Diving into the Cross-Border Payments

With a global market size of USD $190 trillion, the cross-border payments industry is supporting many businesses and consumers.

Startups founded since 2022 have focused on solving 5 key problems in cross border payments:

  1. Interoperability between crypto and macro payments
  2. Improving processes for businesses, such as going digital in emerging markets
  3. Improving processes for consumers, such as improving financial inclusion
  4. Cross-border payments for the workforce
  5. Infrastructure solutions to improve payment flow

With 74% of cross-border companies serving businesses, the product propositions seem to focus on making business payments more efficient and manageable.

FXC Intelligence found that the business-facing startups were more likely to receive funding at 53% compared to only 27% of consumer-facing companies.

Around the globe small businesses are demanding better cross-border payment options, so new startups and investors need to prioritise business needs and build simpler, cheaper and faster processes.

Cross-border Payments in Emerging Markets

As more businesses operate on a global scale, how are fintechs in emerging markets supporting local economies?

Looking at the cross-border payment providers in emerging markets can tell us about market trends of that region and globally.

Within Africa, the majority of cross-border payment startups founded since 2022 came from West Africa. Lagos in particular had the second highest amount as a city, behind London and joint with New York at 7%.

In FXC Intelligence‘s Top 100 list, the majority of African companies were founded in South Africa, testament to the successful founding of new startups within emerging markets.

Similarly, 12% of cross-border startups had been founded in Latin America, a much stronger presence than in the Top 100.

The rising number of cross-border payment startups within emerging markets is indicative of the increased global payment needs of businesses and consumers. Improving the payment processes for businesses within these markets will support their development and accelerate their revenue, in turn supporting individuals through a stronger economy.

Why should payment fintechs implement international industry standards?

As new startups are working to improve cross-border payments with technology, it is worth looking at the interoperability of financial institutions to improve the experience.

The Bank for International Settlements – BIS gave a report to G20 focusing on the data and harmonisation requirements they recommend financial institutions adopt.

The adoption of ISO 20022 (an international standard of communication between financial institutions) has been increasing, but its usage in practice can vary between businesses. The recommendations provide a standard language to ensure compatibility and less friction.

12 requirements have been identified, covering different stages of the payment process from identifying different parties to sending the data securely. These are not regulatory requirements but a recommendation for payment processors to provide a smooth, frictionless experience.

It is hoped the standards will encourage wide adoption of ISO 20022, and will be monitored through a two year transition process from 2025 to 2027 to ensure the implementation has been consistent across regions.

This is a really promising step for the cross-border payments industry, that will support faster, cheaper, more accessible and more transparent cross-border payments, as are the G20 goals.