The cross-border payment ecosystem – comprising financial transactions between senders and recipients located in different countries – is experiencing tremendous growth, a new report by MasterCard says.
According to the November 2023 Mastercard Borderless Payment report, in 2022, total global remittances rose to $794 billion, with the cash inflows accounting for more than 15% of the GDP in 25 low and middle-income countries.
Global remittances are projected to reach more than $810 billion in 2023.
In 2023, mobile applications increased their share of usage while websites declined. At the same time, digital-first fintechs are leading bank apps.
The report, based on a survey of thousands of individuals and small businesses transacting across the globe, including South Africa, nonetheless found several key challenges that present financial services providers with immense revenue and growth opportunities.
“A smooth-running payments system is absolutely vital and no matter the delivery method or destination — whether cross-border or domestic, digital or in-person — security, speed and reliability are paramount.”
Incurring high costs is the main impediment to consumers transacting more frequently, the survey said. Survey participants said that transfer fees were often unclear and expensive, and they frequently were subject to unfavorable exchange rates.
One-third of respondents have experienced late or failed cross-border payments, while another third of those surveyed said their families back home have limited options to access the money they send.
Three key economic areas are driving the growth in cross – border payments:
- Remittances
- SMES
- Gig Workers
Since the pandemic, the informal economy has grown rapidly. Wage disbursement volumes in the global gig economy are projected to reach $298 billion in 2023.5. Gig workers now account for about one in ten of consumers making or receiving cross-border payments.
More than half (53%) of cross-border payment users worked side jobs in 2023 – a number that rises to 79% among gig workers.
For SMEs, one of the emerging factors for growth is an increase in businesses who prefer to source their supplies internationally.
“SMEs indicate they are taking an increasingly global approach, with three in five sourcing more suppliers outside their own countries than 12 months ago.”
Read / Download the full report here.
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