Emerging market growth and financial inclusion have enhanced cross-border payments. As a result, new players are emerging who are redefining cross-border payment by offering solutions to traditional problems of incumbent banks and money bank operators.
HOW DO CROSS-BORDER PAYMENTS FUNCTION?
The currency transactions taking place among businesses of different countries are known as cross-border payments. In this payment process, the sender selects a bank or money transfer operator to make the payment, and the receiver gets the payment through the selected medium of the sender.
WHAT IS THE ROLE OF NEW PLAYERS?
The new players tend to change the entire cross-border payment market by solving the problems present in the typical payment system. Their main focus is on low-value transactions, which the banks and other payment providers are now underserved. The low-value transaction will increase the trade among the emerging markets and lead to higher financial inclusion.
TYPES OF NEW PLAYERS
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Digitally enabled money transfer operators
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Back end networks
Digitally Enabled Money Transfer Operators
The digitally-enabled money operator’s core business is offering digital cross-border payments. Typically, they establish a direct banking relationship with both sending and receiving countries while dealing with liquid currency and make the net payment flow smoother. However, setting up bank accounts in many emerging countries can be difficult, and often, the payment methods of these countries are highly fragmented. These problems hinder the entire payment process. In that situation, digitally-enabled money transfer operators are dependent on back-end networks.
Back End Networks
Usually, back end networks don’t have a direct connection with the sender or the receiver. Instead, they establish a partnership with the banks or wallet providers of the senders and receivers. Therefore, by establishing a direct partnership, they enable interoperability within B2B cross-border payments.
HOW DO BACK-END NETWORKS FUNCTION?
Typically, back-end networks work on the aggregator model.
Aggregating payments helps in reducing the fees of cross-border payments.
Also, it helps in real-time confirmation of the payments as the backend providers credit the recipient account as soon as the transaction is initiated by pre-funding the sending partners in the form of collateral.
Thus, the process is not only cheaper and faster but also transparent.
In the emerging market, high-value transactions are still dominated by banks. But many low-value B2B transactions are dependent on the new players because of cheaper and more reliable solutions.
Thus, new players like Tazapay have redefined the cross-border payment segments as they promised to solve the problems and delays in typical processes. Beyond that, they have reduced the costs and brought more transparency to the payment process. These changes increased the opportunities across the global market. Moreover, new players are working towards the development of new strategies that will meet the demands of different regions and market segments.
