Though it’s less of an issue in regions like Europe (thanks to progressive regulation such as the establishment of the Single Euro Payments Area (SEPA), understanding the nuances of regulation across borders in other markets can represent a major barrier to growth.
If a financial services provider wants to expand their offering throughout APAC, for example, they could potentially be looking at supporting over 50 different currencies, before even beginning to understand how regulation differs across each market.
Investment in technology and infrastructure
Regulation is just one element of the global journey towards seamless cross-border payments, but investment in new technologies and robust infrastructures will be just as crucial for widespread progress.
Central Bank Digital Currencies (CBDCs)
One of the key examples of this we see throughout multiple markets is the increase in governments exploring Central Bank Digital Currencies (CBDCs) and the benefits they can deliver. Key markets throughout APAC such as China and South Korea are already innovating in this space, with players throughout Europe and the US also following suit.
CBDCs could play a crucial role in simplifying cross-border transactions, as funds can be transferred between banks much quicker (offering same day settlement) and at a much lower cost than traditional FX methods.
Global regulation
Investment in digital currencies in the public sector will no doubt help to drive further innovation when it comes to cross-border payments, but without true global harmonisation of systems and regulation, the concept of payments without borders is still a remote possibility. Global initiatives and regulatory frameworks such as ISO 20022, which standardises the means by which financial institutions share data across borders, will play a vital part in driving truly seamless cross-border payments.
Regulation can often be seen as a barrier to technological advancement, however by collaborating with regulatory bodies when it comes to international payments, fintechs can establish global mechanisms and standards upon which to base future innovation, creating solutions to prioritise ease of payments and data sharing, regardless of geography.
Benefits for businesses
For fintechs who embrace the globalisation of payments, the opportunity for long-term returns is significant. As a result of the increasingly digital FX market, and the wider societal shifts towards living and working abroad, the forecasted value of the market is set to reach $250 trillion in the next ten years.
Opportunity and change will also be driven by the merchants themselves which, as they enter into new markets, or work with suppliers in new territories, will come to demand more responsive solutions for cross-border payments, prioritising key elements such as same day remittance.
Although the path to borderless payments will be long, and the challenges (both technological and regulatory) will be many, there are significant opportunities in both the B2B and B2C spaces to be explored.
Find out more about delivering FX multicurrency to your customers via our payments platform Thredd Apex, or read more about the Future of FX and Borderless Payments.
