The Dynamic Nature of Cross-border Payments in Asia
Global cross-border payment volume is booming, driven by increased economic connectivity and rapid advances in technology. Traditional financial institutions, Big Tech, and fintech upstarts are all vying for their respective share of an estimated US$156 trillion market
Global cross-border payment volume is booming, driven by increased economic connectivity and rapid advances in technology. Traditional financial institutions, Big Tech, and fintech upstarts are all vying for their respective share of an estimated US$156 trillion market.
Amid the cross-border payment surge, various alternative payment rails executing real-time or near real-time transactions have sprung up. These rails are provided by fintechs, card companies, platform companies, cross-border QR-based payments networks, blockchain networks, and even incumbent banks.
These rails have emerged in response to market trends, including fickle customers, extreme sensitivity to price and service, heightened expectations, and growth in remittances. Given their competitive cost, convenience, speed, and transparency, these new rails are becoming integral to cross-border payments, though banks continue to rely heavily on the SWIFT network and traditional correspondent banking arrangements.
The sheer number of rails has led to intense market competition that is gradually redefining the cross-border payments landscape. Financial institutions and fintechs sometimes cooperate on one currency corridor and compete on another.
The alternative payment rail boom comes as banks are working to align their technology infrastructure with ISO 20022 and API-based connectivity. Since the new standard (ISO2022) is projected to support 80% of transaction volumes and 87% of transaction value worldwide by 2025, banks have an impetus to update cumbersome legacy information technology (IT) infrastructure to support the new standard. Expected benefits include the opportunity for higher revenue, better compliance, and the reduction in cost per transaction enabled by more robust operational efficiency.
To best take advantage of the cross-border payments opportunities afforded by the new rails, banks should work with payment solution partners who can help them maximize their existing benefits while transitioning from legacy payment systems to transparent, innovative, and agile next-gen payment systems. State-of-the-art technology can ultimately deliver new functionality for banks quickly with less risk.
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