Why we need to rethink cross-border money movement to keep pace with a mobile-first generation
"As consumers and corporate clients get used to smoother and faster payment experiences, cross-border payments need to evolve"
Cross-border payments are growing in response to rising e-commerce volumes and an increasingly mobile population. As a result, there’s increasing pressure on providers to rethink how we pay and move money between markets, in order to keep pace.
Whether it’s consumers, banks or fintechs, no-one will have missed the dynamic changes we’ve seen over the last decade, from contactless payments through to innovative new payment solutions such as wearables, crypto and more.
Despite this torrent of creativity, cross-border payments remain mired in significant challenges for too many consumers and businesses. High fees, long settlement times, inefficient processes or a lack of transparency and communication have all hampered expansion. And these problems prevail at a time of rapid growth: according to the Bank of England1, by 2027 cross-border payments will total $250 trillion world-wide, up 40% since 2017.
As both consumers and corporate clients get used to smoother, more convenient and faster domestic and online payment experiences, cross-border payments need to evolve to meet these expectations – and to secure a role for today’s leading payment providers in the digital era.
Cross-border: past, present and future
Thirty years ago, sending and receiving money across borders was cumbersome. They involved visiting a bank branch, authenticating with two forms of ID (usually passport and drivers’ license) long settlement times and high transaction fees. Fast forward three decades, and while demand has risen, these problems are still in evidence. Global cross-border remittances are set to grow to $930 billion over the next two years2, while global ecommerce sales are expected to grow by a quarter next year alone.
At the same time, there’s been an exponential rise of the gig economy, as we move from millions to billions of sellers. This means that global workers and nano businesses want faster access to their money – and with 162 million people3 in Europe and the US already involved in that economy, the long-standing challenges in cross-border payments need solving.
This is particularly true for banks: as they seek to defend and grow revenue and market share, banks should see the provision of faster and more transparent cross-border payments as table stakes. Our internal analysis of transaction flows on VisaNet shows4 that accounts with fewer cross-border transactions are four times more likely to fall dormant, while account portfolios that increase or maintain high percentages of cross-border transactions grow faster than domestic-focused portfolios. Our research also suggests 89%5 of cross-border account holders are more likely to use their bank’s Visa card for payment compared to digital wallets or other solutions.
In an era where digital-first platforms like Monzo and Starling, known for their efficient cross-border payment services, are gaining more customers than many traditional retail banks, it's crucial for these banks to innovate. They must adopt new business models, technologies, and working practices that meet the heightened expectations of consumers and businesses.
With Currencycloud joining the Visa family in 2021, a major step was taken towards delivering next generation cross-border payment products. Currencycloud enables rapid and secure payments processing between more than 180 countries in 35 different currencies, and has processed more than £250 billion transactions.
Embracing change: a necessity
At a time when Fintechs now share 35%6 of their value chain with banks, the need for traditional financial institutions to prove they can deliver has never been greater. At present, cross-border payments remain a challenge which banks must resolve to ensure their ongoing relevance and competitiveness. Empowered by our enterprise-level security, regulatory expertise and global reach, Visa will continue to innovate for its clients, delivering rapid, secure and flexible collection, holding, conversion and spending solutions that banks can offer to their customers.
Ultimately, our goals are to deliver better cross-border payments and transfers, enhance loyalty to banks, generate greater bank revenue and profit from new and existing products, and above all to create a cross-border payments ecosystem that’s fit for an emerging world built on digital infrastructures.