The Future of CrossBorder Payments: Emerging Trends Shaping Global Transactions

Imagine a world where everyone has to pay Rs. 6 for every Rs 100 spent on purchasing goods or services. The same Rs 6 is also to be paid if one sends money to a loved one. In the era of digital payments and UPI it sounds outlandish, but this is the world of cross border payments and remittances today.

- Neha Upadhyaya

Abstract

Cross border payments are the lifeline to global prosperity. The international payments system stands in stark contrast to the domestic payments system in almost all the countries. While domestic payments happen seamlessly in real time with near zero costs, cross border payments can be a nightmare of rules, documents, and costs to a common layman. As per studies carried out at the behest of G-20, the contemporary Correspondent Banking model of cross border payments is fraught with delays, high cost and limited access and transparency. The present paper aims to look at the present model of international payments and evaluate the latest emerging trends and the innovations in the cross-border payments space that attempt to overcome the challenges and transform the future international payments landscape.

Introduction

Imagine a world where everyone has to pay Rs. 6 for every Rs 100 spent on purchasing goods or services. The same Rs 6 is also to be paid if one sends money to a loved one. In the era of digital payments and UPI it sounds outlandish, but this is the world of cross border payments and remittances today.

International payments whether in form of remittances, trade or grants constitute an important pillar of the world economy. As per World Bank's latest Migration and Development Brief, the global remittance flow in year 2023 was a massive USD 857 Billion with India being the top recipient of global remittances at USD 120 Billion. What is a cause for consternation, however, is the revelation by the Report that the global average cost of cross border remittances was 6.4% in the last quarter of 2023 which is higher than 6.2% a year ago and way above the Sustainable Development Goal of 3%. The rising protectionism and tariff wars is likely to further impact migration, international trade and cross border payments.