The financial services landscape looks a little different from how it used to. New firms, business models, and job titles now exist, evolving as fast as the markets themselves. This is fuelling innovation and leaving a whole host of new opportunities in its wake.

These changes have affected individual behaviour, too. People are no longer limited to living in the country they work in, but instead can run their own business from anywhere in the world. Advances in technology, changing regulations, and the pandemic have driven new ways of working. This has impacted the global flow of money and the types of financial services people need.

With these changes, cross-border retail payment volumes have skyrocketed, and banks are in an excellent position to take advantage of dynamic changes brought about by innovative technologies that drive greater innovation to cross-border payments. This presents a huge opportunity waiting to be seized, but what exactly does it look like? And what are the ingredients for success?

A huge opportunity

Fuelled by the strong economic growth and steady digitalisation of financial services, cross-border payments in Asia-Pacific have been making significant strides in recent years. Examples include the establishment of the Fintech Cooperation Agreement between Singapore and the Philippines in 2021, which enables seamless, low-cost payments between the two countries, as well as the PayNow-PromptPay linkage between Singapore and Thailand. Malaysia and Thailand also announced the PromptPay-DuitNow linkage which, in its first stage, facilitates cross-border payments between the two countries via QR codes.

According to McKinsey & Co, the region’s cross-border payments account for an increasingly large share of the global market, which is expected to reach US$156 trillion (SG$206.9 trillion) globally in 2023.

Today, small businesses can reach more markets from their desks than they can from most airports, and that’s partly thanks to the expansion of marketplaces like Amazon, AliExpress, and Etsy. Not all businesses have the means to trade internationally, but marketplaces make it easy to capitalise on consumer demand and enable businesses of all sizes to sell their goods or services abroad. Combine that with the fact that marketplaces relieve the administrative burden associated with overseas trade, and making this move becomes a no-brainer for businesses wanting to broaden their horizons.

Maybe you’re a website designer offering your services to companies across different continents, with each paying you in their own local currency. Or a landlord with properties spanning the globe, receiving rent payments from tenants in pounds, yen, and euros. Whatever the use case, these new opportunities are driving up the volume of international retail payments.

And it’s not just business behaviour that’s changed; consumers are sending money abroad more often too. Whether it’s migrants sending wages back home to support family or international students funding tuition abroad, cross-border transfers have become a normal part of everyday life for many.

Competition is growing

This demand hasn’t gone unnoticed. Over the past 10 years, fintechs have been emerging thick and fast, all looking to capture a piece of this market. They’re backed by serious investment too, with BCG reporting that investors funnelled US$11 billion into payments-related fintechs in the first half of 2022 alone. And customers have clearly found their offering attractive. Fintech adoption rates have been steadily increasing and recent research found that 75% of surveyed people had used a fintech money transfer or payments service before. In Singapore, for instance, real-time payments platform PayNow is gaining traction.

Innovators in this fast-growing segment are not only fintech, but also central banks keen to build faster, cheaper, transparent, and more efficient conduits for financial flow in the region. While the fintech offering may look a little different from what banks have traditionally provided, they still use many of the same networks and payment routes to process transfers, including the correspondent banking network.

So where do the differences lie? Often, it’s in the experience. Fintechs have simplified the process of sending money abroad, with a minimalist approach to user experience that requires as few steps as possible for customers to make a payment. They also display fees upfront to give total transparency on the cost of a transfer before its sent, avoiding any unexpected surprises when the money arrives. Draw these features together and you’re left with a pretty convincing payment package.

The recipe for success

The reality is that banks already possess most of the ingredients needed to succeed in this market, including customer bases that are millions strong and unparalleled reach that facilitates the global movement of value. At its core, this reach is built on strong bilateral relationships that have been in place for years and stand as an indicator of success for banks looking to seize these growing opportunities. And finally, robust compliance and the highest standards for financial crime prevention put customers in the safest place possible, wherever their money is heading.

Banks should play to these strengths, but also continue evolving their offering to add transparency, predictability and an improved user experience into the mix – building stronger relationships with customers that keep them coming back over and over again. Here, a community-driven approach is likely to be the most effective route to success, both for the currencies we know today and a future that could see central bank digital currencies enter the frame. Together, many banks are already collectively defining the new standard for cross-border retail payments within an interoperable framework that lowers costs, connects multiple payment methods and channels, and delivers instant and frictionless transactions to end users.

However banks choose to progress, one thing is clear: Doing nothing is not an option. There are huge opportunities waiting to be grasped, and banks must go all-in to future-proof their business and seize what this booming market has to offer.