Are Traditional Cross-border Payment Platforms About To Be Replaced? Fintech Is Finding Better Solutions

Fintech has been a lot nimbler in providing more efficient and cheaper options

Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

The Internet and global connectivity have seen a dramatic rise in international trade. Despite this, the infrastructure to transfer money between countries is based on decades-old systems and processes that are no longer up to the job. Traditional international transaction infrastructure is too slow, expensive and complex. 


The problem has been acknowledged, but solutions have been slow to appear. Last year, the G20 made the improvement of cross-border payments a priority. In addition, traditional cross-border platforms like SWIFT and Visa have been trying to improve their offerings. But these are all very recent developments. 

Have they been too slow to respond? Fintech has been a lot nimbler in providing more efficient and cheaper options. P2P or B2B transactions, such as Venmo, Stripe, or PayPal, have been around for a while, but gaps still need filling.

There is a lack of solutions for small businesses  

None of these solutions adequately address the problems faced by small and medium enterprises (SMEs) or businesses (SMBs), and this is a rapidly growing sector. The estimated number of SMEs worldwide has risen from around 122 million in 2000 to 213 million in 2020 and employs over 50 per cent of the workforce. Additionally, a Mercator report found a sharp rise in SMEs making cross-border payments from 34 per cent in 2019 to 43 per cent in 2020.

While the banks have introduced processes to make cross-border B2B transactions easier, SMBs are frequently excluded due to low gross transaction volumes. Consequently, smaller businesses are stuck with the more traditional ways of transferring money which pose several issues for enterprises on tight margins. 

For example, SMBs face considerable expenses caused by high transaction costs, multiple fees, and unfavorable rates. Payments also take time, with delays of up to a week. Additionally, there is a lack of transparency and considerable chargeback risks.

The majority of fintech solutions have been built on top of existing bank procedures and traditional cross-border platforms. There have recently been improvements in efficiency and costs, but significant issues remain. 

Leveraging cryptocurrency might be the key to transforming the industry

The creation of cryptocurrency might provide the answer and lead to lasting change in how international trade is conducted. By leveraging the advantages of cryptocurrency, new fintech companies are creating solutions that circumvent bank and payment platforms like SWIFT and Visa.

A great example of this is a platform called XanPay. Created by Hong Kong-based fintech company XanPool, it is designed with SMB cross-border payments in mind. 

XanPay’s founder and CEO, Jeffery Liu, explains how the platform began, “We created XanPay to help smaller businesses trade in international markets. It uses XanPool’s existing cryptocurrency and network of local currency providers to facilitate settling cross-border transactions. Because we are using crypto, we don’t have to route transactions through any of older platforms.” 

In bypassing intermediaries, the process of international payments is simplified. Liu explains, “For decades, transferring money or making payments to another country required trusted financial institutions that operated at a global scale. That meant banks or large established platforms like Visa or SWIFT. So, when the internet arrived, and SMBs started to conduct increasing amounts of cross-border business, it was natural that systems were built on the existing infrastructure.

“The problem for smaller businesses is that as they embrace eCommerce and expand to new markets, they face numerous issues due to how international payments are currently processed. These include delays of up to a week, foreign exchange charges and a typical 3% merchant fee. In addition, chargeback and credit card fraud are also widespread and can be crippling for an SMB. 

“By using cryptocurrency, we can avoid all of these problems. For example, our platform is cheaper, with charges of at most 1% per transaction plus a nominal network fee. Our routing technology allows partners to send or receive payments almost instantly, with a lot less risk involved.” 

XanPay operates outside the limitations of traditional frameworks. This means they can partner with companies that may have previously been rejected. “We can work with merchants that traditional payment processors may deem too risky. As we are a network of businesses and individuals, we aren’t reliant on banks or payment partners. This means we can work with any legal business,” Liu says.

Established in Asia, XanPay currently focuses on SMBs in the Asia Pacific region, working with local networks. Liu says, “We’ve integrated with 25 payment solutions used in over 20 APAC countries so far. This includes local currencies and connecting to around 500 banks in the region. To make things simpler for merchants, we have created several widgets and eCommerce plugins, and our API uses REST, which is really easy to use.”

Traditional platforms are now trying to catch up

Older platforms and ways of routing money were not designed to deal with the explosion of SMBs operating internationally. Cryptocurrencies and blockchain technology bypass banking infrastructure and its related problems. A growing number of financial institutions, who were previously wary, are now taking notice of the advantages of crypto.

Recent developments have included services such as SWIFT api and Visa Direct, designed to target SMEs and make processes faster. Nations or blocks like China and the EU have also been discussing their own digital currencies, which should make cross-border transactions easier. But to various extents, they are all playing catchup. Fintech got there first and is pulling ahead. 

Note: Investment in cryptocurrency is subject to risk and readers should do their own due diligence. Entrepreneur Media does not endorse any such investment.