Fatihah Ramzi, DigitalCFO Asia | 23 September 2022
There will be major changes to the cross-border landscape with the rise of three new megatrends.
The cross-border payments landscape will change as a result of three new megatrends in payments, technology, and risk, which will also open up new business opportunities. Financial institutions must provide their customers faster, more affordable, and more secure cross-border payments if they want to stay competitive. Here are the effects of these trends and some related opportunities.
More people are using new payment methods because they provide quicker and more affordable options. The expansion of cross-border transactions, which are anticipated to reach almost $156 trillion in total payment flows, is being aided by fintechs, digital banks, big tech, payment service providers (PSPs), card networks, close-looped networks, and other non-traditional actors.
Rush of new players that offer to address enduring pain points are upending this trillion dollar cross-border payments business. The effects of these developments on future strategy will need to be taken into account by existing banks and money transfer operators (MTOs). Two new specialized player groups have emerged as a result of these changes and the typical pain problems associated with cross-border payments which are delays, exorbitant prices, and a lack of visibility. These companies are technologically empowered money transfer operators and back-end networks.
Cross-border payment procedures are continually being improved by new innovations, which increase transparency, clarity, and efficiency. To meet consumers’ expectations, financial institutions should give priority to meaningful innovation by using the appropriate technologies and forming the appropriate partnerships.
Artificial intelligence (AI), for instance, boosts operational effectiveness by automating labor-intensive, manual operations like filling in or updating data in certain SWIFT message fields. Additionally, it improves straight-through processing (STP) rates, decreases manual intervention in payment processing, and mitigates fraud.
APIs are a different area of technology that organizations might want to investigate. APIs offer a dynamic and adaptable digital infrastructure that helps companies keep up with innovation-driven changes in things like costs and time-to-market for new products. It gives financial institutions the versatility, openness, and power over the integration of data, enabling their customers to interact and obtain information through the avenues of their choice.
Up And Coming Risks
As the sector continues to evolve, new threats like fraud and cybersecurity will remain persistent. Cross-border payments are complicated by the presence of several participants, authorities, systems, and regulations. Fraudsters will continue to invent complex new techniques and innovate in order to take advantage of this system.
The payments industry has been particularly vulnerable to fraud because of the fragmented nature of the system and the volume’s rapid growth. Automation simplifies cross-border payments’ traditional complexity and increases transparency, lowering the risk of fraud and security breaches. Enhancing cross-border payment services promotes economic expansion and international progress while boosting revenues for forward-thinking businesses. In order to streamline local and international payments, businesses should look for a strong AP automation and payments solution.
Changes in the massive cross-border payments sector present opportunities along the entire value chain, perhaps even incorporating new acquisition tactics. Finding the proper course of action will require a thorough approach that draws on in-depth local market and industry knowledge. However, such a significantly intricate and diverse market also creates obstacles for veterans, newcomers, and investors. Which is why businesses must keep up with the trends, adapt and further innovate on cross-border payments.