Finance
The future of global money movement: 5 trends for 2023 and beyond
Global Banking & Finance Review®
Company
In May we hosted Currency LDN, an event that brings together practitioners across finance and technology to explore challenges and opportunities facing the future of money movement. From the predicted growth of B2B cross-border payments by 2030 to the potential of embedded stablecoin payments, we’ve...
In May we hosted Currency LDN, an event that brings together practitioners across finance and technology to explore challenges and opportunities facing the future of money movement. From the predicted growth of B2B cross-border payments by 2030 to the potential of embedded stablecoin payments, we’ve distilled 5 trends that’ll matter in the world of money movement in 2023 – using direct insights from fintech, payments, and blockchain experts.
New market sizing data from FXC Intelligence for global cross border payments suggests the market will expand from $190 trillion to $290 trillion by 2030. While wholesale makes up the largest share currently, its growth is projected to slow over the next seven years. Meanwhile, B2B cross-border payments are set to increase from $39.3 trillion to $56.1 trillion, with the largest growth predicted in B2B ecommerce.
No non-bank player currently holds more than 1% of the global market share, pointing to a substantial opportunity for fintechs to specialise and dominate specific verticals.
Despite new infrastructures emerging, it is likely that traditional banking and payment systems will continue to adapt and coexist with these new technologies. As a result, the future will likely offer a variety of choices to customers.
The future will be about choice, said Wise’s Head of European Payments & Banking, Arun Tharmarajah: “There’s probably going to be a future where you can pay X and move your money instantly using one of these networks… or you can pay a bit less and wait five minutes or two days… then of course you’ve got other things like consumer protections which are built into card networks… some customers will be willing to pay for that, some won’t.”
In emerging markets, the value of Distributed Ledger Technology (DLT), a decentralised system that securely records transactions using cryptography and multiple synchronised copies, is already clear. For example, it can help businesses operating globally to avoid liquidity issues or expensive pre-funding as a result of slow Swift settlements.
Airwallex’s VP of Financial Partnerships, James Butland commented: “If you’re just doing payouts in the country, and not collecting money on the other side, you have that liquidity trap where you need to either top up or withdraw money. That’s more of a problem in the current macro environment, as money gets more expensive over the next few years.”
Fintechs like Wise have tackled this with data science, enabling them to predict exactly where they need to send money, “down to the minute”, explained Wise’s Arun Tharmarajah. But even then, there’s an “inherent dependence on the rails”.
Fintechs and payment providers are thinking about how they can integrate DLT into their products. Take international fintech, Ebury. Enrique Colin, Ebury’s SVP of Product explained: “We’re interested in applications that are fintech on the front, powered by DLT on the back… specifically, using USDC stablecoin rails for some corridors. We’re seeing that already happening for remittances, and on B2B flows we have specific clients coming to us with those needs.”
While there are risks associated with DLT payments, the extent of these risks depends on the context and how DLT is used within a business. “Digital assets payment rails will be used for illicit funds – like cash and all payment rails,” acknowledged BVNK’s VP of Risk & Compliance Marta Lia Requeijo. The rate of illicit activity on blockchains as a proportion of total transactions is lower than fiat rails, at less than 1%.
Erica Stanford, fintech specialist at CMS, commented:“Law enforcement are grateful when they’ve got a crypto case because it’s easier to track than any other asset – there are a host of advanced analytics tools which do this, and in terms of evading sanctions or being used to fund terrorism, crypto is actually really difficult to cash out illegally.”
Regulation around digital assets is in a formative phase.
As crypto compliance specialist Shelley Schachter-Cahm explained: “Until 2021, the only sort of regulations that crypto firms were thinking about was AML … but this is the year of full suites of regulation coming out. We have Abu Dhabi and Dubai leading the pack… and the rest of the world is catching up… In Europe, MiCA is a framework regime and we will see it being chewed over, tried and tested – it’s the first iteration of many.”
With inconsistency in global regulation, comes jurisdiction shopping, VASPnet’s Elsa Madrolle commented: “We call it the sunrise issue. Jurisdictions are coming on board with regulation at different times, in different ways. My advice is don’t go to the cheapest, easiest jurisdiction. Pick a reputable jurisdiction, figure out what your obligations are, then apply that risk-based approach. Come up with a compliance strategy and select your vendors carefully.”
Fintechs have a significant role to play in capturing the future of global money movement – but it will be crucial to foster partnerships both within the industry and with regulators to shape it in the right way – so we can create a more efficient, inclusive, and secure global payments ecosystem that benefits individuals, businesses, and economies alike.
Cross-border payments refer to transactions where the payer and the payee are located in different countries, often involving currency conversion and international banking regulations.
Fintech, or financial technology, refers to innovative technology that aims to improve and automate the delivery and use of financial services.
Digital asset regulation refers to the legal framework governing the use, trading, and management of digital assets like cryptocurrencies and tokens.
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