As cross-border payments become increasingly quicker and efficient, so do the demands of consumers and businesses alike. 

The settlement period has become a focal point for end users and firms, such as Visa and Currencycloud, continue to navigate complex compliance, regulatory and technological barriers to achieve this. 

That’s why last September, the two aforementioned firms came together to launch Visa Cross-Border Solutions, offering the best services and technology infrastructures to best support merchants in their bid to expand cross-border payments. 

Tim Moncrieff, Senior Director of Strategic Initiatives at Visa Cross-Border Solutions, lent his opinion on the five impactful trends he forecasts for 2024 on the development and growth of cross-border transactions. 

1.       Convergence between retail and business payment systems

In 2024, expect a convergence between the convenience of personal finance and corporate financial systems. Businesses will increasingly demand payment solutions characterised by speed, ease of access, transparency, and cost-efficiency, mirroring what we’ve grown accustomed to in personal banking. 

This evolution will not only streamline business operations but also fuel competitive advantage. Companies quick to implement these sophisticated payment platforms will secure a first-mover advantage, potentially redefining industry benchmarks for financial transactions.

This ‘consumerisation’ of institutional payment experiences is likely to be a significant focus in cross-border. Cross-border already plays a systemic role in business activity, as evidenced by its robust growth and scale with flows forecast to reach about $250 trillion by 2027​​. 

The demand for improved performance and accessibility in cross-border, however, will drive a focus on systemic interoperability and straight through processing – to ensure the digital experiences enabled through domestic instant-payment schemes and digital wallets can be replicated cross-border.

2.       The rise of ‘Platform as a Service’ models

The last 20 years in payments has seen huge innovation on the front-end user experience, from payment form factors, messaging standardisation and digital experiences. 

However, the core settlement infrastructures that underpin these enhanced experiences have not substantially changed – but we believe this will start to change in 2024, with an industry shift towards enhancing the back-end infrastructures that manage settlement, reconciliation and liquidity. 

This will be partly inspired by economic demand (rising interest rates, liquidity optimisation) and from market demand (FSB imperatives, consumer expectations) which will drive a need to focus on operational efficiency.

Such innovation is vital in an era increasingly moving away from cash, demanding payment systems that are as agile as they are robust. Looking ahead, disconnection from traditional accounts and reliance on technology, may bring forth platform as a service (PaaS) models, reshaping customer experiences and payment processes​​.

3.       Compliance and security are the key

As business payments evolve, compliance and data security will take centre stage. The complexity and scale of corporate transactions necessitate a heightened focus on regulatory adherence and data protection. 

The Financial Stability Board (FSB) is taking significant steps in this direction, as detailed in their G20 Roadmap for Enhancing Cross-Border Payments report. This trend underscores the need for robust security protocols and compliance frameworks, ensuring that as payment system interoperability progresses, the necessary attention is given to legal, regulatory, and supervisory frameworks, and cross-border data exchange​​.

4.       Regulators get serious on CBDCs

With the potential introduction of central bank digital currencies (CBDCs), which over 114 countries are exploring, the need for public-private sector collaboration and robust regulatory frameworks becomes even more crucial. 

CBDCs, a digital representation of fiat money issued by central banks, require careful consideration regarding privacy, security, and interoperability – most significantly together with digital private money (commercial bank money)​​. 

Expect significant advancements, redefining the very nature of money in a digital age, with the need for increased public-private sector collaboration.

5.       Faster settlements

2024 will spotlight the need for enhanced settlement efficiency in financial transactions. While current systems facilitate rapid payments, the settlement process, involving multiple intermediaries, remains sluggish. The focus will be on streamlining this aspect, reducing time lags and trapped liquidity, and improving overall transactional efficiency. This shift is crucial for businesses where speed and reliability in financial dealings are paramount.

The U.S. Securities and Exchange Commission (SEC) has made significant strides in this area, proposing to shorten the settlement cycle for certain securities transactions from two business days to one business day after the trade date, known as “T+1”​​. This change is expected to provide numerous benefits, including quicker access to transaction results, reduced risk of unsettled trades, and enhanced operational efficiency.

However, there are operational risks associated with a shorter settlement cycle, such as less time to address errors and deal with unexpected trading losses. Ensuring a smooth transition requires significant investment, systems changes, and operational testing among various market participants. Detailed planning and process adjustments are essential to mitigate risks and ensure readiness for this change​​.