The cross-border payments industry is a huge business that makes about US$200 billion globally, according to a 2018 study by McKinsey. The industry has been witnessing growth year on year, 11% since last year, and continuous evolution.
New services brought forth by rapidly changing technology are forcing traditional cross-border payment businesses to find ways to improve their services. Aside from the fundamental requirements of regulatory compliance and a vast trusted network, it is now essential for international payments and transfers to be quick, cheap and convenient.
However, the effects of digital revolution are not limited to the payments industry. With new technologies, payments and transfers, which used to take days or even weeks, are being processed instantly.
Technology has created many possibilities, such as companies and businesses that exist only in the digital space. Such businesses generally have lower overheads than traditional ones, allowing the savings to be passed on to customers, translating to lower fees and charges. These online businesses also provide convenience by utilising digital platforms like websites or mobile applications that allow international payments or transfers on the go. The modern consumer is spoilt for choice.
This does not spell death for traditional cross-border payments yet. While they struggle to meet the needs of modern consumers in terms of processing speeds, transaction fees, exchange rates and convenience, they might still be the most suitable choice for others. Many customers, such as migrant workers and small businesses, still rely on them. These customers might not have access to the Internet or belong to the unbanked population, meaning their only option is cash. To remain competitive, these businesses are lowering their fees and/or tweaking their exchange rates, greatly impacting their revenue.
The latest disruption to many industries is the blockchain technology. In the cross-border payments industry, this technology promises low cost, transparency and speedy peer-to-peer cryptocurrency transfers. While many individuals and small businesses have adopted this method, blockchain technology is considered to be in its early stages and remains an uncertain threat as its success depends highly on mass adoption.
Understandably, resources and time are required for change. But one thing is for certain, traditional businesses must improve to keep up with the changing landscape brought by the evolution of technology or risk being left behind.