What is the future of B2C or B2B for cross border payments?
The current globalized world ignores geographical boundaries when conducting trades or business, with the internet making it possible for products to reach every household across the globe. With the increase in global buyers, steep growth in cross-border payments has been observed, where revenues are estimated to reach $1.9 billion by the end of 2020. These international transactions can sometimes be complex and inconsistent due to many uncertainties in delivery time, total cost charged, cybercrimes, and many such issues.
B2B model in cross border payments
Despite a hiccup due to the pandemic in cross- border B2B payments, it is expected to pick up in 2021 as vaccines are rolled out. B2B businesses are stable, and business predictability is better in such models. A study from Juniper Research shows that the total value of B2B cross-border payments will reach $35 trillion by 2022, growing by 30% compared to $27 trillion in 2020. However, the long-term impact on the economy because of the COVID-19 pandemic means it will take up to 2022 before we reach 2019 levels.
The relationship between the buyer business and the seller’s business evolves with time. Both the parties share a mutual understanding, and the buyer business depends on the seller for the quality of payment services. Moreover, where real-time payments are preferred more, this model provides service in a shorter time as well.
A new research study by Nick Maynard shows that in B2B bill payments, services where funds settle in 10 seconds or less will account for 9.3% of B2B transactions by volume in 2022, which earlier was 6% in 2020. However, due to low transaction limits for schemes, such instant payments will only account for 6.3% of B2B transactions in the same year. But on the other hand, the scheme enables the new capabilities of instant payments adoption of greater value.
B2C model in cross border payments
More businesses today require completing transactions with consumers. Insurance companies making up one of the largest markets in this type of B2C businesses. Here, sellers must maintain good relations with customers.
During the pandemic, interregional trade suffered a greater loss than intraregional did. Restriction on country movement slowed down the business to consumer payouts and remittance payments. Marketplace Platforms like Amazon, eBay, Etsy, Flipkart, and Shopify have seen seller sign-ups increase by 70 to 150 percent since the start of the pandemic, based on their recent filings and public statements.
In healthcare, there has been a surge in provider participation for services like telemedicine, which in turn is highlighting a growing need for B2C digital payments in professional services, education, and other areas. In the future, B2C business might see a downfall because its profit varies according to the economy and the customer's needs. For example, businesses always need marketing, and therefore companies that provide marketing services to a large client roster have a better chance of survival than those with a narrow client base. Targeting the right consumers can be a solution, but B2B models are more profitable in building business.
Financial services getting shaped up
Asia has become one of the largest hubs for B2B and B2C Fintech solutions, with China topping the list and followed by India. Apart from these two major countries, Thailand, Cambodia, Myanmar, Malaysia, Indonesia, and the Philippines, had also made a cumulative investment of $217 million in 2016. Fintech companies have started developing innovative services like virtual wallets, mPos, etc., in countries with a heavy population and more demand. Developing countries like India are fast adapting and quicker to adapt and adopt innovation in Fintech. The introduction of UPI has transformed the way mobile payments take place in the country. During demonetization in 2016, a 400-1000% increase in transaction volumes was recorded without hindrance due to cash's non-availability.
The research study by Nick Maynard notifies about the high potential of blockchain that can disrupt the existing international payment system due to its better efficiency and transparency from the traditional methods. Services, including RippleNet and VisaB2B Connect, will play a critical role in enabling these operators to compete in the market. Operators must try new systems now if they want to stand out from the crowd, especially in a highly commoditized post-pandemic world.