😎 Cross-border payments: trends, issues, and solutions

😎 Cross-border payments: trends, issues, and solutions

Here I share the most relevant points from the sector, extracted from the report published by Payments Journal.

Let’s start with the context:

🔵 According to Javelin Strategy & Research, the cross-border payments market is expected to grow to 3 trillion USDby 2030.

🔵 Currently, an average of 0.7 cross-border transactions per capita per year are carried out, an increase from 0.5 in 2014.

🔵 Although cross-border flows represent only 1/6 of the total transaction value, global revenues from international payments reach 200 billion USD, split almost equally between fees and foreign exchange (FX) earnings.

What about the key players❓
🔵 Platforms like India’s UPI 🇮🇳, Brazil’s PIX 🇧🇷, FedNow, and RTP in the U.S. 🇺🇸 show promise in instant cross-border payments, though they mainly operate in domestic markets today

🔵 In the retail segment, Mastercard and Visa strengthen their position in the EU, while American Express leads corporate relationships.

🔵🔵 Although card-based transactions are lower compared to those carried out via SWIFT, their growth is steady. It is projected that, in the near future, they will dominate foreign trade operations currently managed almost exclusively through bank transfers.

🔵🔵🔵 Card brands are responding to competition from mobile payments and aim to operate with settlements independent of correspondent banking, paving the way in a favorable regulatory environment.

🔵🔵🔵🔵 Meanwhile, SWIFT maintains its competitive position. The global standard ISO 20022, implemented in March 2023, has optimized the interface for businesses, payment schemes, and financial institutions, enabling enriched data, greater resilience, and better fraud controls.

What about technology❓
🔵 Among the most notable trends: blockchain, APIs, and CBDCs (central bank digital currencies).

Problems:

🔵 The classics: exchange rate fluctuations (for NON-instant transactions) and delays associated with KYC (know your customer) processes.

🔵 The new: niche fraud. Although cross-border payments represent only 11% of card transactions, they account for 63% of fraud cases.

Solutions:

🔵 Non-commercial consortia. Since cross-border payments are regulated by multiple governments, international consortia are emerging, formed by large banks collaborating to simplify processes. This includes organizations like Project Agora or Interledger Foundation, which promote open and interoperable payment networks.

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