Introduction
In the Financial Services space today, Over-The-Counter (OTC) trading is fast becoming a pivotal force. This article will examine how OTC trading is utilized within the financial services industry, emphasizing its role in revolutionizing cross-border payments using Wewire Africa as a case study.
Understanding OTC and Cross-Border Payments
Over-the-counter (OTC) trading is a popular way of buying and selling assets without relying on an intermediary. OTC trading allows both parties to negotiate directly with each other, avoiding price slippage and accessing higher liquidity.
Cross-border payments are payments from one country to another, usually involving different currencies.
A business might need to send money from one country or continent to another for many reasons.
For context, in Africa today, a business in Nigeria that needs to send money to Ghana will have first to convert the local currency, which is the Naira, to USD and then send USD to Ghana.
OTC trading is fast becoming the preferred way to tackle the many bottlenecks of cross-border payment. OTC trading's relative ease of implementation and practical usefulness to customers have made it attractive for providers trying to move transaction volumes quickly.
The Current Landscape of Cross-Border Payments
According to research, the B2B Payments Market Size was valued at USD 1,324.43 billion in 2022 and is anticipated to reach USD 1,589.56 billion in 2023. It is projected to reach USD 2,456.76 billion by 2031, growing at a CAGR of 9.2% during the forecast period (2023-2031). However, challenges such as high transaction fees, currency exchange rates, and compliance with regulations and tax laws must be addressed to streamline B2B payments and improve efficiency. In Africa, Diverse payment systems, currency fluctuations, and limited banking infrastructure have hindered African cross-border payments. High costs, additional fees, and security concerns further complicate transactions.
OTC in Cross-Border Payments: A New Approach
One of the most significant applications of OTC trading is in the realm of cross-border payments. Traditional methods of international fund transfers have long grappled with high fees, slow processing times, and volatile exchange rates. OTC trading provides a solution by facilitating direct currency exchanges, reducing costs, and expediting transaction times.
Platforms like Wewire Africa harness cutting-edge OTC platforms and technologies to facilitate cross-border payments. This ensures transaction speed, easy customer accessibility, and secure and transparent transactions.
When a customer who lives in Nigeria and has Naira in his possession needs to pay his supplier in China, for example, for raw materials, there's a need to look for Yuan, which is the Chinese currency. Hence, a currency trade has to be made.
OTC Trading flow
Currency trading is the process of buying and selling currencies. When a customer needs to move money from one currency to another, a trade has to happen, trading his currency for the currency needed, like buying and selling. Depending on the transaction volume, The customer comes to an OTC trader such as Wewire Africa and explains his specific needs. Then, an offer is made. This means that rates are agreed upon, and the trading team completes the transaction.
Advantages of OTC Trading in Cross-Border Payments
Adopting OTC solutions for cross-border payments by Wewire Africa translates into tangible benefits, especially for users. Users experience expedited transaction times, reduced fees, and increased accessibility. The flexibility of OTC trading enables Wewire Africa to tailor its services to the unique needs of cross-border transactions.
When asked, one of Wewire’s customers, Mr Roger Gbeve of Maison T'acier, a steel manufacturing company with a presence in 3 African countries, said that before he started using Wewire Africa, he would usually have to go to the bank for his cross-border payments needed by his business. Still, he was never sure that the banks would be completely helpful. With Wewire Africa, he always has the foreign currency he needs to pay his suppliers or sort out his business operations across multiple geographies, which was made possible by OTC trading. Some reasons why customers prefer Wewire Africa for OTC trading in cross-border transactions include
- Volume of transaction
- Ability to negotiate price
- Liquidity availability
- Security or Safety
- The human factor
Mitigating Challenges and Risks of OTC Trading in Cross-border Payments
While OTC trading offers substantial benefits, acknowledging potential challenges and risks is crucial. Wewire Africa addresses these risks by ensuring thorough regulatory compliance, security, and innovative security measures on the digital platform. For any customer to be able to perform a transaction, they must have completed their verification with complete background checks, as well as had their business verified to be legitimate.
Conclusion
In conclusion, OTC trading has become a dynamic force within the financial services industry, especially in making cross-border payments accessible globally.
You're better off going the OTC route as a business owner who utilizes large liquidity in multiple currencies and across different countries for business transactions.
Contact Wewire Africa to get a quote today. Visit the website or send an email to Hello@wewireafrica.com to get started now.
