Blog article
See all stories »

Building the payment rails of the future

It truly feels that the world is becoming smaller. We now live in a global economy where the ability to make international transactions – for businesses and consumers – is almost taken for granted.

Despite this, there are several challenges still facing the sector. Conducting currency conversions and managing the exchange rate risk throughout the process is just one part of the problem. E-commerce businesses also face direct and indirect costs related to ongoing payment issues – from lags in receiving funds to payments that need to be recalled.

These have significant knock-on impacts for merchants. Overcoming these challenges may impact operations, technology, network management, and front-office teams may use their limited time to get involved in resolving payment issues. The cost of involving so many teams every time a cross-border payment fails can escalate quickly and become difficult to quantify.

These challenges facing cross-border payments also impede financial inclusion efforts around the world. For instance, international remittances are usually the first financial service used by migrants and their families when they arrive in a new country. Another issue is unbanked populations. The requirement to use a bank in order to move funds contributes little to the promotion of easy cross-border money transfers. While there has been progress over the years, obstacles to accessing these services remain, including the poor implementation of regulatory and legal requirements, barriers to competition and a lack of transparency and consumer protection.  

As an industry, we must overcome these barriers and improve cross-border transactions for everyone. According to Juniper Research, global spend on B2B cross-border payments – driven by the rising popularity of e-commerce marketplaces - could exceed $40 trillion by the end of next year. This is a potential which must be tapped.

Upgrading payment rails

I’m a firm believer that improved, innovative payment rails hold the power to improve cross-border transactions. “Rails” are a piece of payment network infrastructure that enables digital money transfers between payers and payees – regardless of the country, currency, or payment method. It doesn’t matter if the payer or payee is a business or a consumer.

Payment rails are becoming increasingly complex, and each rail differs in the method it uses to carry out this process, based on the type of payment. Ownership of rails is also a factor – are the rails centrally owned (by banks for example) or decentralized. In turn, this means different strengths and weaknesses. While SWIFT – arguably the most widely used payment rail - has more than 11,000 global member institutions, settlement times can be slow, with transactions typically taking between 3 to 5 business days to clear. SEPA meanwhile, offers reduced processing costs, thanks to the introduction of common standards, but only services a limited number of countries.

Navigating the nuances between each framework that can add friction or prove costly for both consumers and businesses can therefore prove a difficult task.

The track ahead

The transition to new payment rails will be a major topic of discussion throughout 2023 and beyond, particularly when it comes to the use of blockchain technology.

While many agree that building payments rails on blockchains has advantages, only a small number of markets, financial institutions, and regulators have deployed distributed ledger technology (DLT) rails so far. Uniform regulatory compliance and oversight across crypto-marketplaces around the world is needed to ensure smooth global money flows.

Initiatives to transfer stablecoins between global markets are also important. By updating rails and financial infrastructure to enable merchants to accept stablecoins, the doors will open for millions of people in emerging markets (who are underserved by traditional financial institutions) to easily pay for groceries, subscription services, and retail goods at participating merchants.

To make money flow more practical, affordable, and effective for everyone, the fintech sector must continue to take the initiative. The next generation of global payment rails will enable businesses to create cutting-edge payment services and products that follow customers everywhere they go. In doing so, we will take a step towards a world without financial borders.



Comments: (0)

Daniel Cohen

Daniel Cohen

Chief Product Officer


Member since

21 Sep 2022


Tel Aviv

Blog posts


This post is from a series of posts in the group:


Fintech discussions and conversations around the development of fintech.

See all

Now hiring