This article appears in TechTimes and discusses the ongoing innovation in cross-border payments being led by non-bank entities. The traditional cross-border payment flows are bank centric and in terms of P2P and to some extent C2B and B2C uses, these flows have been gradually switching over to fintech-developed interactions, which have improved the access, ease of use, transparency, and expense related to transferring funds between sovereign entities. We have covered the innovation part in B2B scenarios through member research. The predominant use case in cross-border transactions is B2B, which when discussing value transfer of goods and services represents about 84% of all value. The article mentions a much larger number of B2B value transfers than we estimate, but we would expect that is because the source of data is including transfers for liquidity, syndicated loans, capital markets settlement, and so forth.
‘Despite the dominance of financial institutions in the money-transfer market, new Fintechs and MTOs (money transfer operators) attract most of the customers that move smaller amounts of money, as well as SMEs. By implementing cutting-edge technologies and making apps intuitive and user-friendly, they offer better rates, time, and services. Thus, Fintechs finally met all the consumers’ demands. Wise (formerly Transferwise) claims it saves its users $1 billion a year in transaction fees compared to the use of legacy bank cross-border payment methods. To make it happen Fintechs either rely on alternative cross-border payment rails independent from traditional bank networks or allow users to connect to legacy banks more easily…
The market size and its growth is still appealing to the newcomers. With the compound annual growth rate (CAGR) of 5% per year, the global cross-border payment flow is expected to top $156t by 2022. According to our market review, 66.6% of industry experts expect remittances and international payments to be one of the most growing Fintech sectors in the upcoming years. Thus, there is still a place for both the newcomers that are able to occupy the niche and the incumbents willing to modernize and adapt.’
The article goes on to cover the many areas that fintechs and others have been targeting with new technology (blockchain, real-time payment rails, AI, etc.), all of which we have been covering in our member research across various topics. Some readers may enjoy the brief summary recap of what has been happening and will continue to occur in cross-border innovations, so worth a couple of minutes to browse through the piece.
‘Fintech has become a game-changer for the remittance market and redefined the way cross-border payments are made worldwide. This made once costly service available to everyone and gave a boost to sustainable development by bringing the transformative impact to many developing economies: better healthcare, education, and even a better standard of living… In the near future, Fintechs will continue to drive innovation in international payments. And banks can still win in this game if they rethink and transform their services and processes to address modern customer needs.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
