Payment Networks: Cross-Border Growth & Security Challenges

The payments industry is undergoing a seismic shift, with innovations in tokenisation, cross-border transactions and real-time payment networks evolving at pace. 

As businesses and consumers alike adapt to these changes, new opportunities and challenges are emerging in equal measure.

Tokenisation: The key to frictionless payments

One new innovation is tokenisation, which has emerged as a game-changer in the quest for seamless and secure payment flows. By replacing sensitive data with unique identifiers, this technology is revolutionising how businesses handle transactions and store customer information.

The global tokenisation market is on a steep growth trajectory, with projections suggesting an expansion from US$2.3bn in 2021 to US$5.6bn by 2026. This rapid growth is driven by the technology's ability to simplify compliance, reduce costs and enhance customer experiences.

Anish Kapoor, CEO at AccessPay, says: “Independent software vendors (ISVs) seeking to add payment capabilities to their offerings have traditionally grappled with storing sensitive information. Tokenisation removes this requirement and lowers the barriers to entry.”

For businesses, the benefits of tokenisation are manifold. Beyond simplifying PCI DSS compliance and reducing regulatory burdens, tokenisation is paving the way for frictionless customer experiences. 

One-click transactions and automatic card updates are becoming the norm, potentially boosting conversion rates and fostering customer loyalty.

“When sensitive data is replaced with a token, we can streamline transactions by eliminating the need for repeated data entry and speeding up the authorisation process,” adds Gabriel Vieira, VP of Engineering, EMEA at CI&T. “As a result, tokenisation facilitates quicker, more secure payments and supports seamless features like one-click transactions, ultimately creating a smoother user experience.”

Cross-Border payments: A market in flux

The cross-border payments landscape is experiencing unprecedented growth, driven by globalisation, e-commerce expansion and the rise of the digital economy. 

Recent projections suggest that the B2B cross-border payments market will surge by 43% to reach a staggering US$56.1tn by 2030.

Ryan O'Holleran, Head of Sales, Enterprise at Airwallex, explains the driving forces behind this trend: “Businesses are increasingly reliant on moving money across borders in their quest to scale and be global from day one. 

“While traditional payments systems have historically been slow and expensive, new technologies are removing the friction and cost associated with cross-border payments.”

Technological innovations are playing a crucial role in this transformation. Artificial intelligence (AI) and real-time processing are reducing operational costs, improving transparency and accelerating transactions. 

AI-powered systems can now optimise payment routing, reduce errors and find the best exchange rates, making cross-border transactions more efficient and cost-effective.

The emergence of consumer remittance apps has also democratised international trade, making it easier for small businesses to participate in the global marketplace. 

Meanwhile, incumbent banks are upgrading their offerings, leveraging technologies like SWIFT's Global Payments Innovation (gpi) and SWIFT Go to improve the speed, transparency and traceability of cross-border payments.

The rise of real-time payment networks

Real-time payment (RTP) networks are gaining traction worldwide, offering near-instantaneous fund transfers and settlements. 

Brazil's PIX system stands out as a prime example of RTP's potential. Launched in November 2020, PIX processed more than 1 billion transactions per month within its first year, with nearly 60% of Brazil's population adopting the system.

Gabriel Vieira, who works with some of the largest banks in Brazil, offers insight into PIX's success.

“PIX has transformed the payment landscape in Brazil by offering instant, 24/7 payments with no fees for individuals, making it a preferred choice for millions of users,” he notes. “The success of PIX showcases the potential for RTP networks to become ubiquitous globally.”

However, the global adoption of RTP networks has its challenges. The pace of implementation varies significantly between countries, largely dependent on regulatory environments and investment levels. 

While some nations, like Brazil, India and the UK, have made significant strides, others are still in the early stages of adoption.

“The bigger question is whether all these RTP schemes join together so that instant, low-value, cross-border payments become easier,” says Anish. 

“We’re already seeing this in Asia, where the ASEAN nations have created a low-value, cross-border system connecting Indonesia, Malaysia, Singapore and Thailand. However, there has been less activity in the EU, UK and the US.”

Security: The linchpin of modern payment networks

As payment networks become more sophisticated and interconnected, the importance of robust security measures cannot be overstated. With cyber crime costing the global economy more than US$1tn annually, payment fraud remains a significant concern.

Anish emphasises the critical nature of security in real-time payments: “It’s essential that security measures are front of mind for real-time payments. 

“Instant payments require more security measures across the transaction lifecycle, including the payment originator and the sending and receiving banks.”

A particularly concerning trend is the surge in Automated Push Payment (APP) fraud, especially in markets like the UK. As instant payments become more prevalent, there's a risk this type of fraud could escalate if security measures don't keep pace.

For businesses, investing in payment security is not just about preventing losses; it's about building and maintaining customer trust. 

Recent surveys suggest a significant portion of consumers would stop patronising a retailer following a data breach, even if remediation steps were taken. This underscores the critical role of security in maintaining customer relationships and brand reputation.

The interplay between innovation and security will remain crucial as payment networks continue to evolve. Businesses that can successfully navigate this landscape – leveraging new technologies while maintaining robust security measures – will be well-positioned to thrive in the digital economy of the future.

From tokenisation to real-time payments, today’s advancements are creating new opportunities for businesses to streamline operations, expand globally and enhance customer experiences. 

With these opportunities come new challenges, particularly in the realm of security. As the industry continues to evolve, staying informed and adaptable will be key to success in this dynamic environment.

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