We live in a time of great convenience where payments happen instantly. Where you are able to either swipe or tap your card. Where you are able to leave the card at home and use your phone or smartwatch. Move money quickly between different banks in thirty minutes or less. Pay someone through their phone number, and they can withdraw the cash with just a pin code at a nearby ATM.
Money has never flowed more freely than today—even for cross-border payments. Moving money between sovereign countries is becoming easier, however it’s complex and often an expensive exercise, especially compared to the rapid and cheap options available inside a country.
Never before has faster cross-border payments been as important as today. Customers are losing patience with the convoluted processes, especially when seeing how fintechs and payment startups can deliver such payments faster and cheaper. Additionally, it’s also a competitive advantage to improve such payments: the cross-border payments market topped nearly US$156 trillion in 2022 (Statista). Furthermore, the Bank of England estimates that the cross-border payment market will reach US$250 trillion by 2027.
What’s fueling this growth? A globalised economy means we do business wider and farther than ever before. Customers, employees, partners and contractors engage with us from across the world.
Why cross-border payments lag behind
People and businesses have gone global. It’s time cross-border payments do the same, but why aren’t they? There are three underlying challenges:
Checks and balances:
Cross-border transactions are subject to many financial regulations, with particular emphasis on anti-money laundering, fraud screening, sanction checks, and various bespoke processes at individual banks. These are onerous and time-consuming, but necessary for risk and compliance reasons.
Intermediaries:
Cross-border payments pass through multiple intermediaries before reaching their final destination. These groups apply respective checks and balances, often repeating what already happened upstream. This is necessary for them to remain compliant, but it significantly increases the time and cost of payments.
Legacy:
Old technology and manual processes are still very prevalent among cross-border payments, and the market remains stubbornly manual due to the extensive checks and different stakeholders with incompatible processes. Many cross-border transactions are not digitised and still rely on paperwork. Even electronic standards, such as SWIFT MT103, don’t transmit enough data for richer transactions.
There are other issues, such as transaction costs and insufficient visibility. But those are often symptoms of the above three issues: too many people trying to meet identity-related compliance while using outdated systems.
Speeding up Payments with Identity
Identity can fix these issues, in fact, it’s surprisingly straightforward.
Identity tells us who a person is. It’s the crux of the above processes: if banks could move money without worrying about who receives it, cross-border money could flow unhindered. But that is absurd; at the very least, a bank must ensure the right person gets their money. And the risks of fraud and crime are too significant to ignore or leave to other parties.
The fundamental problem with identity is its incompleteness. Often, payments take longer because of missing customer details or are rejected because a customer shares a name with a known criminal or flagged individual. Yet, a unified and informed identity process removes such issues. As it can automatically query many different identity markers and extend those capabilities to different stakeholders.
Integrated Identity Platforms
Cross-border payments are not slow by design. They simply lacked an effective answer to that identity proposition. Integrated Identity Platforms (IIPs) are changing this. These platforms specialise in checking identities through layers of automation and artificially-intelligent technologies. Packaged into platforms, they can be readily integrated into existing business systems and scale to let different authorised parties use them.
Even if we don’t remove any intermediaries in a payment-approval chain, imagine how much faster they would be if they all used the same platform. The processes are natively digital, and most checks and balances happen automatically as the IIP crosschecks hundreds of local and global identity databases. They power concepts such as reusable identity, a new paradigm where a person can use one identity across multiple transactions and businesses.
Integrated identity speeds up compliance checks, reduces risk, and removes friction for customers. Notably, the best IIPs have self-service tools that offer customers control of their information. They also ensure that companies can hold onto customers and their information, not ceding anything to competitors.
Cross-border payments are complex. The Committee on Payments and Market Infrastructures once noted that “cross-border payments do involve more risks, complexities and rules than domestic payments.” But it added that “the difference can often feel disproportionate.” Specifically, customers and employees are noticing the difference. They want speed, convenience, and due diligence wrapped into one. They want to track payment movements and not pay a fortune to move money from country A to country B.
Identity managed through Integrated Identity Platforms such as Contactable creates those opportunities. Cross-border payments don’t need to be the slowpokes of the modern financial world—the right identity brings them up to speed.
