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Cross-border Commerce is a Trillion-Dollar Opportunity – but is your business ready?

Dubai, UAE - February 16, 2022

According to a Juniper study, the value of B2B cross-border payments will exceed $42.7 trillion in 2026, from $34 trillion in 2021. The main contributor to this upsurging growth, as the research suggests, is cross-border e-commerce with a total value expected to reach over $4 trillion by 2027.

Although cross-border payments sit at the heart of international trade and economic activity, it acts as one of the key roadblocks to global e-commerce business growth and success.

While the demand for cross-border commerce thrives, managing cross-border payments is still a challenge for most organizations. Cross-border payment affairs can especially impede small merchants from expanding their businesses overseas.

First, let's define cross-border payments.

Cross-border payments are broadly defined as fund transfers for which the sender and the recipient are located in different countries/jurisdictions. These transactions can be made between individuals, companies, banks, or institutions.

Banks and other financial institutions have taken many initiatives to help bridge the gap and simplify the process. However, traditional cross-border payment systems still have major pain points.

For this reason, Fintechs are transforming the current scene; re-inventing cross-border payments, by enabling faster, easier, and more transparent international transactions.

In this article, we will deep dive into cross-border payment challenges, and how fintech APIs can help merchants combat these challenges and seize the trillion-dollar opportunity.

Cross-border Payments Challenges

1. Slow transactions

Traditionally, cross-border transactions take between two to five days to process, and even longer for some less-developed markets. This counts as a very slow turnaround time compared to instant domestic payments transactions. That's because numerous entities and intermediaries are involved with every single transaction, which results in a series of steps often delaying the transfer of payments.

2. Transparency

Ideally, organizations and merchants of all shapes and sizes want better visibility over financial transactions and movement across their business, and cross-border transactions have been far from transparent.

A SWIFT and EuroFinance survey found that 64% of corporations want real-time payment tracking capabilities, while 47% want better visibility into the costs and deductions involved.

A single cross-border transaction can go through multiple different intermediaries. As payments move across international waters, fees accumulate passing by every intermediary along the way – with no reliable way of calculating for that near future hidden cost.

3. Security

There is no single global regulatory body controlling cross-border transactions. Every country abides by its own set of regulations. Therefore, the cross-border payment system is at risk of being hacked whenever money enters a country with less-rigid security policies.

In the past, cross-border payment systems have suffered from high-level security breaches, like Bangladesh central bank's $81 million heist in 2016. Security hackers used a Federal Reserve Bank account in New York belonging to Bangladesh Bank to illegally transfer $1 Billion and successfully managed to steal $81 million.

4. High costs

Sending money from one country to another through banks has always been notoriously expensive. Money is channeled through several intermediaries, each of which charges a fee for its service – regulatory, SWIFT, chargeback, and FX fees.

Harnessing the Trillion-Dollar opportunity using Fintech APIs

This trillion-dollar cross-border e-commerce market is being shaken up by the rush of new entrants that promise to solve long-standing pitfalls.

Overcoming cross-border payment challenges and barriers is becoming easier every day, but exploring reliable cross-border payment solutions is paramount to navigating the world of global commerce.

As the pandemic pushed the fast-forward button on innovation in payment systems, Fintech APIs are reducing the friction and increasing the efficiency needed to make cross-border transactions feel more like domestic payments. That means cutting down on transaction processing time, removing hidden costs, and mimicking the domestic payments experience.

Fintech APIs, through single API integrations, are setting a new standard of trading without borders, enabling faster & simpler transactions and a more transparent system of cross-border payments.

With real-time payment tracking and instant payment processing capabilities, Fintech APIs are making international payments more accessible to small businesses and merchants.

Planning on globally scaling your business? Discover how modern card issuing can enable your business to settle payments with other businesses in real-time and help you grow globally.

Want to find out more? Get in touch with our team today!