Top Fintech International Payment Trends to Expect in 2023
Customer-centricity has always been a top priority for providers of international payment services, right? Wrong. For too long, this pragmatic approach to doing business that focuses on delivering a positive customer experience to drive profit and gain competitive advantage was an afterthought. The monopoly traditional banks held over the international payments space meant small and medium-sized enterprises (SMEs) were underserved when it comes to transferring funds overseas.
With their resources focused on core banking services, these financial institutions provide international payments that lack efficiency and transparency. Thankfully, this crippling monopoly has been broken by the emergence of tech-driven financial companies - aka “fintechs”. Born out of a desire to disrupt the traditional banking model in the wake of the 2008 financial crisis, this new breed of provider is taking aim at outdated financial services. This determination to offer innovation that supplants traditional banking methods has reshaped the international payments landscape - where efficiency and transparency are now a prerequisite for consumers, not a pipe dream.
So, what fintech payments trends are making it quick and easy for SMEs to execute international payments and reducing the cost of doing so as we head into 2023?
What Trends Did We See in 2022?
Several digital payments trends continued to fuel innovation in the international payments space in 2022, allowing SMEs to manage their financial requirements more efficiently and securely than ever before, including:
Digitisation of B2B payments
Innovation in the B2B payments space has traditionally lagged behind B2C payments - a disparity that has been amplified post-pandemic. In response, B2B payments are undergoing a digital transformation that’s enabling them to meet the expectations of vendors and suppliers. Manual processes - such as inputting mass payments into a spreadsheet for uploading to the bank - are being replaced by digital payments, including, accounts payable, accounts receivable, expense reimbursement, and employee-initiated spending.
Businesses now have greater visibility of what funds are going where and why. Consequently, they benefit from the transparency and control needed to optimise cash flow, eradicate errors, and mitigate fraud.
Digital data privacy
Innovative payment providers continued to harness the power of technology to improve data privacy over the last 12 months. For example, tokenization has tightened the security screw in the payments industry. This separation of personally identifiable information (PII) from other customer data allows businesses to maintain compliance, enhance customer protection, and utilise non-personal data for new insights.
Virtual accounts expand global reach
Virtual account solutions (also known as virtual IBANs) offer businesses a competitive advantage by allowing them to provide international business bank accounts to customers. Virtual accounts open the door to new regions and currencies, so customers can make and receive payments to unique addressable IBANs in multiple jurisdictional formats using local and international payment rails.
What International Payments Trends to Expect in 2023
Fintechs will continue to pioneer transformative innovation in the international payments space in 2023, with several global payments trends catching the eye.
In layman’s terms, embedded finance is the process of non-financial companies offering banking-like services. This seamless integration of value-added services by nonbanks provides businesses with the payment autonomy needed to achieve financial independence and improve the user journey. One branch of this finance revolution has the agility to streamline the previously cumbersome international payments process: embedded payments.
Open-access application programming interfaces (APIs) - a set of programming instructions for customising a web-based software application or web tool, such as online payment systems - are presenting businesses with the opportunity to leverage B2B embedded payments technology. Empowered by this, their customers are benefitting from real-time visibility into foreign exchange rates and managing currency exposure more effectively.
The embedded payments industry personifies fintech’s strengths: speed, agility, flexibility, and convenience – and it’s projected to expand rapidly amid consumer demand for a streamlined digital-first experience. Revenues are expected to swell from $43 billion in 2021 to $138 billion in 2026. This potential for embedded payments to become ever-present within the online payments landscape has led market research firm IDC to predict that 74% of global online consumer payments will be executed via platforms owned by non-financial institutions by 2030.
Blockchain - Bitcoin’s underlying architecture - is a disruptive technology that’s starting to gain traction in the international payments space. Despite the closure of many Bitcoin exchanges, the technology that powers the virtual currency has the potential to fundamentally transform international payments by enabling secure, low-cost transfers that no longer take hours or days.
The underlying blockchain technology has broad applications, including international payments functionality that accelerates the overseas transaction process by deploying encryption technology. The decentralised nature of the network offers a seamless alternative to traditional services that are typically expensive and protracted. Consequently, a range of companies are entering the blockchain-powered international payments market, including fintechs.
There’s a growing clamour from SMEs with an international footprint for real-time payments - not to be confused with The Clearing House’s brand name RTP®. Frustrated by prolonged settlement periods, they are demanding the convenience of paying their international customers and vendors instantly, with little to no friction. The aim is to complete the payment process - initiating, clearing, and settling - in a matter of seconds by removing technical bottlenecks.
Real-time payments rails - the digital infrastructure that facilitates real-time payments - is already capturing a significant share of the payments market: the total number of real-time transactions amounted to 70.3 billion in 2020, up by 41% from the year before. This is expected to continue growing in 2023 and beyond, with fintechs at the forefront of this adoption: the real-time payments share of global electronic transactions is forecast to jump from 9.8% in 2020 to 17.4% by 2025.
Payment orchestration streamlines international payments by connecting payment processors, acquirers, and gateways to provide a unified platform for enabling and optimising payments from anywhere in the world. By providing a holistic structure for managing international payments, orchestration platforms remove integration complexity and allow merchants to add or switch payment partners in one click - and the benefits are compelling: better checkout conversion rates, higher payment approvals, and lower fees. Real-time analytics and AI tools, such as intelligent routing, help SMEs to gain insights into how payments impact their business and how they can be enhanced.
The global payment orchestration platform market size was valued at $927 million in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 24.5% between 2022 and 2030.
The Fintech Revolution
Fintechs are putting the customer first in the international payments process by fundamentally addressing the outdated financial services traditionally available to SMEs. From established fintech trends like digital data privacy to burgeoning trends like embedded finance, these innovators are making payments faster, more secure, and better value for money.
A cornerstone of this fintech revolution is international payment specialists that offer a technology-led approach to overseas transactions; one that makes it quick and easy to execute peer-to-peer transfers and reduces the cost of doing so. To achieve this, they deliver efficient and intuitive technology, provide access to competitive exchange rates, and can offer competitive exchange rates, particularly in comparison to banks.
Make International Payments with Clear Treasury
Clear Treasury specialises in providing businesses with clarity on the tools available to mitigate their exposure to currency risk. Exchanging money into another currency and transferring it overseas can be daunting and confusing. Aware of this, we use our knowledge and experience to cut through the jargon and provide you with a friendly and personal service.
We can use our knowledge and experience of facilitating frictionless international payments to help your business leverage virtual IBANs: a non-tangible account that enables you to send and receive money internationally hassle-free, by allowing the routing of multiple virtual accounts to a single ‘physical’ account. And the benefits are compelling: easy to set up, faster transactions, cost-effective, improved security, and improved transaction management.
When you join us, you’ll be assigned a dedicated account manager. In addition to helping you benefit from quick, easy, and secure transfers, they can outline the tools available to mitigate the impact of currency risk on your international payments, including forward contracts.
Open your free Clear Treasury account today for quick, secure and cost-effective international currency transfers.
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