Cross-border payments have been and will continue to be one of the hot topics and robust areas of innovation in the global payments space.
Cross-border payments for commercial goods and services have been estimated to be north of $30 trillion per annum, with the vast majority of these flows in the B2B use case, as members of our service are aware. These cases of course run the gamut across accounts payable, e-commerce, and other scenarios like financing needs.
There are also business sizes that range from small to multinational. In a Fintechnews Singapore article, the author writes that in the Asia region, specialty fintechs are rapidly gaining ground on the traditional bank providers of cross-border payments. The authors quotes some 2022 revenue growth rates from a couple of fintechs that operate in Asia. This is then tied to a broader global indication of share shift by citing the McKinsey Global Payments Map, which breaks down market share on payments revenue into regions and certain segments. In this piece the data indicates that fintechs hold a 12% in global market share for 2021 B2B cross-border payments in the SME space (which has various definitions based on revenue size or number of employees). We do not know what defines market share in the source study, but readers can link out to read further.
The article then goes on to discuss some of the possible reasons for this expected continued growth, which they primarily attribute to a better integrated experience. Many will know the complications in traditional cross-border payments, which involve wire transfers, correspondent banking, lack of transparency, etc. And that’s just on the front end. Back-end complications involve additional issues like forex, time differentials, as well as incorrect and missing data. It seems that fintechs are doing a better job of this for SMEs than the banks, while also broadening their services deeper into treasury and trade capabilities. They then refer back to the source study to recommend that banks in Asia place much more focus on the fast-growing regional SME space, which seems like reasonable advice.
Overview by Steve Murphy, Director, Commercial Advisory Service at Javelin Strategy & Research.
