In the early days of the internet, there was a lot of excitement that you could launch an online business and sell items all over the world. The approach for businesses processing digital payments was to use a domestic bank, with global payments limited to Visa or MasterCard. Then PayPal was introduced, and businesses tried to work out how to reach the maximum audience with minimum effort.
Now, many enterprises are looking to grow by expanding their reach to customers outside of their established markets and want to optimise local payments in these regions accordingly. As such, the days of an online business having a single online banking relationship in one country and trading globally have changed.
Trends such as the growth of online businesses, borderless e-commerce, cross-border business-to-consumer payments and improvements in global trade have all contributed to a surge in cross-border transactions. This is reflected in cross-border transactions across the world growing in value from $29 trillion in 2019 to a projected $39 trillion in 2022.
The trends reshaping the landscape
Rapidly changing consumer demands are a significant factor too, with consumers not only less willing to pay for banking services but also expecting a fast and intuitive experience.
Additionally, there is the increasing popularity of alternative payment methods like e-wallets and the use of smartphones for remittances, not to mention greater access to banking and e-payment services through increased mobile phone ownership. In emerging economies, mobile phone ownership among the adult population has risen to over 80% – a likely contributing factor to why it’s estimated that over 60% of the world’s population will be using digital wallets by 2026.
Then there’s the growth of increasing trade with emerging markets in Africa, stimulated by initiatives such as the African Continental Free Trade Area, and Latin America where the unbanked population relies on cash and mobile phones to make payments. Some countries in these regions are working on payment innovations involving Open Banking technology – the practice of enabling secure interoperability by allowing third-party payment services and other financial service providers to access banking transactions and other data from banks and financial institutions. These developing payment infrastructures complement a growing demand for international goods in line with a rise in e-commerce activity.
The disenfranchisement of global networks
To meet and cater for this increased demand and to remain competitive in the global marketplace, businesses are looking to their banks and fintech partners for ways to make payments more swift, secure and transparent. Consequently, payment providers are adopting the latest digital innovations to transform and accelerate the cross-border payments experience.
Set against this backdrop, we’re seeing the potential disenfranchisement of global networks and questions being raised about how international payments can be processed domestically. The result is the emergence of a new international payment landscape.
It’s here we’ve identified there is great potential for e-commerce merchants and payment companies to leverage international payments far more effectively than just sitting in one country trying to do it all behind one domestic framework.
From the perspective of online companies based in Europe, with disposable income expected to decline in the current climate, unless enterprises start assessing how they internationalise more effectively to regions that are not struggling, business is going to decline. Here, survival and growth are dependent on executing better sales campaigns in different geographical regions of the globe.
Becoming less dependent on markets in decline means businesses effectively launching their services into new markets like Latin or North America, the Sub-Sahara, Africa, or Australasia – regions where they haven’t had or needed a presence in the past. Not only will this help businesses survive, but it also has a positive impact domestically as it means jobs are protected and taxes generated locally.
A centralised network
At Payen, we’ve worked out how we can transact with regional customers using regional banks and corresponding embassies – whether it be Latin America, Canada, Australia or another part of the world.
In doing so, we’ve effectively created our own centralised network. One where, as a merchant, you don’t need to be local in all those markets – resulting in a much more competitively priced local payments service.
For instance, a UK business with a UK bank, processing payments with UK cards, is going to be running its operations as cost-efficiently as possible, and with the best outcomes. Once it starts to process card payments from, for example, North America, that’s going to cost the business a cross-border transaction fee.
Our global payment service allows merchants to provide their customers with the most appropriate local payment method in their countries – underpinning this is our deep local market and industry knowledge. By saving the online business up to a percent on each transaction, it all soon adds up, and at the same time, the completion rates are higher.
The result is merchants that can reach customers in new, emerging or fast-growing markets, not only in terms of the technical connection itself but also in navigating the complexity around regulation, money collection and foreign exchange – heralding a new era of cross-border payments.