Cross-border payments have existed for millennia.
Throughout history, they have served as a bridge, connecting diverse cultures and fostering economic relationships in unprecedented ways. Also, they have continually evolved, shaping and adapting to the changing landscapes of society and technology.
That’s why, to understand what the future of cross-border payments looks like, we must first investigate our past.
In this article, we will explore the history of cross-border payments, the complex landscape that businesses face today, and the adaptive online payment platforms that can secure their future.
Cross-Border Payments by the Numbers
Technology has turbocharged the payments ecosystem.
Thanks to digital innovation (and smartphone proliferation), cross-border payment flows exceeded $156 trillion in 2022.
Such growth shows no signs of slowing down.
In fact, if cross-border payments continue their compound annual growth rate (CAGR) of 7.5%), the market could reach $290 trillion by 2030.
While B2B payments constitute the bulk of cross-border growth, other verticals are on the rise:
- B2C cross-border payments increased 14% in 2022, from $1.4 trillion in 2021 to $1.6 trillion last year.
- C2B transactions have seen a similar expansion, rising from $2.4 trillion to $2.8 trillion over the last two years.
- C2C payments (i.e. global remittances) reached nearly $800 billion in 2022, en route to an anticipated $1.7 trillion market by 2030.
But to really appreciate the scope of modern cross-border payments, we have to look back.
A Brief History of Cross-Border Payments
While technology changed culture, it hasn’t changed human desire in the slightest.
Since the dawn of time, people have shared the same fundamental needs of safety, shelter, and sustenance.
That was as true in the Neolithic Age as it is in New York City today.
Cross-border payments represent one of mankind’s earliest attempts at promoting economic peace and prosperity.
The Very Early Beginnings
Cross-border payments have existed in some form since 2,000 B.C. Ancient Mesopotamia (modern-day Iraq) is regarded as the official home of “mercantilism”—the practice of trading and transacting.
People bartered, trading “this for that,” whether it meant fur for jewelry, grain for water, or a sword for a shield.
Over time, this quid pro quo economy was anchored by a more reliable store of value: money.
Around 600 B.C., gold, silver, and bronze coins began to populate throughout the Mediterranean, Persia, China, and parts of Europe.
While money made trading (and traveling) more efficient, it also introduced new obstacles.
For example, money quickly became the target of widespread theft and fraud. On the Silk Road,
bandits preyed on unsuspecting merchants and looted with impunity.
Later, the advent of paper currency attracted a less violent type of criminal.
Around 1260, China began creating paper money from mulberry trees. At the time, Chinese
Emperor Kublai Khan wanted to encourage domestic trade by unifying the region’s disparate coins under a dominant new currency.
While paper promoted commerce, it also attracted criminals eager to make an easy profit. After all, a lone mulberry branch could make them rich.
According to Marco Polo, Emperor Khan threatened criminals with the death penalty if they ever forged his currency. While that may sound extreme, attempts at counterfeiting U.S. currency carries a 20-year prison sentence today.
West of Kublai Khan’s empire, cross-border payments had an equally militaristic origin in the Knights Templar, which economists regard as the world’s first multinational corporation.
Throughout the 12th and 13th centuries, their job was clear: to move and protect financial assets from Europe into the Holy Land. Like modern-day B2C transactions, they transferred money to clients (albeit with weapons in hand).
While the Knights Templar were disbanded by Pope Clement in 1312, they helped pave the way for the emergence of central banks.
Cross-Border Payments Evolve
Over the next few centuries, financial tools like advancing funds, deposit making, and foreign exchange became more commonplace.
By the 17th century, central banks were flourishing in Amsterdam, Sweden, and London, which would become the global hub for financial trading by 1870.
These early central banks hastened the development of cross-border payments, as they enabled transactions between domestic and foreign banks.
However, such payments would take months to complete.
Whenever banks sent checks, banknotes, or currency abroad, it traveled on backs, boats, and horse-drawn carriages.
Successful delivery was wholly dependent on myriad factors including the weather, accurately drawn maps, well-intentioned couriers, reliable mail systems, language barriers, and the successful avoidance of thieves and robbers.
This antiquated and slow system remained the norm until the mid-20th century. In the Middle East, this ancient practice is known as “Hawala,” and it continues throughout the region to this day.
Ultimately, the problems that foreign exchange rates posed for many centuries were simplified in 1873, when most western nations moved onto the gold standard.
International commerce was close at hand.
Following the invention of the telegraph, Western Union made it possible for Americans to send money from one major metropolitan area to the next.
Over the next few decades, Morse code would facilitate cross-border payments around the United States, though international transactions remained out of reach.
