Cross-border payments are an engine for economic growth. Here's why

Cross-border payments are important for global economic growth. Whether you are travelling internationally, purchasing a good or service from an international merchant, or sending a remittance to a family member, secure cross-border payments help facilitate a seamless payment experience.

Recognizing the importance of cross-border payments in 2020, the G20 endorsed a roadmap designed to improve coordination between the public and private sectors, and establish shared goals to address existing frictions in cross-border payments. The G20 economies have made progress on the roadmap, but there are still challenges related to regulatory frictions and fragmented settlement infrastructure. To address these and other challenges, ongoing collaboration between the private and public sectors is essential.

Put simply, cross-border payments involve the transfer of value between a sender and a recipient in different jurisdictions. They support personal and business tourism, trade, and commerce around the world, connecting consumers and merchants on a global scale. Three key drivers of cross-border payments are:

After years of lockdown during the COVID-19 pandemic, global travel has been steadily increasing. The UN Tourism reports that international tourism reached 96% of pre-pandemic levels in the first seven months of 2024. And Visa’s data shows that travellers around the world are travelling for longer durations, compared to the pre-pandemic period.

While e-commerce was growing at a rapid pace prior to 2019, the global pandemic fundamentally changed the way we interact with the world. We have become accustomed to doing our shopping online, and global e-commerce has grown in recent years. According to the US International Trade Administration, worldwide ecommerce sales for B2B businesses are expected to reach $36 trillion by 2026, up from a little less than $10 trillion in 2017.

Remittances, the money sent by people working abroad to their countries of origin, are a vital source of income for hundreds of millions of families worldwide. In many developing nations, remittances constitute a significant portion of GDP, and are crucial for economic stability. In 2021, remittances set a record of $773 billion, $605 billion of which went to low- and middle-income countries (LMICs). While global remittances slowed in 2023, they are expected to have grown faster in 2024, according to the World Bank.

As demand for cross-border payments increases, the private sector is developing innovative solutions to continue making payments safe, secure, and consistent. Take remittances, for example. Imagine trying to receive cash in a remote location, which often involves going to an ATM machine or agent. To help solve for this, digitally transferred remittances, which can move money across borders from a smart phone or computer, help make remittances faster and more secure. World Bank data shows that the cost of digital remittances is consistently lower than non-digital remittances.

Behind the rise of digital remittances and other cross-border use cases are innovative money movement capabilities. For example, Visa Direct enables peer-to-peer (P2P) payments and account-to-account (A2A) transfers to individuals or small businesses around the world. It has the potential to reach more than 11 billion cards, bank accounts and digital wallets across more than 195 countries and territories. To facilitate business-to-business cross-border transactions, Visa developed B2B Connect which is now available in 100 countries and territories and provides same-day payment services.

Despite these private-sector-led solutions, there is still friction in the cross-border payments process. The Financial Stability Board’s (FSB) G20 roadmap explicitly acknowledges the crucial role of the private sector in achieving the goals of more efficient and inclusive cross-border payments. But innovation is only part of the story. The other piece of the puzzle is reducing regulatory friction. To put this in perspective, the impact of regulatory divergence in the financial sector is significant, totalling about $780 billion annually. Regulation is critically important and helps address things like money laundering and terrorist financing; however, countries around the world apply policies differently, which can raise costs for business, especially small businesses.

Data is a lynchpin for cross-border payments. Governments should enable, rather than constrain, the free flow of data. In their most recent report, the FSB acknowledged that some friction is unavoidable, but that fragmentation in data frameworks continues to be a drag on the efficiency of cross-border payments. This means that governments should avoid regulatory requirements that mandate the storage or use of data in one country and ensure that policies do not discriminate between domestic and foreign suppliers. But it also means ensuring greater regulatory cooperation among countries, including through more interoperability.

For cross-border payments, ensuring that transactions meet compliance requirements across different jurisdictions, including requirements related to data privacy, consumer protection, and dispute settlement, would be key. Regulatory interoperability relies on international cooperation through bilateral and multilateral agreements, in order to facilitate transactions.

Finally, governments should work toward streamlining and harmonizing licensing processes to facilitate money movement. Improving the consistency of licensing requirements would help private sector money movement providers – both established participants, and new entrants – introduce innovation across jurisdictions in a faster and more inclusive way.

While there is still work to be done, progress is being made on the path to more efficient cross-border payments. Private sector-led innovation is helping. But innovation on its own won’t solve all the problems. For that, governments should find ways to standardize and increase interoperability across jurisdictions, to reduce the regulatory burden. Doing so will ensure that cross-border payments continue to be an engine of growth for the world economy.