The Future of Cross-Border Transactions

In the rapidly evolving world of global finance, cross-border transactions are undergoing a transformative shift, marked by technological advancements and changing market demands. 

Here are our predictions for the future of these transactions.

Business Payments look for ease in cross-border transactions. 

In 2024 and beyond, businesses are increasingly demanding cross-border payment solutions that offer speed, ease of access, transparency, and cost-efficiency, akin to what they are accustomed to in personal domestic banking. This shift is not just a matter of convenience; it represents a competitive edge, and companies that rapidly implement these advanced payment solutions are likely to secure a first-mover advantage, setting new industry benchmarks.

As companies expand their operations internationally, the ability to manage financial transactions quickly and transparently across borders becomes crucial for expanding their business verticle and  fostering strong business relationships. It is fundamental to building trust and maintaining good relationships with both customers and suppliers. This reliability can lead to better pricing, terms, and long-term partnerships. The businesses that recognize and adapt to this shift early on are likely to reap the benefits of increased agility and improved global partnerships.

Businesses are actively looking for methods to streamline their international transactions to match the flexibility and efficiency seen in personal (P2P) transactions. 

Emergence of 'Payment as a Service' Models

The cross-border payment landscape is witnessing a growing shift towards 'Payment as a Service' models - a trend reflecting the growing focus on innovative solutions provided by fintechs that take the burden of  back-end infrastructures off of businesses. These platforms are finding innovative ways to overcome the shortcomings of the traditional cross-border payments by either building on top of them or by using new technology like blockchain. Either way, their aim is to provide streamlined, efficient, and often more cost-effective ways for businesses and people to manage international transactions. 

This approach simplifies the complex world of international payments and ensures integration with various business systems, providing a comprehensive solution that represents the future of financial technology companies.

SMEs: Accessing Cross-Border Payments

Small and Medium-sized Enterprises (SMEs) are increasingly looking towards global expansion, and cross-border payments play a crucial role in this process. The surge in international transactions among SMEs is driven by the need for broader market access and improved supply chain operations, a trend that has been amplified in recent years.  For instance, a significant percentage of SMEs, as high as 58%, are now engaged in more cross-border payments than before 2020. This increase is notable in countries like India, Mexico, Saudi Arabia, China, and the United States.

In addition to the common issues in cross-border payments, such as slow processing times, high transaction costs, and poor transaparency, SMEs often also operate with tighter cash flows and resources compared to larger corporations. So while more of them are entering the market their barriers to entry are higher than for others. But Payment as a Service platforms do take a bulk of their obstables away. 

B2B payments market, estimated to be worth around $110 trillion, suggests a massive opportunity for improved payment solutions targeted at SMEs.

Focus on Emerging Markets

Emerging markets -  Latin America, Africa, and Southeast Asia - are seeing rapid growth driven by a younger, growing population that is increasingly adopting digital payment methods. Countries like Brazil and Mexico  are showing remarkable growth rates in digital commerce. Similarly, in Africa, digital commerce and payment systems are undergoing a significant transformation, with mobile money and alternative payment methods gaining traction. The continent is ready to become a new digital frontier, with a strong smartphone adoption rate and more cell phones than bank accounts. The Indian fintech industry, estimated to be around $50 billion in 2021, is projected to reach approximately $150 billion by 2025 

These trends suggest a clear interest for reliable, and secure cross-border payment systems in these regions. Fintechs can seize this opportunity by offering customized payment solutions that meet the specific needs of these markets, such as accommodating local payment methods and ensuring seamless cross-border transactions.