Cross-border payments are vital for the global financial system

The world is changing and so are consumer demands, shopping patterns and product-sourcing techniques. People feel much more empowered with globalization. Digital shopping through global e-commerce gives them access to a wide range of products and customers can’t wait to make the most of it! With global product-sourcing, shopping on e-commerce, a surge in freelance activities and export of software and services comes the need for cross-border payment system.

Cross-border payments are, basically, transactions involving individuals, companies, banks or settlement institutions that operate in two or more countries. Such payments include retail, as well as wholesale transactions. According to experts, global cross-border payment flows are likely to reach USD156 trillion by end-2022.

But the cross-border payments market has always been fraught with pain points and inefficiencies from both, cost and time perspectives. This leads to expensive transaction fees and complex and lengthy payment-processing methods and, sometimes, even rejection of authentic payments with added guardrails to protect an institution from illegal transactions. These payments are divided into two types, wholesale cross-border payments and retail cross-border payments.

Wholesale Cross-border Payments

Such transactions are carried out mostly between financial institutions—either to support their customer activities or for internal cross-border activities—like lending and borrowing, foreign exchange and trading of equity and debt, derivatives, commodities and securities. Government bodies and big non-financial organizations also use wholesale cross-border payments for larger transactions generated by the import and export of goods and services or dealings in financial markets. Large IT services and ITeS companies that provide contractual services to big corporate clients overseas require wholesale cross-border transactions that are hassle-free and automated and yet provide complete transparency.

Retail Cross-border Payments

These are basically carried out between individuals and businesses. The key ones are business-to-business, person-to-business and person-to-person. These include remittances, mostly money that migrant workers send back to their home countries.

B2B and B2C transactions can happen through platforms or sales channels such as…

E-commerce Marketplaces – Both goods and services. Marketplaces providing services typically provide freelancers and affiliate marketing companies an opportunity to connect with their clients
D2C Marketplaces – Privately owned websites maintained by brand owners for selling products directly to customers to avoid platform fees
Traditional Goods Exports – Direct sales to B2B/B2C buyers. Normally, such trades involve taking orders directly from buyers. It usually involves direct shipments from exporters to end-users
Traditional Service Exports – Can involve various categories of service outsourcing jobs, such as IT services, consulting, branding, HR services, digital marketing, website and app building, and travel itinerary and ticket booking, among others

Importance of Cross-border Payments in India

India, as a country, is moving at a faster pace compared to most other countries. Our growth rates have consistently been around 6-7% in the past 2-3 years when the entire world was seeing stagnant or negative growth. This is because several things are working in harmony to provide trade advantages to India.

We, traditionally being an agricultural economy, have shifted our focus to being a service-based economy and there is a further move taking place in our approach while we focus more on manufacturing industries. The incumbent government recently started a ‘Make in India’ campaign giving the much-needed push to sourcing and manufacturing goods locally. Not only that, but the government is also coming up with new schemes to incentivize local manufacturing and is making policies to reduce the timeline to start new businesses and provide tax holidays, too.

The government is also pushing hard to build a strong FDI regime to attract new investments and set-ups from foreign companies. Therefore, these new developments will lead to the need for more wholesale and retail cross-border payment rails.

Cross-border Transaction Amount

The size of the international payments market is growing at a rate of 5% (CAGR) a year and the following is the transaction breakdown…

Business-to-Business (B2B):These transactions hold the largest share by far and are likely to touch USD 150t
Consumer-to-Business (C2B): These transactions, like cross-border e-commerce and offline tourism spend, are supposed to reach USD 2.8t. This involves individuals paying to businesses for B2C sales, like e-commerce or D2C websites
Business-to-Consumer (B2C): These transactions include wages, salaries or interest payments and may touch USD 1.6t in 2022
Consumer-to-Consumer (C2C): or remittance payments contribute the least and this is expected to reach USD 0.8t in 2022


Cross-border payments are at the very centre of international finance and economic activities. However, this is in direct conflict with five long-standing key challenges that face cross-border transactions:

1. High costs–Banks being the only option until a couple of years back for direct payments in B2B/B2C offline tend to be a costly option
2. Low speed–Wire transfers can take 3-5 days normally and, in some cases, up to 7 days
3. Difficult Risk and Compliance Mechanisms–Offline or traditional businesses get payments from bank accounts of individuals and businesses which need a strict compliance verification
4. Limited access to trade currencies
5. Lack of complete transparency of payments and deductions

Improving cross-border payments by making them faster, cheaper, more transparent and inclusive would have widespread benefits for supporting economic growth and global trade, besides development and financial inclusion. But bringing about that much-needed change is a slow process and the implementation of new and competitive cross-border payment strategies across all the countries requires global cooperation.


The fast-changing cross-border payments market is closely connected to rapidly changing consumer demands. Consumers are well aware of the growing choices they have and are less willing to pay for costly banking services. Simultaneously, they expect the international payments process to be fast, secure and intuitive. Use of smartphones and the growing popularity of digital access points, like alternative payments methods (APMs) for remittances, have created new demands that incumbents are struggling to meet. Alternative solution providers that offer faster, cheaper, and more transparent cross-border payment solutions can gain a competitive edge over traditional banks.

• Manufacturers expanding supply chains across borders–Logistics and warehousing companies are setting up stations in all countries to provide last-mile delivery and better inventory storage options to exporters
• Cross-border asset management and investment flows–Now, an individual trader can buy or sell stocks in all international stock exchanges
• Increasing international trade and e-commerce
• Migrants sending money via international remittances to relatives and friends
• Increasing trade with emerging markets, such as Africa and West Asia
• Accessibility of mobile phones and e-payments


Until 6-7 years back, banks used to be the most prominent option for all kinds of export transactions, including e-commerce and Direct to Bank transactions for B2B/B2C sales. This used to be a costly option (fees charged up to 6-9%) with limited transparency of the rates charged at different stages of payment. With Third-Party Payment Service providers, the conversions rates have reduced to less than 1% for most e-Commerce and direct export (offline) payments. And not just that, the third parties also brings in new offerings to the table, such as…

• Transparency at different stages, such as collection, distribution and FX exchange. A 24/7 customer service team is deployed to support clients with transparency of payments
• Offshore bank accounts which help an exporter receive and send money from across 100 geo-locations
• They also provides a complete ecosystem to exporters for starting new e-commerce business, such as product consulting and logistics and legal advisory, among others, through their partner network
• The lowest rates in the market for any kind of export business
• Capital funding to exporters to grow their businesses
• Currency hedging through forwards by having a superior banking network
• Payment gateway products, which helps individual brand owners to receive payments through D2C websites
• An option to direct exporters in starting their e-commerce exports through the payment portal ecosystem

Ning Wang, Co-founder & Chief Business Officer, PingPong, says, “Payment is an ultra-competitive market. However, we do not operate with a zero-sum mentality. Our purpose is to maximize the benefits and values for our customers and our business partners through persistent product iteration and innovation. We ask our team—all of them, whether they are customer facing or in back-office roles—to keep thinking of new ways in which they can add more value to customers and how they can create a win-win situation with business partners.”