The world of global payments is evolving rapidly – driven by an increasingly global economy, expanding consumer buying power in Asia and South America, rising adoption of digital payment methods, and increasing concerns over security and transparency.
One area I’m focused on in particular is large, cross-border payments – a segment that has grown dramatically in recent years. There are several trends underway that I believe will have a significant impact for years to come.
Emergence of the new “global citizen.” Today, there are more people transacting across borders in larger sums than ever before. This emerging demographic does not consider borders in terms of lifestyle, access or travel. They spend more than ever on goods and services outside of their home countries and are making large cross-border payments with increasing frequency – whether it’s on education for their children, medical care, real estate or other offerings. Businesses looking to appeal to this growing and affluent segment have to take steps to reduce the friction in today’s cross-border payment process.
Increasing preference for digital and mobile payments. As large, cross-border payments become more common, consumers are looking for the most convenient, cost-effective, transparent methods. This is driving an increasing portion of these transactions to web and mobile. The traditional agent-based model, while still sizable, will diminish in importance as millennials and GenXers gain affluence. Traditional banks are already being forced to consider new forms of service delivery, as legacy models and fee structures are diminishing in relevance.
Stronger focus on compliance and transparency. With the ever-increasing threat of terrorism, and the focus on cutting-off financing sources for nefarious acts, we can expect to see a much greater emphasis on transparency and compliance. Any entity processing large, cross-border payments will need to be able to verify sources and recipients with increasing precision and certainty; ensure strict compliance with anti-money-laundering laws; and be able to provide detailed transaction reporting.
Demand for related support services. If a business is accepting large, cross-border payments of any significant volume, they will also need to provide ancillary support services related to those payments. With consumers from around the world making large payments in different time zones, 24x7, multi-lingual, omni-channel customer support – including phone, email, chat, text, and social media - becomes essential.
There are also two specific areas of growth in large cross-border payments.
The first is education. In 2014, 4.5 million students from around the world attended schools internationally. That number is expected to grow to 8 million by 2025. In the US alone, almost one million international students from over 200 countries spent an estimated $27 billion in tuition and living expenses. It’s a big business – and getting bigger every year.
The second is medical tourism. The worldwide medical tourism market, estimated at $40 billion today, is growing at a rate of 15-25%, with patients traveling abroad for access to more affordable procedures, shorter wait times, and the latest advancements in medical care.
As the world becomes more global, we have to remove the barriers that exist in our payment channels. If we do, the opportunities we can open up are tremendous.
Mike Massaro is CEO of Flywire.