The 20th Century and Beyond
Finally, in 1951, Credit Suisse developed a direct “telex” connection between Switzerland and New York.
While this technology remained inefficient, it laid the groundwork for the 1973 founding of SWIFT, the “Society for Worldwide Interbank Financial Telecommunication.”
Electronic cross-border payments were officially born.
However, despite the speedy acronym, SWIFT wasn’t as fast as promised, and funds often took days or weeks to be delivered.
Today, of course, digital technology powers payments to happen at the speed of now. And yet, while fintech innovations thrive, the industry deals with struggles of the past, and the new challenges of the present.
In fact, despite technological innovation, informal remittance channels remain in effect worldwide.
Cross-border payments continue to be threatened by high costs, security concerns, and scalability limitations, among other compromising factors.
The Complex Landscape of Modern Cross-Border Payments
The past is prologue, and the future is now.
Over 4,000 years of invention have enabled us to reap the benefits of an international payments ecosystem.
Nevertheless, there is always room for improvement. To that end, cross-border payments are faced with four key challenges.
1. High Costs
The average cost of cross-border payments is 6.5%, more than double the United Nations’ target goal.
After all, each transfer incurs a variety of costs along the way, including intermediary charges, regulatory charges, currency conversion fees, and more.
This “chain of intermediaries” can present an insurmountable barrier-to-entry for consumers and businesses alike.
2. Slow Delivery
While cross-border payments are faster than ever, they’re still too cumbersome.
Though advanced technology is available, many businesses are stuck with legacy online payment platforms that force them to wait weeks for a given payment.
In fact, the average U.S. company waits a whopping 33 days to receive cross-border payments.
3. Compliance Hurdles
Each cross-border payment must clear the laws and regulations in both the originating and recipient country.
Because each nation has their own compliance expectations, modern businesses must have online payment platforms that efficiently satisfy all laws and regulations—both foreign and domestic.
If they fail these tests, they could face numerous fines and lawsuits.
4. Security Vulnerabilities
While cost and compliance are important, security is essential.
Unfortunately, many online payment platforms lack the encryption tools needed to fully protect transactions at each touchpoint.
And cybersecurity remains an existential threat: 56% of businesses are concerned about cross-border payments fraud.
On top of these issues, financial institutions face an even larger roadblock: they lack the technological and capital resources needed to build their own platform.
As a result, they are unable to participate in the lucrative landscape of cross-border payments.
Fortunately, adaptive online payment platforms can solve each of these problems and position modern businesses for short and long-term success.
The Need for Adaptive Platforms: The White Label Solution
In recent years, online payment platforms have solved many of the systemic issues facing cross-border payments.
They have eliminated the inefficiencies of legacy systems and replaced them with affordable, scalable, and adaptive technology.
Best of all, modern companies aren’t required to invest precious time and money into building a competitive product from scratch.
Instead, they can easily leverage online payment platforms to jumpstart their payment journey.
These white label solutions aren’t “one-size-fits-all” strategies: they’re fully tailored to the unique needs of each and every provider.
After all, no retailer, financial institution, money transfer company, or fintech firm has the exact same goals. So why should they have the same tools?
Customization is crucial, and modern companies deserve access to turnkey payment platforms that provide:
- Cost-effective implementation
- Rapid time-to-market launch
- Robust regulatory compliance
- Seamless branding integration
- Reliable security protocols
At UniTeller, we’ve developed an online payment platform that provides all of these features—and so much more.
UniTeller Digital Link: Remittance as a Service
Welcome to the industry-leading “remittance as a service” platform.
With UniTeller Digital Link, you can create a powerful revenue stream within the cross-border payments landscape.
Our technology, licenses, and compliance—your brand and customers.
As part of our client commitment, you’ll have zero development responsibilities. We’ll handle the details and do the heavy lifting, so you can focus on what matters most.
Whatever you hope to achieve, UniTeller guarantees:
- Global Access: With an expansive payout network spanning 80+ currencies and 200,000+ paying locations in over 80 countries, you can go truly global.
- Total Convenience: Rather than developing costly integrations of your own, UniTeller helps you save on resources and leverage cross-border payments with ease.
- True Customization: From turnkey solutions to white-label integrations, UniTeller technology powers the platform with your brand front and center.
- Tested Compliance: With UniTeller, you’ll never have to worry about regulatory details. Our state-of-the-art compliance and licensing platform has you covered 24/7.
- Unrivaled Security: With our “Zero Fraud Guarantee,” you’ll always be supported by UniTeller’s top class authentication and risk-approval model.
Finally, UniTeller clients gain access to our best-in-class, multilingual customer service agents—available to you and your team every day of the week.
Interested in learning more? Check our UniTeller Digital Link features page, or reach out to us directly.
