Two-Thirds of Banks Team With FinTechs on Cross-Border Payments

Digital payments have sparked interest in how traditional banking institutions, particularly in the U.S. and U.K., are partnering with FinTech companies. This is crucial in the area of cross-border payments, where consumers and businesses want faster, more efficient and more cost-effective methods for transferring funds internationally.

According to a PYMNTS Intelligence report, “Global Money Movement: How Digital Wallets Are Transforming Cross-Border Payments,” in collaboration with TerraPay, 62% of banks are actively exploring partnerships with FinTech firms to elevate their cross-border payment solutions. This integration signals a trend in the banking industry where collaboration with FinTech firms is becoming a key strategy for driving innovation.

The report surveyed 2,601 consumers, 398 small business leaders and 80 financial institution (FI) employees in four countries (U.S., U.K., Saudi Arabia and Singapore) to explore the trend of digital wallets and related challenges and opportunities in the global payment system.

Digital wallets have become a popular alternative to traditional banking methods for cross-border payments, according to the report. They simplify sending and receiving funds, particularly for remittances. In the U.S., nearly 73% of consumers send cross-border payments to family or friends, drawn to the speed and low-cost digital wallets offer over slow, expensive bank transfers. The same trend is seen in the U.K., where 63.4% of cross-border payments go to family or friends, further highlighting the demand for fast, reliable payment solutions.

FinTech companies have capitalized on this demand by offering seamless, efficient solutions. These firms provide digital wallet products that allow individuals to transfer money directly between wallets, bypassing intermediaries. By focusing on speed and ease of use, FinTechs are meeting the demand for cross-border payment solutions that traditional banks have been slower to adopt.

While consumer remittances are a driver of cross-border payments, businesses also account for a large share of these transactions. According to the report, U.K. businesses are 73% more likely to send cross-border payments to suppliers than to customers.

The U.S. presents a slightly different picture, where businesses are 20% more likely to receive cross-border payments from consumers than from suppliers. These differences highlight the diverse needs of businesses across regions, but they also point to the potential for FinTech solutions to streamline operations by offering tailored cross-border payment solutions.

For businesses, digital wallets can provide a more efficient and cost-effective way of handling payments to suppliers, settling bills or paying taxes. Traditional methods of international payments often involve multiple intermediaries and can incur high transaction fees. By partnering with FinTechs, banks can offer businesses faster, less expensive, and more secure ways to process payments, improving cash flow management and reducing operational costs.

Despite the advantages of digital wallets, challenges remain in improving cross-border payments. Regulatory limitations and limited availability of wallet services in some regions hinder progress. About 26% of digital wallet users report difficulties due to strict regulations or restricted access, indicating the need for better collaboration between FinTechs, banks, and regulators.

While the U.S. and U.K. are adopting digital wallets, other regions face hurdles in using these technologies. Banks and FinTech companies are working together to address these challenges, ensuring digital wallets are widely accessible and comply with local regulations and consumer protections.

Partnerships between banks and FinTechs will strengthen as digital wallets and FinTech solutions gain traction. With 62% of banks exploring FinTech collaborations, there’s a movement toward viewing FinTechs as partners, not competitors, in changing the banking industry.

In cross-border payments, this collaboration will drive faster, more efficient, and secure solutions. As digital wallets become widely adopted and demand for real-time transactions grows, U.S. and U.K. banks and FinTechs can improve global money movement, making cross-border payments easier for consumers and businesses.

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