Historically, international payments have been the driving force of cross-border investment and trade, and have heavily influenced the growth of the global economy. In the new age of the digital era, cross-border payments are increasing in popularity. Traditionally dominated by B2B transactions, the evolving digital landscape of cross-border payments is shifting. The Bank of England (BoE) predicts that “The value of cross-border payments is estimated to increase from almost $150 trillion in 2017 to over $250 trillion by 2027, equating to a rise of over $100 trillion in just ten years.” Urged on by the resolve of the 2020 G20 priority to improve cross-border payments as part of their sustainability goals established in 2020 and further nudged on by the pandemic, three main trends drive this shift.
Trend one is digital tools such as Application Programming Interfaces (API) enabling real-time rates, the next trend is virtual accounts increasing the global reach, and the final trend is customer demand in a globalised economy.
In the past, treasury operations used SWIFT MT940 as part of the end-of-day reconciliation process. This was an improvement over manual reconciliation, but in today’s globalised economy, it is much slower than the current demand for faster cross-border payments.
APIs are promising to speed up this process by enabling real-time rates, which minimises manual error and improves operational efficiency throughout the end-to-end payment chain. According to JP Morgan case studies, APIs were able to help companies:
- Retrieve real-time data from its accounts across the world at the click of a button and consequently reconcile transactions in real-time.
- Import directly into the existing spreadsheet software, which contributes to easier reconciliation, forecasting, and integration with existing processes. Additionally, all data is materialised in pre-configured templates, further enhancing the ease of use and facilitating the data’s integration into existing processes.
- Facilitate a real-time view of activity on accounts and users’ entitlements, helping to prevent fraudulent access and activities.
Of course, there is an investment to be made for companies interested in turning to APIs. As more businesses turn toward technological solutions, cross-border payments will become faster and easier than ever.
Virtual accounting is a trend that continues to grow in the digital era. There are several new virtual banking account (VBA) companies that are increasingly popular with younger generations who have been shaped by the digital age and prefer using their phones for managing money as opposed to a traditional bank. Businesses also use virtual ledger accounts (VLA) to help streamline their banking structures. Virtual accounts come with several benefits. For one, they offer companies a centralised structure with the ability to manage payments in a variety of currencies. This means that businesses have no need to maintain multiple local accounts in the same markets. Able to manage cash flow through a centralised structure helps companies to reduce their risk exposure and maximise their liquidity.
Formerly defined by B2B transactions, cross-border payments are increasingly made by individuals through activities such as remittances and online shopping. Cross-border payment increase is especially influential in marketplace payments and the gig economy. Companies such as Amazon, eBay, Expedia, and Airbnb have been driving the travel and e-commerce industries, comprising around 50 percent of the marketplace disbursements space, and niche players like Etsy and Upwork are fueling cross-border commerce and employment and driving C2B, B2C and business-to-small-business payments.
The demand for faster, cheaper, and easier cross-border payments is growing. According to the Bank of England, “The push for transparency, speed, and lower transaction cost is leading to a shift from bulk transactions to individual processing, which is more likely to be spread across a variety of payment rails.”
How Does PayAlly Make Cross-Border Payments Easier?
With all the technology pushing for the growth of cross-border payments, there will be an assortment of potential issues. Certain digital tools can assist with cross-border payments, but when something goes wrong, there is no one available to follow up on the transfer. Inevitably, transfer snags will occur. Instead of relying solely on tools such as automated services, PayAlly offers clients Relationship Managers who can step in with the personal touch that makes all the difference. Be it a phone call to help move the process along or simply helping you understand the process. Thanks to their international financial expertise, the relationship managers at PayAlly can offer their clients a tailored solution to any issue.
An essential part of daily financial transactions, cross-border payments have revolutionised how people pay for the things they need. With the commitment from G20 to improve cross-border payments, there have been several new trends driving progress forward. New digital tools such as APIs, virtual accounts, and increased customer demand are the trends driving the evolution of this critical operation. When the inevitable snags occur, there is no one better to assist with facilitating the transfer than a PayAlly Relationship Manager.
PayAlly gives you the tools to transfer your money globally. Our financial experts will find the ideal payment strategy for your business. Apply for a corporate or individual account today by visiting: https://payally.co.uk/apply/.
If you are already a client, you can contact your Relationship Manager at any time or call +44 330 777 2220 for more information.
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Payally Limited is a company registered in England and Wales (company number 10600055). Payally Limited is authorised by the Financial Conduct Authority under Electronic Money Regulations 2011 (firm reference number 944721) to issue electronic money (e-money) and provide payment services.