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Cross-border payments are currency transactions between people or businesses in different countries. The existing cross-border payment channels are the lifeblood of the globalised economy, facilitating global e-commerce expansion, the rise of complex international supply chains, and remittances sent by migrant workers in billions of dollars each year.
Cross-border payments involve the movement of funds between individuals and businesses in separate countries. It is the driving force behind remittances and international e-commerce. Remittances, payments, and purchases all require money exchanged across borders, and cross-border transactions make this possible.
Here are the top 3 major factors responsible for the growth of the cross-border payments industry.
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Increase In Digital Remittances
According to Statista, global remittance increased steadily from 2016 to 2021. In 2021, the value of remittances worldwide amounted to an estimated 773 billion U.S. dollars, which increased to 794 billion dollars, according to the World Bank in 2022.
More people are embracing the digital world and exploring digital payments now more than before. This has therefore increased the need for a cost-effective, safe, fast, transparent, and seamless payment solution. Thereby leading to more Money Transfer Operators stepping up to meet these needs.
The cross-border payments industry is experiencing growth due to the increase in consumers’ need for a cost-effective, safe, fast, transparent, and seamless payment solution and a decrease in the willingness to use traditional banking services, which are slow, expensive, and nontransparent.
Also, there has been a massive shift from cash payments to digital payments in developing countries due to increased mobile wallet usage.
With the increase in digital remittances, especially in frontier markets, cross-border payments are gaining more traction.
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Increase In Small And Medium-sized Enterprises
Cross-border payments are a huge factor that helps businesses to expand their reach and do business globally with other businesses.
According to Juniper Research, business-to-business cross-border payments will reach $35 trillion by 2022, and as of 2021, 83% of global businesses of all sizes found it easy to send or receive cross-border payments. This is due to proprietary technology that has made it easy for businesses to carry out cross-border transactions seamlessly, thereby meeting the needs of these businesses.
As the open market trade unlocks several opportunities and benefits for small and midsize businesses, their need for cross-border transactions and payments will increase.
According to Visa, in 2020, 43% of small and medium-sized businesses handled international business compared to 34% in 2019.
The increase in small and medium-sized enterprises will, in turn, lead to a rise in international businesses, thus increasing the need and growth of cross-border payments.
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The Rise Of Central Bank Digital Currencies (CBDCs)
A central bank digital currency (CBDC) is a digital version of government-issued fiat money. This digital currency is issued by a central bank and tied to the country’s national currency.
CBDCs will not only make payments seamless, quick, and more cost-effective, but with the right technology, they will also increase interoperability between payment platforms and various financial institutions, thus facilitating easier cross-border payments.
CBDCs have the potential to simplify the existing payment system making it easier for cross-border payments to grow and be more efficient. This will, in turn, lead to the growth of cross-border payments.
About AZA Finance
AZA Finance is a leading provider of cross-border payments, FX, and treasury solutions for businesses in emerging markets. With a presence across Africa, Asia, and Europe, AZA Finance offers its clients a secure and reliable platform for making international and intra-Africa payments and managing foreign exchange transactions.
Our innovative technology and deep understanding of local markets allow us to offer competitive exchange rates, transparent pricing, and other benefits, making us an ideal partner for businesses looking to expand globally. Whether it’s sending funds to suppliers, paying overseas employees, or settling invoices in foreign currencies, AZA Finance simplifies the process of cross-border payments for businesses of all sizes.
AZA Finance’s cross-border solution provides businesses with better payment and last-mile settlements, foreign exchange, and treasury services built on its leading proprietary technology platform available via web and API. AZA Finance helps businesses and global enterprises facilitate intra-Africa and international payments and settlements across 50+ currency pairs in 115+ markets, and your business can also be one of them!
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