The cross-border payments market is seeing an influx of new players that are bringing with them both new payment options and cross-border value-added services. To make the most of the partnerships these new companies offer, banks must rethink their own cross-border operating models.

To learn more about the state of the cross-border payment market and what banks need to know, PaymentsJournal sat down with Anders Olofsson, Head of Payments at Finastra, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

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The new narrative around cross-border payments

In the 18 months since the pandemic emerged, there has been a tremendous increase in trade and international business. This includes a higher number of global transactions. The combination of this increase, rapid digitization, and new market entrants is creating what Olofsson refers to as the “perfect storm” in the cross-border payments space.

“In essence, we see a really big growth in the number of transactions and also in new currency corridors. Historically, [cross-border payments] have been dominated by Chinese, Japanese, European, and American trade; now we see as well that new currency corridors are opening up… These [are] providing new challenges for the traditional correspondent banking network, but also providing opportunity for new market entrants,” explained Olofsson.

While cross-border payments were once largely reserved for B2B use cases, that is slowly changing. “We’ve heard calls for better cross-border experiences from the Bank of International Settlements, working groups, and central bank figures and so forth, [and] that’s mostly on the consumer remittance side as well as our C2B use cases,” said Murphy.

There are also rising expectations that the seamless, integrated, and real-time experience of conducting payments in a commerce environment will become available on a corporate level. “We see the merger of the expectations and experience between retail and corporate payments, where [the expectations] are being shared across users,” said Olofsson.

Additionally, new players are entering the market with different fee structures than traditional correspondent bank networks, putting pressure on banks’ fee income. Combined with the decline of the global interest rate,