The global economy keeps on expanding, as cross-border transactions account for over $34 trillion globally. Banks, financial companies and neobanks have been attracted in large numbers to this market that has experienced exponential growth. They see opportunities to expand their business and cater better for customers globally.
Cross-border payments are simply moving funds from one nation to another nation and can be done in any currency. People and companies use cross-border payment solution to transfer funds or send international remittances for personal reasons.
Despite the fact that these activities are not new. The options available for individuals who want to make such payments keep changing with time due to constant influx of new firms and technologies into the market at an ever-increasing rate.
As a bank, you must capitalise on cross-border payment solutions to gain competitive advantage and to improve customer services. Besides, this blog shares why cross-border remittance is crucial for your bank and how you can leverage its technological advantages.
Economic Importance of Cross Border Remittance
Cross border money transfer entails a lot of returns, which to some extent explains why your bank should rely on it. Another source of funding is from the international transactions through transfer of funds where the banks benefit from the transaction fees and the exchange rates of the other countries’ currencies.
The World Bank report indicate that global payments rose to $706 billion in 2019. Out of the total remittance, USD 272 million was channelled through official banking sectors. This steady rise shows that people want to send money to other countries more and more, your bank can take advantage of this trend.
Keeping trade and the economy stable around the world
The remittance of money through borders is very important in international business and maintaining the economic strength of many countries for the coming generations. Financial resources directly injected into developing economies through international remittances become a lifeline to social safety net. This keeps families stable, and fuels local enterprises thereby greatly contribute to a stronger global economy.
For your bank, such transactions facilitate functioning and growth of the economy. This helps you to develop a close-knit relationship with customers across the globe.
Increasing access to financial services
International remittances can serve as an access point for migrants to formal financial services by making it easier for them to send and receive money. Remittance recipients are thus empowered where they are able to save, invest, take part more fully in the domestic economy thereby promoting growth and stability.
Banks like yours can step in with affordable and efficient cross-border payment solutions that cater to migrants' needs. In addition, such services can help eliminate the high charges that usually accompany informal money transfers and encourage migration into banked individuals. You can also offer such customers other forms of financial products, including transactional banking needs.
Technological Advancements in Cross-Border Remittance
Globalization of banking has made it easier for cross borders remittances, as banks have been turned into digital operations. Advanced financial technologies such as e-wallets, mobile banking applications, and cryptocurrencies have increased the speed, and reduced the cost. It also enhances the security of transferring money across borders.
As a bank you can provide better international remittance services, at a lesser price while keeping customers happy, by utilizing these technological advancements.
Blockchain and digital currencies
You can experience a lot of transformation in digital payments since the inception of blockchain technology and cryptocurrencies. They make deals autonomous, open, and impossible to change, which cuts out the need for middlemen and lowers costs. When banks like yours use blockchain-based solutions, you can make money transfers faster and safer, which gives you an edge in the market.
Machine learning and automation in banks
Increasingly, technology and AI are being employed to facilitate cross-border money transfers cheaper and faster. With AI, it becomes easier to identify scams, get the best exchange rates, and ensure that every customer is treated differently. Automation reduces costs associated with manual errors and quickens the rate at which transactions are processed hence increasing efficiency of banks.
Regulatory Considerations
Banks that deal with the transfer of funds across borders are greatly affected by compliance with regulations. To prevent money laundering, financing of terrorism and other unlawful businesses, you must consider the local and international regulatory.
Besides, you must invest in good security practices such as KYC, AML, and monitoring of transactions.
Standards and cooperation around the world
For banks that work in the cross-border transfer market, following international rules like those set by the Financial Action Task Force (FATF) is very important.
Working together with global regulatory groups helps your bank to keep its good name and escape big fines. Also, you need to keep up with changes in the rules so you can make your compliance plans fit.
Effects of Rules on New Ideas
It is crucial to adhere to the rules laid down, yet following those principles does stifle creativity. To maintain a balance, a medium has to be adopted where banks do not completely stick to the laid down rules and regulations but also come up with new and innovative plans.
Special regulatory frameworks often referred to as sandboxes, alongside the best practices for interacting with regulators enable you to experiment with new technologies and business patterns safely. This helps you to innovate in new technologies that you are not aware of.
Conclusion
Thus, international remittances hold a prominent importance in the world economy. It creates financial opportunities for more individuals and maintains global stability. It is a strategic business opportunity for your bank to bring on board new users who will be loyal to your service. You can offer a cost-effective and efficient cross-border payment solution for international money transfers.
One of the cross border remittance benefits is that it enables you to generate fee income from such transactions. You can establish your bank as the best channel to offer other financial services to such immigrants. In addition, this leads to increased financial inclusiveness within the target population and enhancing brand reputation which gives you an edge over the rest of the players in globalizing finance.
No comments yet