As 2022 cross border payments are expected to reach a record high USD150T, digital payments are shaping as key success factors in the business world. To date, a few large global correspondent banks dominate the field of cross-border payments, engendering in the process standard oligopolistic rigidities, first and foremost of which is resistance to change, at the great detriment of the consumer.
In this current paradigm, a global business must still somehow cope with an alarming lack of transparency, long settlement periods, high transaction costs, and limited service accessibility. Digital-payment entrants are prone to cause significant disruption by deploying modern fintech tools, such as digitally-enabled money transfers, coordinated back-end networks, especially in the high-value B2B and B2C sectors.
Fintech accelerations have swelling support among central banks, 80% of which, according to the Bank for International Settlements, have some type of central bank digital currency initiative, including corporate and individual use cases.
There are several market drivers for digital-payments innovation:
Traditionally under-banked, emerging markets can grow directly into digital payments, bypassing existing oligopolistic rigidities. While total global cross-border trade should grow at 5% CAGR between 2018 and 2022, the share of emerging markets is more than double at 11% CAGR) in the same period.
Consumer demand is shifting towards digital payments as well. In line with other mobile-phone delivered-experience, consumers expecting payment services to be fast and intuitive and far lower-priced than current banking alternatives. Remittances are a case where digital services are faster, cheaper, and more transparent than existing cross-border payment solutions.
Mobile wallets forecasts anticipate significant growth. Global mobile wallet usage at the point-of-sale (POS) is expected to shift from c. 22% in 2019 to c. 30% in 2023, while mobile wallet usage in e-commerce is forecast to grow to more than half (c. 52%) in 2023, from c. 42% in 2019 to c. 52% in 2023 (Worldpay). This growth is increasing cross-border commerce volumes.
Together, these drivers create demand for new business models and value propositions that address the pain points of the existing process with correspondent banks.
Successful market disrupters examples:
Investopedia has analyzed payment-platform performance across several vectors: products, sign-up ease, user interface, multiple device accessibility, security, and tutorials). Some platforms stand out from the crowd.
PayPal: is now one of the most versatile and recognized online payment processors with a market cap of around $346 billion. BTC has recently become available to its users. PayPal claims to increase customer checkout conversions by approximately 44%. Phone-based credit card payments, online invoicing, and in-person payments are all built-in standard features.
Stripe: as a beneficiary of the e-commerce boom accelerated by the COVID-19 pandemic, Stripe has experienced a jump in market value to $95B. Dominant in the freelancers’ world, its C2B payment is instantaneous. Customers include Amazon.com Inc., Salesforce.com Inc., and Lyft Inc.
Wise: Wise provides a cheaper and easier alternative to overseas remittances. Wise has become a robust international money transfer in both USA and global markets. Its millions of registered- customers generate billions of yearly transaction events.
FreshBooks: a cloud-based small business accounting software that provides comprehensive time-tracking and receipt and expense management options. Powered by WePay, FreshBooks creates, edits, delivers, tracks, and follows invoices for its customers. Intuitive interface design and rich functionality make FreshBooks a strong player in the digital payment industry.
Barriers to overcome:
- As digitalization continues, platform security becomes a necessity for every platform and its customers as any potential cyber-attack can put payments in danger. Testing safety feature becomes the groundwork for any successful company.
- Data privacy often ranks first in customers’ concerns regarding digital payment platforms. Authentication technologies such as Secure Sockets Layer (SSL), digital certificates, and RSA encryption become the key to protecting customers’ valuable information.
- Customized programs that provide flexible transaction limits and recognize customer preferences and cross-border payments needs breed the service familiarity needed o make customers permanent.
Cracks for left new players?
Intelligent pricing, solid interface design, unobtrusive security, and REST application programming interface (API) are key to succeeding in this fluid and dynamic digital payment industry.
When it comes to taking advantage of the new opportunities offered by digital payments systems and platforms, Cubri Services is ready to help, powered by its significant accumulated competence from a long string of previous and current successful engagements.
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