Growth of cross border payments
I've been in the cards and payments field for the last 18 years. I started my career at American Express in 2004, and while payments has always been a dynamic and interesting space, the rate of change has really ramped up in these last few years.
Having travelled to Hong Kong, China, Australia and various SEA markets recently for client and partner meetings, I’ve seen some of these changes first hand. It’s been interesting to hear about what businesses are looking for from a payment processor in APAC right now and it will be of no surprise that seamless international money movement is top of the agenda. With cross border continuing to grow, especially B2B payments in southern Asian corridors[1], there is a real need for solutions that tackle and resolve regional barriers to accelerate this growth.
In fact, Asia-Pacific accounted for more than 40% of global cross-border payments revenues in 2021, with B2B making up nearly a quarter of this[2], and the value of cross-border as a whole is estimated to reach a staggering $250 trillion by 2027[3]. That creates a huge opportunity for businesses in the region, especially when you consider the predicted 10% growth[4] in APAC alone.
This growth has, in part, been made possible by a new breed of fintech players like Nium, Ping Pong and LianLian, who are making it easier and cheaper for businesses of every size to send and receive international payments.
There is also a huge card issuing ambition growing in China specifically for international B2B payments, which is why I’ve been spending so much time there. It’s given me a chance to dig into specific market-level needs and to provide advice on how to navigate the complexity of card issuer processing, including how to issue cards in both local and international markets. I’ve found that simply being there and speaking the language really makes a difference.
What’s driving this shift?
With rapid economic growth, the APAC region is leading the charge in cross border innovation and transformation. This is especially true in the ecommerce space where there's been a huge increase in APAC buyers making overseas purchases and payments on global marketplaces like Amazon, Alibaba or Etsy. Driven by smaller businesses and social media influencers, who are using platforms like TikTok to promote products via affiliate links to ecommerce sites, this creates a need for payouts that span the globe.
Cross border trading is also on the rise, especially in small and medium sized APAC businesses who are increasingly buying and selling outside the region, accounting for more than $20 billion in Asia-Pacific cross border revenues in 2021[2]. Secure and timely payments for these goods, and payments to international suppliers for services and subscriptions is a solution I’m asked about frequently.
Finally, the last few years have also seen a huge consumer behaviour shift with many changes in the way we live and work. With more people working abroad, there is an increased need for businesses to pay salaries internationally, and as a result more reliance on digital remittance for employees that want to send money ‘back home’.
The barriers to overcome
Working in the payments industry means dealing with complexity on a daily basis, but cross border payments can be especially tricky. Some of the barriers I’ve helped clients navigate include:
- Regulatory and compliance processes which vary from country to country and can change without notice
- Risk of transaction interception if correct security and fraud measures are not in place at each stage of the payment process
- The cost of wire transfers, especially for smaller and medium-sized businesses, and high FX rates.
- Interruptions in international banking networks which can cause additional time and cost to a given transaction
- Business liquidity and necessity to have funds available in differing time zones
- Lack of transparency at every stage, including expected timings, progress, and payment status
- Opening hours and availability limited by traditional banks who still operate on a 9-5 workday basis
- Long settlement time and lack of payment options which may result in unhappy end customers.
Despite these challenges, the payments space continues to be an exciting place for me, personally and professionally. I really enjoy connecting with customers and seeing them take new products to market, especially when I’ve had a hand in making that journey easier for them.
As I see the industry, and cross border payments, continue to evolve at speed in Asia, I’m glad to be able to explore it with an organisation as visionary as Thredd.
Resources:
[1] A vision for the future of cross-border payments
[2] Mckinsey global payments map
[3] Bank of England Cross Border Payments
[4] APAC b2b cross border growth
