We cannot dispute the fact that the pandemic has given a strong impetus to digitalization. Digital technology is all around us, becoming an integral part of the life of every modern inhabitant of our planet. Even after the decline of the coronavirus frenzy, many companies aren’t stopping there.
They are trying to improve on the latest technologies that have already taken root. Financial institutions aren’t an exception. Banks, fintechs solving current global payment problems, are accelerating financial innovation that directly impacts international transactions. I cause them to boom to the point where they project to reach $156 trillion this year.
Applied Technology Development
The rapid growth of these currency transactions between people or businesses located in different countries is already on its way to reducing the cost of international remittances to less than 3% of the transaction value. Just look at the potential application of technologies such as blockchain or the introduction of CBDC, the central bank’s digital currency.
Some well-known companies have already started to accept cryptocurrency as payment for their goods or services. Moreover, Visa and Mastercard are steadily moving into the cryptocurrency space. And many global banks are exploring the use of digital currencies for cross-border payments.
Payment Systems Development
We can also see the development of payment systems in the tendency of many banks in neighboring countries to partner in cross-border payment initiatives. Examples include PayNow and DuitNow in Singapore and Malaysia collaboration, or Immediate Cross-Border Payments (shortly IXB) between SWIFT, The Clearing House and EBA CLEARING.
Simplification of cross-border payments
Open banking obviously leads to the simplification of cross-border payments. The value of such an industry embodying transparency, accessibility and security is currently about $4 billion, with a 29-fold growth potential in less than 4 years. Two and a half years ago, it was determined that 75% of consumers worldwide use some form of remittance and payment services, making these services the most common FinTech category. And already in 2021, FinTech has attracted $91.5 billion in investments.
After all, consumers are less willing to use banking services because of facing a number of obvious disadvantages. Digital payments, on the other hand, offer a clear advantage for Internet-connected consumers. The rapid change in consumer demands entails instantaneous reactions from the technology world. As a result, immediate change.
This is directly responsible for the growing popularity of cross-border payments. This trend is being picked up by developing countries, such as India, where in the spring of 2020 the use of ATMs dropped by 47%. The volume of remittances will continue to increase, leading to financial integrations that were previously inaccessible to financial markets.