The global cross-border payment industry is a trillion-dollar market that is being disrupted by new entrants seeking to solve existing pain points for consumers.

Traditionally, such payments have been transacted by the few dominant global banks. The lack of competition resulted in long settlement periods, high transaction costs, and a lack of transparency for the consumer, particularly for exotic currencies. Thanks to technological innovations, new players have entered the market to quash these pain points and the market is growing by around 5% a year, the majority of entrants focussing on the low-value transactions of segments underserved by the banks.

The change is consumer driven, with fewer consumers willing to pay higher bank charges and now expecting rapid, transparent transfer at low rates via smartphone. There is a growing focus on emerging markets, again with smartphone technology driving demand and accessibility even in remote areas. In 2017, 69% of the world’s population had a bank account and/or mobile wallet (Worldbank).This figure is only expected to increase with mobile wallets forecast for massive growth and will lead to increasing cross-border commerce volumes.

To address consumers’ needs more flexibly, these new entrants are using new business models and value propositions and offering solutions the banks can’t match, such as transferring a deposit in one currency to a beneficiary in a different currency as can be done through PayPal, for example. However, such providers of these back-end networks tend to focus on selected currencies and regions, so the money transfer service provider would need to connect to a number of back-end networks to offer customers a global solution that covers all currencies.

Such low-value transactions are usually performed using an aggregator model which reduces costs, and are faster as the back-end providers typically require prefunding of their sending partners as collateral, which allows them to credit the beneficiary’s account in real-time once the transaction is initiated.

With technology enabling greater access to funds transfer by a wider percentage of the global population, it’s an exciting time for new-entrant payment providers. But it will also differentiate markets, which means entrants require a strategy that draws on deep knowledge of the local market and the industry at large.