Cross-border payments: still a very dynamic and innovative market


Despite the geopolitical tensions and the health crisis, the development of the cross-border payments market shows no signs of slowing down; in fact, quite the contrary...

The situation is even contributing to the acceleration of changes affecting the sector, in particular the move towards more fluid and transparent transactions

Cross-border flows continue to increase, even with the pandemic and its consequences. In 2020, while travel and international trade were declining, cross-border e-commerce transactions were increasing by 17%. Better still, in December 2020, volumes processed by SWIFT were up by 10% compared to the previous year1

With the reopening of borders, the movement of individuals (international students, travellers, expatriates, etc.) has rapidly resumed, while new consumer habits and the development of the “gig economy” (Uber drivers, Deliveroo delivery drivers, etc.), mainly driven by American players operating locally throughout the world, are generating new cross-border flows. And although the war in Ukraine has challenged the notion of the “global village”, trade has not declined in 2022, albeit it is tending to become more regional. 

As a sign of the market’s dynamism, an increasing number of players, regardless of their position in the value chain, are taking a close interest in the cross-border payments sector.

Less liquidity: moving towards a rebalancing of forces?

Fintechs have been around for a long time and have led to a real transformation in the standards of customer experience. But now the traditional banks are determined to make up for lost time. This could be a good time for a rebalancing of forces: the cash that startups have used to finance themselves is now less abundant and they will now have to face the imperatives of profitability. 

In this now less-buoyant context, some will manage to find their place – or have already succeeded in doing so – but many will not manage to reach critical size and will have to look for a way out. 

An increasingly competitive payments market

In recent years, players from the banking card world, in search of growth drivers, have also increased their acquisitions in the payment sector. Visa acquired Earthport in 2019 and Tink in 2021, while Mastercard acquired Vocalink, Aiia, Transfast, Finicity and Nets, among others. The new situation could open up new acquisition opportunities for them.

And don’t forget GAFA, with initiatives such as Apple Pay (which now offers consumer credit), Google Wallet or Meta Pay (ex-Facebook Pay). Their efforts have not yet fully paid off, given the fragmentation of the markets and the demands of banking regulations. But they are learning and progressing very quickly.

SWIFT, still at the forefront of the scene

In this highly competitive landscape, SWIFT will remain a key player. Nevertheless, recent geopolitical tensions have highlighted a number of alternatives already in place, underlining, if proof were needed, the increasing fragmentation of the world and SWIFT’s anchorage in the West. 

However, SWIFT’s power will be difficult to replicate, due to its very high level of adoption around the world. In addition, the ongoing migration of SWIFT payments to ISO 20022 will provide a more harmonised and efficient ecosystem.

Moving towards a concentration and strengthening of the major banks

As regards the banking sector, the continued concentration of clearing players seems inevitable in the medium term. The deployment, driven by the regulator, of new technologies that make it possible to envisage enhanced payment applications, with better structured information, real-time and 24/7 exchanges, without compromising on security, is leading to very heavy investments. At the same time, regulatory pressure and price squeeze will continue and certainly increase. The combination of all these factors, in our opinion, gives the market leaders an edge. 

Global banks are likely to become even more powerful than they are today: they can draw on their robust infrastructures, critical mass, expertise in compliance and security, and decades of experience in dealing with financial risks. The very large clearing players have the means to remain at the centre of the financial system to ensure its stability and to guarantee the protection of their clients. This is conditional upon the success of the ongoing digital transition.