Globalising Transactions: Cross-Border Payments in the Digital Age
In recent years the world has seen a surge in cross-border payments, driven by the globalisation of trade and migration flows. In fact, global payments are expected to rise from USD 190 trillion in 2023 to USD 290 trillion by 2030.
But while domestic payments are becoming instant and digital, cross-border payments have taken a while to catch up.
Thanks to innovative approaches and technologies that have emerged to address the challenges traditionally associated with cross-border payments, they are now realising their potential to not only benefit individuals, businesses, and financial institutions, but serve an even greater purpose.
Here’s how next-generation cross-border payments are driving global economic growth, facilitating financial inclusion, and fostering greater connectivity in an increasingly interconnected world.
The technology transforming cross-border payments
Perhaps the most headline-grabbing developments driving cross-border payments are blockchain-based solutions that offer the potential for faster, more secure, and cost-effective cross-border payments. But the rise of digital wallets has arguably been the most impactful. By storing multiple currencies and facilitating quick transactions, digital wallets are streamlining the process of cross-border payments for consumers and businesses alike.
Going forward, we’ll see open banking frameworks, which allow authorised third-party providers to access financial data and initiate transactions on behalf of customers, play an equally pivotal role by promoting competition and innovation in cross-border payments. This increased competition is resulting in improved services and reduced costs.
The world of business and ecommerce has never been more interconnected. Cross-border payments offer a range of tools to make international transactions streamlined, efficient, and affordable, so are clearly beneficial to merchants. But by going digital, they are doing far more than driving the growth of individual businesses.
Driving global economic growth and financial inclusion
Thanks to innovations in cross-border payments, it’s never been easier for businesses to expand their operations internationally, access new markets, and to collaborate with partners and suppliers worldwide. As such, cross-border payments play a crucial role in driving global economic growth, enabling international trade, as well as facilitating foreign direct investment (FDI) by allowing investors to transfer funds across borders securely and efficiently.
But in addition to playing a vital role in global economic growth, cross-border payments can also have a transformative effect on individuals who routinely face barriers of distance, accessibility and cost.
Traditional cross-border payments often involve high fees and lengthy processing times, particularly for small-value transactions. Digital payment platforms can substantially reduce these costs, making it more feasible for individuals with lower incomes to engage in cross-border transactions.
Digital payment systems also facilitate faster and more efficient transactions compared to traditional methods like checks or wire transfers, which can take days to clear. This speed and efficiency enables faster movement of funds across borders, which is especially beneficial for individuals relying on remittances from family members working abroad.
Which brings us to another important point: cross-border payments are often essential for migrant workers who send remittances to their families and communities in their home countries. Remittances represent a significant source of income for many developing countries, contributing to poverty alleviation, household consumption, and investment in education and healthcare. Efficient cross-border payment systems ensure remittances reach recipients quickly and cost-effectively, maximising their socioeconomic impact.
Perhaps most importantly, by facilitating cross-border transactions, digital payment systems enable individuals and businesses in emerging markets to participate more fully in the global economy. This inclusion can foster economic growth, create employment opportunities, and improve standards of living in underserved communities.
Access to reliable cross-border payment systems provide individuals and businesses alike with access to global financial networks, and are central to facilitating the integration of national economies into the global marketplace, not only promoting globalisation, but boosting financial inclusion around the world.
If we can get to a stage where cross-border payments match domestic payments for speed, transparency and convenience, we’ll see the digitalisation of cross-border payments truly revolutionise the way money is transferred globally. If you would like to discuss next-generation cross-border payments further, get in touch today.