Reach, inclusivity and global impact – the cross-border payments opportunity
Borderless payments – breaking down payment barriers
Faster, more transparent and more inclusive cross-border payments services don’t just make good business sense. When they are safe and secure, cross-border payments facilitate socio-economic progress in the form of economic growth, greater international trade, global development and financial inclusion. And yet, despite their crucial role in a thriving global economy, at present speed and security is not always guaranteed.
It’s been more than a year since finance ministers and central bank governors of the G20 countries endorsed a “Roadmap for Enhancing Cross-border Payments”, a landmark priority project for the global cross-border payments system spearheaded by the world’s most powerful, vibrant economies.
The Roadmap is intentionally ambitious, far-reaching and challenging. The impact it stands to have on enterprises, small business and individuals throughout the world is enormous, whether that’s helping people improve their financial health, or helping businesses do more business internationally, strengthening and increasing their competitive advantage.
Enabling reach is critical to achieving success. Reaching those that are in countries that have been historically financially excluded and reaching those markets that have previously been de-prioritised due to complex regulatory frameworks or unstable currencies.
True success on the Roadmap means reaching the “hard to reach” in every corner of the globe.
Fitting cross-border payments into complex market systems
Whether it’s empowering individuals to achieve greater personal financial wellbeing, or helping businesses to grow, cross-border payments that are built on safety, security and end-to-end processes can reduce complexity, cost and risk in economies however complex, regulated or restricted they may be.
Take China, for instance. Throughout China, individual recipients of foreign funds may only receive $50,000 of foreign currency per year. The duty of maintaining documentation to administer these controls falls on banks, many of whom find it a burdensome offline experience resulting in a slow process to releasing funds for the individuals involved.
Mastercard’s partners and the senders and receivers they serve benefit from a streamlined, online regulatory process, one that allows them to run safe limit checks on beneficiaries’ limits and release funds on the same day or even in real time.
The complexity of China’s regulatory landscape is matched dollar-for-dollar by the administrative headache of the Colombian cross-border payments market. Inbound payments in Colombia are subject to a registration mandate regardless of threshold; and once a recipient or sender hits a certain new threshold, further different documentation is overlaid, depending on the purpose or payment type.
Such a complex documentation process means more cost to both banks and end-beneficiaries either in monetary or time terms and therefore providers steer away from markets like this. Mastercard, along with its partners, blend bespoke advice services to beneficiaries with more efficient documentation creation processes, presenting a stronger value proposition for the market that cuts time, effort and resource.
Creating cross-border payments that fuel financial inclusion
Speed, transparency, predictability and certainty. These are key tenets of a financial services system that many economies may take for granted when making domestic payments but remain frustratingly elusive to hundreds of millions of people and business owners making cross-border payments.
While we may see these qualities permeate other aspects of our personal and business lives, cross-border payment experiences throughout the world can be poorly aligned with how people expect and want to live and do business today, excluding vast swathes of the global population from financial services they should expect to have.
Pakistan, for instance, is home to the world’s third largest unbanked adult population. According to the World Bank, there is a community of 100 million people living without the simplest financial service: a bank account. By partnering with more than 16 banks around the country, Mastercard now provides Pakistanis with access to funds sent from friends and family overseas in a way that no other organisation, not even domestic digital providers, can. People can receive money via bank deposits, with those without bank accounts able to access it via mobile wallets or cash payout.
Likewise in Bangladesh, the last mile delivery of cross-border payments is complex as only one in two adults has a bank account and the local clearing system hasn’t modernised as quickly as other markets. By integrating directly with nearly all commercial banks in the country, Mastercard is able to simplify the final delivery of payments. By allowing multiple pay-out options, such as cash, mobile wallet, or bank deposits, this model allows beneficiaries to receive their funds even if they are unbanked.
Reaching the end destination
The G20 has the capacity and authority to incite real change in cross-border payments like almost no other collective, intergovernmental or otherwise. But the Roadmap is a long one and creating efficient cross-border payments, however well backed by the world’s most powerful governments, will be challenging.
The key is reach: reaching people and markets with a cross-border payments experience that meets the way they’re living and working in the world today. This is the only way in which we can arrive at the end destination on the Roadmap and ensure we see the true potential and impact of a genuinely global payments systems.
By Stephen Grainger, Executive Vice President, New Payment Platforms, Mastercard