Author: Anjulie Patel, VP of Partnerships at Nucleus365
The business world has been going global for some time now however with growth opportunities booming all over the world thanks to remote working and the digital society we live in, as well as commerce flourishing in emerging markets, demand for businesses to operate worldwide is at an all-time high.
As a result, the way businesses send and receive money is having to adapt as well.
It is this environment that has led to an increase in the need for efficient, secure, and overall, easier global payment methods.
The demand for cross-border payments
As e-commerce growth continues to surge, and businesses continue expanding into new regions, merchants are looking for fast, adaptable, and secure payment facilitation on a global scale. This means there’s a higher demand from merchants not only looking to send and receive payments in all the countries they operate in, but also to be able to do so instantly as well as move money from one location to another easily.
With that in mind, merchants understand the need for localised and tailored payment solutions, meaning the demand for seamless cross-border and in-country payments is growing at a rapid rate.
Bumps in the road
As with any growing technology or system, the benefits will be met with challenges. As cross-border payment platforms are still developing, there are considerations that both merchants and payment providers need to bear in mind.
Regulation.
As regulation updates and changes, businesses constantly have to reassess the way they’re working, storing data, and making payments to remain compliant in the multiple regions they may be operating in. However, financial technology firms and payment platforms also have to do the same.
While compliance certainly reduces risk and fraud, it can also create complexities in moving money globally. As such, payment firms with robust currency management programs, multiple licences and MCCY IBANS will become more popular with businesses engaged in global trade, while others are unlikely to remain as competitive.
Fragmented payments.
The current cross-border payments network lacks a seamless end-to-end system meaning merchants often incur elevated transaction fees and extended processing times when compared to lower friction domestic payments. According to the Bank of England, a cross-border payment can take several days and can cost up to 10 times more than a domestic payment.
The emerging (markets) opportunity
Emerging markets like the Middle East, south-east and south Asia, as well as Latin America, are seeing an increase in business activity due to rising consumer classes, rapid urbanisation, and a fresh demand for innovative banking services that serve as another option to both traditional banking or the choice to be “unbanked”.
This change in landscape has already seen the likes of tech and payment giants Microsoft, Mastercard and JP Morgan making moves in the Middle Eastern payment space.
Furthermore, a recent report highlights that the digitisation of emerging economies is driving an acceleration of digital commerce in regions such as Latin America.
As the world becomes more globalised, such moves will not only facilitate but also demand more cross-border payments, leading to financial technology firms who are able to operate in those regions and provide the necessary infrastructure gaining more traction and opportunity.
Generating growth
While a vital component, cross-border payments are only one aspect of a company’s overall growth goal, and therefore should be looked at from the broader perspective of that strategy.
The cross-border payment system is not going to be fixed overnight. As such, merchants and businesses need to work out where their efforts are best placed when it comes to the regions they plan to expand into and generate growth in. The question of how much focus should be on international markets and the strategy around expanding into said markets, will be key when it comes to forecasting business operations, resources, and payment partners. The more this becomes a priority, the more important seamless and efficient cross-border payments become.
Overall, no matter how much focus there is on becoming a worldwide business, the majority of organisations will have to make payments outside of the region they operate in, so establishing a partnership with a firm with the required payments capabilities is a good first step to achieving growth.
With the right infrastructure in place, businesses that do make inroads into emerging markets and commit to international operations, will reach their growth goals much quicker.
