Cross-border payments – do they have to be so complex?

Borderless payments – breaking down payment barriers

Borderless payments – breaking down payment barriers

Never before have so many people and businesses relied on the ability to send money quickly and securely around the world.

During the pandemic, cross-border payment services have provided a lifeline to many and allowed others – including small business owners – to seek out new opportunities. With travel restricted, more people have been sending money overseas electronically, while many businesses moved online, sourced international suppliers, and embraced new ways of reaching customers around the globe.

Whether a small business owner being paid by a customer on a different continent, or a migrant worker sending money to family in their home country, more and more people are making and receiving cross-border payments. And as they do, people have understandably come to expect them to be as quick, easy and reliable as domestic transactions.

Complexity and risk – inequities, barriers and issues in cross-border payments

However, for many this isn’t yet the case. Historically, and often depending where someone lives, they can still experience barriers and inequities on a daily basis when trying to send or receive money across borders.

With Mastercard’s Borderless Payments Report we wanted to better understand these challenges – surveying thousands of consumers and businesses around the world. What we found were high levels of complexity and risk that hindered them when making cross-border payments.

For example, one Dubai-based worker told us how he needs to wait several days to find out if money he has sent back to his family has arrived safely. Another told us that they are routinely caught out by high and unpredictable exchange rate fees, as well as times when human error by payment providers means their money doesn’t reach its destination.

For businesses, it’s a similar picture. A small business owner we spoke to in the US said that she often sees her international transactions denied, despite to funds going to a regular payee. In India, one supplier told us how they often had to wait weeks or months to receive payments for goods, while a business owner in Thailand worries about fraud and data loss when making international transactions.

A time of change – accelerating international commerce and changing customer demands

Despite this, cross-border payment services have played a significant role in enabling many to weather the impacts of Covid, and even help some businesses grow during this difficult time.

40% of people we surveyed across the globe said they’re sending and receiving more cross-border payments than before the pandemic. And of the businesses we spoke to, the majority said they intended to do more international trade in the future by taking advantage of new opportunities and combatting risk by not relying on one supply chain or market.

There is a clear appetite amongst businesses to capitalise on the potential benefits of cross-border payments. As an industry, we have an opportunity to create a simpler, less risky system that not only supports them but also boosts trade and commerce across the globe – something vital as the world’s economies look ahead post-pandemic.

We’ve already seen lots of innovations in the payment space which is helping cut down on complexity. Advances in network technology have made processes quicker and more streamlined, and distributed ledger technology means that transactions can be recorded in multiple places at the same time.

There is a determination by the world’s most vibrant economies to make progress in this space. G20 nations have made enhancing cross-border payments a priority and in 2022 will set out next steps on the roadmap to improving this. Success will depend heavily on cooperation between national authorities and private sector providers, but the rewards of reducing complexity and increasing transparency are already apparent.

What can industry do to break down complexities and risk?

A priority for the payments industry should be to reduce the complexity of sending and receiving payments across borders and give people reassurance that their transactions will be processed quickly and reliably in all markets. This is why our focus has been on expanding our cross-border services to more than 100 markets, covering over 90% of the world’s population, while providing transparency on upfront costs and greater predictability for fund delivery.

We’re growing the number of markets where we can deliver funds to bank accounts in real-time, as well as digital wallets, cards and in cash. We’ve also invested heavily in technology to combat crimes like money-laundering, giving customers greater confidence when undertaking international payments as we know half of people globally worry about the risk of fraud when it comes to cross-border payments.

Cutting out complexity and risk from cross-border payments is key to boosting global trade and facilitating economic recovery.

By working with banks, non-banking financial institutions and digital platforms, we can provide a single connection to reach the entire world. We want to break down barriers to cross-border payments so people can focus on what really matters – supporting their loved ones and growing their businesses.

By Rasika Raina, senior vice president, strategy and transformation, Mastercard Cross-Border Services