An Anticipated Surge in Cross-Border Payments
An anticipated surge in cross-border payments is expected to occur in the coming years, with the value projected to rise from nearly $150 trillion in 2017 to over $250 trillion by 2027. This represents an increase of over $100 trillion within a decade. The Bank of England supports this estimation and emphasizes the significant opportunities for entities in the cross-border payments domain.
Potential Shifts in Market Share
Market dynamics indicate potential shifts in market share, with almost 90% of financial institution clients surveyed by Citi believing that at least 5% of the market share will transition, mainly to FinTechs, in the next 5-10 years. Additionally, 40% observed that a share of the wallet has already been redirected.
The Transformative Potential of Cross-Border Payments
Citi’s recent Global Perspectives & Solutions (Citi GPS) report titled ‘FUTURE OF CROSS-BORDER PAYMENTS — Who Will Be Moving $250 Trillion in the Next Five Years?’ highlights the transformative potential of the cross-border payments industry. The report sheds light on how technologies like artificial intelligence and digital assets can revolutionize the cross-border payments experience.
The Evolving Nature of Competition
Shahmir Khaliq, Global Head of Services at Citi, notes that competition in the industry is evolving. Traditional payment methods are being replaced by API connectivity, providing FinTechs and other participants with enhanced opportunities through established financial infrastructures. Regulatory initiatives such as open banking are further propelling innovation.
Challenges and Innovations
Legacy technologies and regulatory obligations pose challenges for financial institutions, consuming significant portions of their investment budgets. However, despite these hurdles, financial institutions are increasingly focusing on innovation and exploring both traditional fiat currency and digital asset spaces.
Attractiveness of the Cross-Border Payments Sector
Amit Agarwal and Debopama Sen, Global Co-Heads of Payments & Receivables at Citi Treasury and Trade Solutions, emphasize the growing attractiveness of the cross-border payments sector driven by e-commerce growth and new business models. They highlight Citi’s strategic objective to offer differentiated client experiences.
The Potential of Emerging Technologies
Ronit Ghose, Head of Future of Finance at Citi Global Insights, emphasizes the potential of emerging technologies like artificial intelligence and the Metaverse to disrupt the cross-border payments landscape. These technologies have the power to reshape how cross-border payments are conducted.
Importance of Client Experience
The report emphasizes the importance of enhancing client interactions and revamping front-end interfaces to remain competitive. Over 50% of financial institutions recognize the need for these improvements to deliver superior client experiences.
Hot Take: Speed, Cost-Efficiency, and Transparency Are Paramount
The Citi GPS report, based on insights from market infrastructure experts, FinTechs, and banks from around the world, highlights that speed, cost-efficiency, and transparency are paramount for superior client experiences in cross-border payments. The industry is on a journey towards evolution within cross-border payments, leveraging technologies like artificial intelligence and digital assets to enhance the overall payment experience.
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