What are the top payments-related barriers a business may face when entering a new market?
The COVID-19 pandemic has fast-tracked significant shifts in the global economy. Ecommerce and the sales of digital goods and services are booming – and this is only going to become more important as the global economy begins its recovery. One of the factors fuelling growth is the proliferation of digital payment methods that make it possible to buy and sell goods from anywhere in the world.
A key consideration for any business expanding into new markets is a simple one: how to send and receive payments across borders. Making sure that cross-border payments work is not as straightforward. The combination of growing protectionist measures, like having to use local infrastructure and comply with regulatory requirements, can make it tough for international players to launch.
Moreover, it is critical to understand the local payment landscape and financial ecosystem. Getting it wrong can derail a business’ growth plans. An important step is to find a reliable local partner that has the structures in place to facilitate local currency payments, whether it is via mobile wallets, bank accounts, or cash pickups. Businesses need to be ready to offer local payment methods that reflect the demands of customers.
Understanding the local regulatory environment can be a minefield, especially if a local office or presence is required. Ensuring compliance with regulatory bodies can be time-consuming and expensive, but the risk of ending up on the wrong side of the rules can make or break a business.
There are also many factors that impact currency fluctuations, which have a knock-on effect on a company’s cash flow, including macroeconomic trends and competitive behaviours. Currency controls need to be taken into account when moving money both within and across borders.
Given your expertise in cross-border transactions, can you elaborate on the challenges that are rather specific to certain markets?
No two markets are the same. Depending on the industry, we look at general developments in the payment industry, global trade activities, the local geopolitical climate, unique developments within each sector and country, and have a deep understanding of ecommerce in each market.
What works in Europe and the US doesn’t automatically work in Latin America, Africa, or Asia. And what works in Nigeria may not work in Kenya. There is no one-size-fits-all approach. Payments need to be tackled country by country and adapted as the market changes.
In Latin America, cross-border payments have been inefficient, especially for smaller value transactions. Cash usage is high, the payments infrastructure is fragmented, and there are regulatory constraints to overcome.
Thunes provides a better alternative for banks, money transfer operators, payment service providers, technology platforms, and marketplaces. We have built the infrastructure, a cross-border payments network that allows the movement of money in a safe and timely way between countries.
How can Thunes’ payment network help businesses operate in new markets?
The beauty of working with a partner like Thunes is that we have done the hard work in building a payment network in emerging markets. If a customer in Europe wants to send money to an M-pesa account in Kenya, we make it possible to transfer money effectively.
Consumers are given a great deal of choice with multiple payment methods like e-wallets, mobile money, and bank accounts. Thunes’ solution allows previously incongruent payment methods to fully operate with each other, connected to the vast web of partners. Partners will then be able to move money between each other in a faster, more economical, and reliable way.
What are some of the main trends and developments that will shape the cross-border payments space in the next couple of years?
There is an ever-increasing demand from customers and businesses to move money across borders in a streamlined way. Interoperability between digital wallets and banks is one of the major developments in this area. Businesses expect real-time payments not just across cities but across borders, and that is an area where Thunes has invested in the right technology and infrastructure.
There are many initiatives leveraging distributed ledger technology (DLT) beyond blockchain. This area is still quite new, but there are positive trends there that will enable instant payments and provide access to the unbanked in more remote areas. These capabilities will become a must-have over time.
Lastly, given the current geopolitical environment, payment flows are likely to change on a per-country basis. Southeast Asian (ASEAN) countries are set to trade more with other regions, for example, while China is likely to trade less with the US and Europe but more with Latin America, Africa, and ASEAN countries. That means opportunities for providers in the market are also likely to change.
The reality is that cross-border retail payments are incredibly complex and involve working with vastly different banks, technologies, internal and international payment operators, merchants as well as the end consumer. As fintech continues to evolve, and the need for inclusive growth in the global economy increases, payments will continue to play a vital role in these developments.
This editorial was first published in our Cross-Border Payments and Ecommerce Report 2020–2021, which assesses the change of pace that occurred in 2020 and provides a comprehensive overview of the major trends driving growth in this space, being the ultimate source of information for players interested in selling across borders.
About Bodgan Dinu
As a seasoned product and fintech executive, Bogdan Dinu has more than 15 years of experience in the global payments market. He currently heads the product team at Thunes and drives innovation in cross-border payments, leveraging technology to deliver solutions in emerging markets.
About Thunes
Thunes is a B2B cross-border payments network that enables the seamless transfer of funds between payment systems in more than 100 countries and 60 currencies. Thunes aims to drive greater financial inclusion and reduce the inequality gap so that individuals and businesses worldwide have access to financial products and services that meet their needs.
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