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The world of cross-border payments is fragmenting due to competition

By Puja Sharma

May 18, 2022

  • Cross Border Digital Payments
  • Cross Border Money Transfer Services
  • Cross Border Payments
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Cross border payment

eCommerce companies are eager to take advantage of cross-border sales, which have opened up a world of opportunity. In addition to being a key growth driver for online businesses, international sales contribute more than ever to their bottom line. Online companies are increasingly conducting cross-border business. According to research conducted by Visa Global Merchant eCommerce Study (Visa GME Study), 87% of merchants believe growing online sales into new markets is one of their largest growth opportunities.

Despite the massive growth of cross-border digital commerce, many businesses still struggle with sales strategies, logistics, and more. For small businesses, global eCommerce presents significant challenges. As technology speeds up innovation, even more, anyone in retail can take advantage of the opportunity to become more relevant to potential buyers around the world. A merchant must understand the landscape because no two retailers, regions, or consumers are the same.

Trends and Opportunities

According to PayPal’s Borderless Commerce report 2021, this is an excellent time for merchants to diversify their business models and tap into cross-border growth. Over time, as consumers became more comfortable shopping online, they started shopping internationally more frequently, and this trend will continue.

Cross-border payments offer FinTech companies an opportunity to solve long-standing pain points – high transaction costs for international payments, inefficiencies in operations, accessibility, and speed. Historically, banks dominated the cross-border payment market. However, in recent years, smaller players, powered by technology, have disrupted and developed the market by offering fast, cost-effective solutions.

With the emergence of new players, the cross-border payment landscape has become increasingly fragmented and complex, with companies focusing on different regions, transaction sizes, and payment segments. In addition, these new entrants could disrupt markets by targeting low-value transactions in the B2C and B2B segments that are underserved by traditional payment providers.

With the growth of mobile eCommerce, digital wallets have grown in popularity. Wallets made up 26.4% of e-commerce payments in Europe in 2020. France, Germany, Russia, Spain, and the UK are the top five countries with wallet use. By 2024, it is predicted that e-wallets will account for up to 30% of e-commerce transactions in Europe.

The global digital payments sector is expected to continue its impressive growth in 2021 with transaction values of over $6.6t. These trends have created the need for more digitally-enabled money transfer operators who offer digital payments as their core business. They establish direct relationships with sending and receiving countries. In regions with more regulations, they work with partners, such as back-end networks.

Challenges

Efficient payment orchestration is especially challenging for large companies that serve multiple markets, each with its regulations and banking landscape. At the same time, smaller businesses struggle with having the sales strategies and resources to tap into the international payments landscape. According to research by Visa, small business executives are not as eager to tie their growth strategy to international sales, because a misstep could have greater consequences. It also takes much longer (up to 55%) to receive cross-border payments than domestic payments, which can have negative cash flow impacts on small businesses.

Keeping Cross-Border Payments Safe

PYMNTS has conducted research that revealed seven main pain areas for cross-border businesses in the United States and the United Kingdom. The top worries were payment fraud (56%) and data security (54.6%). The number of legal and regulatory constraints that organisations must consider when developing their security procedures makes it difficult to maintain international transfers secure.

Expansion into international markets can give long-term commercial prospects and growth for merchants and payment providers. Partnering with third-party suppliers, whether to improve payment security or increase operational efficiency, can speed up and simplify the payment modernisation and innovation process.

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