The Ever-Changing Terrain of Cross-Border Payments

Mick Fennell
Mick Fennell – Business Line Director, Payments

The cross-border payments sector is swiftly transforming due to the changing ways in which global customers conduct and perceive transactions. This transformation is being propelled by several factors, altering the way customers around the world carry out and interact with transactions. In this article, we will delve into the opportunities and challenges that are molding the future of cross-border payments.

1: Intensifying Competitive Environment The cross-border payments market is becoming more competitive, with transaction volumes increasing and at the same time the industry is undergoing consolidation. Dominant, well-established firms and challenger Fintechs are joining forces to increase their market share. These companies possess extensive networks and focus on specialized services and/or targeted regions.

2: Rapidly Changing Market Requirements Needs are changing due to various market conditions:

  • Customers now demand quick execution and uninterrupted payment visibility
  • Innovations such as AI, digital currencies, and real-time transactions are transforming the market environment
  • Availability on a 24/7/365 mode has become the base standard
  • Alternative payment routes, like Wise, Thunes, Mastercard Move, and Visa Direct, provide new highly competitive remittance channels

3: Difficulty in Implementing Change Swiftly Legacy technology is a major obstacle to quick and cost-effective transformation. Fulfilling customer expectations for new services, competitive rates, and contemporary payment channels is difficult with antiquated systems. Moreover, the lack of skilled personnel in the legacy environment exacerbates the issue.

4: Rapid Pace of Regulatory and Standards Revisions Banks are grappling with the high cost and risk associated with adhering to rapidly evolving regulations and market practices. They must consistently upgrade their systems, particularly those related to SWIFT standards and services. This encompasses the transition from MT to MX formats and the CBPR+ initiative for international payments and reporting. Compliance demands extensive planning and execution, and non-compliance can threaten business viability.

5: Escalating Operational Expenses Operational expenses are on the rise due to various factors such as outdated infrastructure technology, antiquated work methods, and general market inflation. Banks must devise strategies to cut these costs to maintain their market competitiveness.

6: Surge in Transaction Volume and Payment Modes Globalization and digital economies have led to a surge in international payments, while the average transaction value has dipped. This trend exerts pressure on banks to offer real-time, seamless payment services at reduced costs.

7: Integration Expectations In today’s marketplace, efficient integration with both internal and external systems and services is essential. Lower cost Swift and alternative payment networks implementation are made possible by pre-integrated solutions offered by tech providers. Customers anticipate a smooth integration of payments into automated financial processes, such as online embedded payments, deferred payment services (BNPL), and ERP integration for businesses.

Traditional solutions find it challenging to adapt to new services. However, the adoption of new technology can reduce the cost of payment services by optimizing operations and enhancing efficiency. This ultimately results in higher STP (Straight-Through-Processing) rates and thus more affordable payment services.

In Conclusion The cross-border payments sector is currently undergoing a significant metamorphosis. By leveraging new smart technology, adaptable platforms, and skilled personnel, they can stay competitive, satisfy customer demands, and adhere to regulations. The future of international payments holds great promise for those who are willing to invest and innovate in this rapidly evolving and lucrative landscape.

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Mick Fennell
Mick Fennell – Business Line Director, Payments