrun by nonbank competitors, like Google.

Although the international payments market itself is somewhat complex and fragmented, businesses have increasing choices when making and receiving payments internationally. New choices for electronic payments, including both the payment itself and its related remittance information, will increase in coming years. Please see below for resources to help in your decision-making:

American Express: Improve International Payment Processing

Research Results: Need for Faster, Easier Cross-Border Payments

SWIFT: Will the SEPA End Date really change the game?

International Payments: Overshadowed by SEPA? (registration on gtnews.com required)

Collin Canright is principal of Canright Communications, a Chicago B2B marketing communications firm focusing on content marketing in the technology, financial, building, and association-nonprofit sectors.  He is also editorial director of www.EPayDb.com, a directory of epayments companies and content produced by Canright Communications. He can be reached at: collin@canrightcommunications.com.