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Partnership - Universal Approach to Versatile Challenges of Cross-Border Payments

Updated: Feb 6

The Perspectives of Global Payments 🌏


The ongoing world market expansion is incredible. The goods and service market outlets are unfolding in front of the merchants, adding new locations and currencies to the business roadmaps. Needless to say, it’s a huge motivation for the modernization of international financial systems. In particular, the share of cross-border payments increases dramatically. According to the European Central Bank, “Global payments are expected to skyrocket from USD 190 trillion in 2023 to a staggering USD 290 trillion by 2030.” [1]. At the same time, according to Citibank report [2], to keep up with this growth and prevent revenue loss, “while over 50% of banks see the need to revamp their front ends to improve client experience, over 60% of respondents point to the need to upgrade their core infrastructure.”


Knowing the overregulated and conservative nature of the banking industry, this looks like a perfect opportunity for alternative funds transfers infrastructures and systems to evolve. In practice, it’s easier said than done. Still, we at PartnerAlly believe that cross-border payments will erupt in synergy with upcoming technology breakthroughs (quantum computing, AI, etc.) making the future of seamless cross-border payments a well of opportunities. And strategic partnerships will play a key role in this process.


Back to the Ground 🏙


Cross-border payments have natural obstacles that can hinder business dynamics. But if you look at it from a different angle, each challenge is a well of opportunities. How to make an implication a pivot point for a change? Consider a trusted partnership that helps find the missing piece of a riddle.


⚖️ Double Compliance? 🤝 Room for Local Payment Providers


Cross-border payments are subject to legal regulations on both sides, as well as in the middle. When considering an expansion to an exotic (from the financial point of view) location, there’s a temptation to accept payments via global Networks and PSPs. But for the service/goods consumers and providers, who are part of a local ecosystem, domestic payment systems and methods are way more trusted and preferred. That is because local PSPs are more advanced in terms of regulation compliance, customer service, and understanding of the local financial landscape.


From a global PSP point of view, exotic locales are not the main source of revenue, at the same time they carry more risks, decreasing the expansion priority on the roadmap. For a local PSP however, it’s the main line of business to make domestic customers' payments safe, transparent, and secure, and assure 24/7 user support.


With this said, it’s rational to expect that local Payment Service Providers will grow in number, in turn causing a concurrency and technology evolution. Of course, external banking and fintech institutions will have to partner with these local PSPs to expand to that market.


💸 SWIFT Commissions? 🤝 Opportunity for Banks Direct Partnerships


SWIFT is the most trusted and conventionally popular way to send funds overseas. As not all the banks are members of SWIFT, the network members participate in the transfer benefit by taking their commissions. The other issue with Swift is the lack of transparency and unpredictable transaction time - in some cases, it takes up to a week with several correspondent banks in the middle, each with its compliance department, in superposition increasing the fees as well as the possibility of the transaction rejection.


The alternative here is a direct bank partnership. The potential benefits are huge: transparency, instant currency conversion with predictable rates, anti-fraud strategies exchange, and shared black lists.


 ⛓ Risks of Using Fintech and Crypto? 🤝 Increase of Money Transfer Versatility


While many governments struggle to regulate the Crypto technologies, they provide smother regulations and easier licensing to the fintech organizations compared to that of banks. On one hand, this leads to increased fraud risks for both fintech and end customers, and the emergence of new fraudulent schemes causes new regulations. On the other hand, fintech and crypto platforms feel in a way unchained and can provide security and user service upgrades, and introduce new products and integrations in no time.


From here it looks like fintech and crypto will be with us from now on, utilizing the regulation gaps and covering for the banking system where it has proved less efficient. It seems more of a symbiosis than concurrency with the banks, taking different niches. Because the end customer needs comprehensive solutions, banking, fintech, and crypto simply have no other choice but to partner with each other.


📈 Currency Rates Volatility? 🤝 Opportunity for Direct Partnerships


This issue also relates to new markets with currencies other than EURO and USD. With high volatility, companies and customers risk their funds on several currency exchanges, happening at random moments. Direct funds transfer, which requires direct partnerships between the parties, with single currency conversion at a known rate, would be an ultimate and preferred solution.


🛡 Political Climate? 🤝 Room for Global and Offshore Payment Providers


The most common example is sanctions - and not the least the indirect ones (sanctions targeting sanction evasion, that commonly affect unrelated countries and financial institutions). The political climate is one factor that hinders direct partnerships. This is where the neutral-based and offshore fintech and crypto platforms can be the only option for companies to survive and expand. At a commensurate cost, they can provide financial services to the parties at risk of direct and indirect sanctions.


Wrapping Up

The conclusion is simple here. To turn each challenge into an opportunity, you would need the key, and the key is a partnership.


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