The financial services landscape is evolving rapidly with several new companies, business models, and job titles driving innovation and creating a plethora of new opportunities.
Such alterations are impacting how people behave, enabling them to operate their businesses from anywhere in the globe seamlessly, without having to live in their home country. Technology advancements, evolving regulations, and the pandemic all contributed to new methods of working that influenced the flow of money throughout the world and the types of financial services that individuals require.
Through this advancement, cross-border retail payment volumes have substantially increased.
Banks are now in a strong position to benefit from the changes brought by cutting-edge technology that encourages greater innovation in cross-border payments. What precisely is the potential of this opportunity? And what elements would be essential to lead to its success?
A huge opportunity
The emergence of marketplaces like Amazon, Flipkart, and Snapdeal has provided small and medium businesses access to increased marketspace operating from their own locations. Such marketplaces make it simple for MSMEs to make the most of customer demand, providing them with an opportunity to sell their products or services overseas with limited resources. These platforms absorb administrative overhead expenses associated with overseas trade thereby relieving a huge share of expenditure.
The remittance for a website designer who works with businesses across multiple continents or a landlord with a global portfolio of properties in varied locations can be in different currencies. Such prospects are increasing the amount of international retail payments regardless of the use case.
Interestingly, consumers are also adopting newer prospects of retail payments as they are moving money overseas more frequently. Cross-border transfers are becoming a common occurrence in many people’s daily lives, whether it’s migrants sending money home to support their families or foreign students paying for their schooling overseas.
Increasing influx of payment platforms
With the increasing demand for better payments platforms, fintech companies have also sprung into the scene. Majority of these Indian fintech startups are not even a decade old but have observed tremendous growth. According to the Minister of State for Finance, the Indian fintech market is expected to reach USD 150 billion in valuation by 2025. With a fintech adoption rate of 87% against the global average of 64%, India is one of the fastest growing fintech markets in the world and the pace is continuously rising.
When it comes to providing a smoother customer experience, commercial banks too are continuously adopting technological solutions and tools that enable quicker, cheaper, transparent, and more efficient cross-border payments. So, the question that arises is whether fintechs are any different from banks? Fintech companies have made it simpler for users to send money overseas by streamlining the user experience for consumers to complete a transaction seamlessly. In my opinion, it is the experience that matters.
The path for success
In reality, banks already have most of what is required to compete in this industry, including a strong user base and unmatched reach that enables the transfer of value across borders. Their reach is fundamentally based on solid customer relationships that have existed for many years, which in turn helps them attract new customers. Additionally, in India, consumers have shown their trust in the banking system for decades, owing to strict compliance regulations and financial crime prevention.
Banks should capitalize on these advantages while also enhancing their services with greater predictability, transparency, and improved user experience. This will help the forge lasting bonds with their customers and keep them coming back for more.
In conclusion, a customer-driven strategy stands the best chance of success. With an interoperable framework that reduces costs, links various payment methods and channels, and provides instantaneous and frictionless transactions to end users, several institutions are already working together to define the new standard for cross-border retail payments. While we discuss the potential of the market, we have yet seen only the tip of the iceberg.
Disclaimer
Views expressed above are the author’s own.
END OF ARTICLE
