Cross-Border Digital Wallets as the Antidote to Cash?

Taking a payment mechanism that’s been around for centuries and bringing it fully into the digital age requires work.

But as Ralph Koker, global head of product at TerraPay, told PYMNTS for the “What’s Next in Payments: How Do You Do Digital?” series, the movement to displace cash has momentum, even if there are still pockets of resistance when it comes to cross-border transactions.

“We are creatures of habit,” he said, adding that “when you see how cash has been around for years, and we’ve never questioned, it’s because it’s trusted and because it’s ubiquitous. And for us to make the paramount change [from] cash to digital, we need to make digital just as ubiquitous as cash.”

That’s what firms like TerraPay are trying to do. The company provides a single point of connectivity for digital wallets and cards across 7.5 billion bank accounts and 40 global markets.

“The way TerraPay ‘grew up’ was through the digital wallet space,” said Koker, who added that the company encourages and enables the interconnectivity between The Clearing House’s RTP® network and bank rails, but there’s a whole ecosystem that encompasses remittances across borders. The company’s sweet spot remains with digital wallets.

The digital options, comparatively speaking, are missing the coveted trust factor. There’s a bit of a paradox here, as domestically speaking, we’re all used to using those wallets and digital channels to split the bill and send and receive money, sometimes in real time.

“But in cross border, you’re trusting somebody else to deliver hopefully cash or the equivalent of cash on the other side,” Koker said.

The tried-and-true digital methods in a domestic setting — typing in a phone number, email or another handle so that a receiver can access the money — exist internationally.

It’s incumbent on firms such as TerraPay to raise the level of awareness of those options, he said. There is still more traction on the sending side, where cash is being converted into digital payments to be transferred to their ultimate destinations. In at least some corridors and regions, such as the Asia-Pacific region, as much as 70% of all commerce is going through a digital wallet. Half of all face-to-face transactions are going through digital routes, too.

“What that tells me is that the digital receive points are there, and we are, for instance, with TerraPay connected to them to receive [the money] in real time,” Koker said.

In terms of the company’s current and future efforts, TerraPay is focused on enhancing its cross-border money movement capability by direct integration with wallets, he said. The company launched its wallet interoperability council in August. Through that council, TerraPay works with several wallet operators to facilitate interoperability rather than relying on government mandates alone.

We’re close to a future where a traveler might go to lunch with friends and split a bill.

“Imagine that we are going to the Philippines, and I come in with a U.S. wallet, and there’s somebody sitting there with a Filipino wallet, and there’s somebody sitting there with a wallet from Uganda, and we’re all having a lovely lunch, and none of us want to pay for each other,” he said. “So, we split the bill, and we can all transfer to the Filipino wallet digitally. I don’t have to go to an ATM or look at the fees or conversion rates.”

QR codes will also gain ground as merchants and wallet operators come together to facilitate commerce across borders, he said.

“Suddenly they can be on a global market platform, and payments could be done through their own instruments, and the buyer can use their own instrument to buy it,” Koker said. “And no cash changes hand.”

“The people that really need to do cross-border payments are going to get more demanding on a daily basis,” he added.

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