Cross Border Payment Drivers

Goals

To understand the drivers that are affecting cross border payments.

Early Findings

Cross Border Background Information/Volume.

  • Cross-border flows represent only one-sixth of total transaction values, international payments revenues total up to $200 billion globally, split roughly evenly between transaction fees and foreign exchange (FX) revenues. This equates to 27 percent of global transaction revenues and is increasing by 6% annually.
  • Although estimated revenue per cross-border transaction remains healthy at more than $20, evidence of changing dynamics and increasing pressure in the most established segments (such as B2B and remittances) is growing and becoming increasingly commonplace across the value chain.
  • The cross-border payments market is valued at nearly $21 trillion with a 90% (CAGR). Fueling this growth is the rise of global e-commerce, which is expected to grow to about $16 trillion by 2025.

Drivers

E-Commerce

  • Growth will shift towards new segments (from trade to commerce). The growing purchasing power and number of e-commerce consumers will drive up average remittance values and advance the growth of digital solutions.
  • B2B companies like Upwork, Etsy, and the sort will increase the global e-commerce, thus becoming a driver of cross border payments. Amazon, eBay, Expedia, and Airbnb are the drivers behind travel and ecommerce, comprising around 50 percent of the marketplace disbursements space, while niche players like Etsy and Upwork are also growing strongly—fueling cross-border commerce and employment and driving C2B, B2C and business-to-small-business payments.
  • According to Deloitte, there are several trends that will affect the market. They are: competition between closed and open payments platforms, evolving payments economics , development of new standards to govern the flow of money, and noncommercial entities’ role in shaping the ecosystem.

Technology Will Play a Vital Roll

  • Blockchain and distributed ledger technology (DLT) can help to streamline cross-border payments, in which every transaction is processed in a secured distributed ledger. The great benefit of DLT is that intermediaries are no longer involved, resulting in a smooth and seamless process with no unnecessary fees.
  • Peer-to-peer DLT is still in a nascent state and presents technical, legal, and regulatory obstacles that may take time to overcome.

User Expectations Will Drive Changes

  • User expectations have risen as businesses and consumers have become accustomed to faster, cheaper, and more convenient domestic payments. According to the CPMI report, these rising expectations create a large and growing demand for international cross-border payment systems that offer improved speed, convenience, transparency, and cost.8

Results of Initial Research

  • Our initial research was able to uncover some drivers and trends in the industry, although with such a vast topic, we barely scratched the surface.

Proposed next steps:

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