Digital Wallets Help Rewrite the Calculus for Cross-Border SMB Growth

Cross-border transactions have historically been the Achilles’ heel of small- to medium-sized businesses (SMBs).

While digital tools and eCommerce platforms have lowered barriers to finding international customers and suppliers, sending and receiving payments across borders remains fraught with friction. That’s why, for decades, the narrative of global commerce was defined by multinationals and enterprises with deep pockets, dedicated treasury teams, and the infrastructure to handle the complexity of cross-border payments.

But the landscape is shifting as FinTech platforms, digital wallets and solutions like stablecoins re-architect the economics and workflows of cross-border payments. Papaya Global, for example, announced Wednesday (July 2) that it integrated Citi’s payment solutions to enhance cross-border payments, showing that the SMB ecosystem is finding its footing as it goes global.

As financial frontiers open to small firms thanks to payments and banking innovation, new business models are emerging for SMBs.

Read also: Can Digital Wallets, Stablecoins Solve Small Banks’ Cross-Border Cost Center?

Cross-border payments, from a cost-basis perspective, have traditionally made sense mostly to the world’s biggest companies, and to the world’s biggest banks that service their finances and payments. The reasons for this historical imbalance are embedded in the very infrastructure of international finance.

At the heart of cross-border transactions lies a complex web of correspondent banking relationships. When a payment is initiated between two countries, it often passes through a series of intermediary banks, each extracting fees and adding layers of administrative overhead. These intermediaries handle currency conversion, verify compliance and manage settlement, but they also contribute to a system that is slow, opaque and expensive. The fees associated with this process are not trivial.

By contrast, SMBs, independent contractors and emerging market firms face more challenges. For these participants, the high fixed costs associated with cross-border payments can be prohibitive. The foreign exchange spreads are wider. The transaction fees are more pronounced. Settlement times stretch from days to a week, often creating working capital pressures and disrupting supply chains.

At the same time, the process lacks transparency. A payment sent from one country can vanish into a black box of intermediaries, with limited tracking capability and little recourse in the event of a dispute.

Imagine, for example, an SMB trying to pay a supplier in Vietnam, collect payments from a client in Germany, or reimburse a contractor in Kenya. Cross-border inefficiencies are not just an inconvenience but a growth inhibitor. In markets where cash flow is king, waiting days for settlement or losing 5% to 7% to intermediaries can render cross-border expansion uneconomical.

See also: Trust Is Key for Banks as Cross-Border Trade Grows Turbulent

Nearly 1 in 5 SMBs are pessimistic about their odds of survival over the next five years, according to the PYMNTS Intelligence report “Brewing Storm: Why 1 in 5 Smaller Businesses Without Financing Fear They May Not Survive Tariffs.”

“When you have volatility in the values of currencies, it adds to what is ‘necessary’ to carry out successful cross-border payments and an overall payment strategy,” Rob Seidman, head of U.S. Bank’s Avvance, told PYMNTS in May.

“The holy grail is a frictionless experience for your customers, and we’re all striving for great user experiences,” he added.

It is against this operational backdrop that digital wallets, once considered the domain of peer-to-peer remittances or domestic mobile payments, are evolving into critical infrastructure for global commerce.

“In the past, we had wires, EFT and checks,” Lyndsay Langford, Bank of America’s head of Global Payment Solutions for Canada, told PYMNTS in June. “Today, clients demand faster payments, less friction and richer remittance data.”

PYMNTS Intelligence’s “Global Money Movement: Singapore Edition” report found that 64% of merchants surveyed indicated that faster transactions would motivate them to start using digital wallets within the next 12 months.

Digital wallets aren’t just conduits for moving money. They are becoming multi-functional financial operating systems for SMBs. This embedding of financial services is especially powerful for SMBs that may be underbanked or lack access to formal credit. With digital wallets, transaction history becomes a proxy for creditworthiness, enabling alternative financing models and insurance.

By integrating wallets into operational platforms, friction is reduced. SMBs no longer need to navigate the labyrinth of international banking; they simply interact with the systems they already use.

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