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The future of FX and borderless payments.

It’s a time of great change for the cross-border payments space; from consumer solutions such as mobile FX and multi-currency wallets, to enhanced services for international B2B payments.

The Thredd team

March 11, 2022

As such, the sector is largely seen as the next great frontier for innovation in fintech. As with all change, however, the growth of cross-border payments will bring a litany of challenges and opportunities for banks, fintechs and regulators alike. So what can be done to prepare? 

Here we explore the future of cross-border payments, the social trends that are driving the change, and the obstacles financial services providers will have to overcome to offer a seamless cross-border service. 


The factors driving change 

The ways in which we live and work are constantly evolving and, thanks to the changes ushered in by the pandemic, the concept of a truly ‘global’ society has never been closer. Figures suggest that 270 million people globally now no longer live and work in the country they were born in, an increase of 44% in under 30 years. The wider move towards more flexible and remote working policies will no doubt spur this on, leading to more citizens moving abroad but sticking with their current employer. 

Furthermore, as a new day dawns for the travel sector in a post-COVID world, digital-first behaviours cemented during the pandemic will have a domino effect on consumers’ demands when it comes to currency exchange. Increased use of online banking and a shift towards contactless payments means that solutions such as multi-currency wallets and mobile FX will see greater adoption as consumers start to travel again. 

As the scale of international transactions increase exponentially, fintechs and financial institutions will have a crucial part to play in the innovation of products and solutions, ultimately delivering better services that increase the speed, efficiency and security of cross-border payments, but what challenges are on the horizon as the industry currently stands? 

The challenges facing financial services 

When it comes to international expansion and cross-border payments, navigating the complex map of regulation is a key challenge for financial services providers. 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. 

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. 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. 

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. 

The opportunities for fintechs   

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 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 more than $100 trillion in 10 years [1]. 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. 

The passport to post-COVID payments 

To unlock this potential, however, fintechs need to leverage the experience of trusted global players who have proven expertise operating across borders. Thredd has helped several customers in the financial space on their international growth journeys, including the likes of UK-based start-up Revolut, which is now available in the APAC market. In 2021, we agreed to continue our long-term partnership with Revolut to bring its innovative services to customers in new and emerging territories.  

We can help support businesses expand into new markets, utilising our local connections and in-depth expertise of each country’s jurisdiction to help them navigate complex regulatory issues. 

Regardless of how financial services providers arrive at the solutions, the fact is that change is coming, and the banks and fintechs who work towards borderless payments now will find themselves at the front of the market in the long term, well positioned for future growth and innovation.




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