Mastercard
Fraud is a significant worry for SMEs when sending and receiving money, particularly internationally.
Different countries have varying rules and requirements when making an international payment.
Mastercard is innovating in the cross-border payments space to tackle fraud in an increasingly borderless digital economy.
There is now a plethora of new ways to send and receive money both domestically and internationally, enabled by exciting and innovative developments in payments technology.
Such transactions are the “crucial support” that keeps the global economy moving, said Rasika Raina, Mastercard’s senior vice president of Strategy and Solutioning. That role in the global economy is only expected to grow. Global remittances reached $794 billion in 2022, with the figure expected to reach $810 billion this year.
Demand for low-cost and reliable international payments from both consumers and businesses has been driven by more people choosing to work, trade, and do business internationally, partly as a response to COVID-19 and global economic fluctuations.
But fraud is a significant worry for those sending — and receiving — money, particularly internationally, according to new research from Mastercard, which surveyed 11,000 businesses and individuals in 15 countries around the world.
The fear of fraud is a main concern for 41% of small-to-medium-sized (SME) businesses who have used online payments services. Almost half — 47% — of SMEs who have experienced problems with international payments say they have become less confident about sending money across borders and as a result send fewer payments overseas.
“The market expectation is that the user experience for domestic payments can be replicated with cross-border payments. However, cross-border payments still face a lot of challenges. They are slower, they’re not transparent, and people are really unclear about how much they will be charged in fees,” Raina said.
Security is the top concern for businesses making international payments
Security of transactions and protection against fraud are the highest priorities for SMEs when choosing an online international payments provider.
As the volume of payments has increased, so have the types of fraud, Raina said, including digital identity scams and money laundering. “Every year, there are new types of fraud added to the spectrum,” she said. Research from PwC shows that businesses reported $42 billion of losses due to fraud between 2018 and 2020, while two-thirds of consumers who had been a victim of a scam or fraud when sending or receiving payments either domestically or internationally said they did not get all of their money back, according to Mastercard’s report.
“Against this backdrop, it’s never been more crucial for cross-border payments to arrive safely. That poses a big challenge for financial institutions who need to keep money moving at pace, but with the higher levels of security required,” Raina said.
This situation is further compounded by different countries having varying rules and requirements when making an international payment, such as the need to manually verify the identity of a payer or payee.
This is a challenge that Mastercard is working to overcome with advances in technology, helping “to automate manual processes related to data and document transfers, as well as information exchange, such as financial crime and compliance information,” Raina said.
Mastercard is innovating to prevent fraud and help make financial systems more frictionless with multiple solutions in the space. Brighterion, which Mastercard acquired in 2017, provides AI solutions for businesses, including helping them to meet the regulatory requirements of governments, while Ekata, acquired by Mastercard in 2021, provides digital identity verification and risk assessment.
The very real consequences of payment problems
Making sure that people have access to finance — otherwise known as financial inclusion — is a significant issue, particularly in developing countries, with more than 50% of all global remittances being made to people without traditional bank accounts, who therefore need cash payouts. Many of these payments are made via a money transfer operator from one country to another, with the receiving family collecting the cash from a grocery store, for example.
The G20 Roadmap for Enhancing Cross-Border Payments aims to make such transactions “cheaper, faster, more transparent, and more accessible” by 2027.
“Those targets have to be achieved. Governments have to come together, and we also have to participate in the innovation in this space,” Raina said. “At its core, the financial sector wants a safe, secure, and transparent payments ecosystem.”
An interconnected, digitized, and secure cross-border payments ecosystem will be crucial in driving modernization and tackling fraud, meeting the demands of an increasingly borderless digital economy, and fostering financial inclusion.
This article was created by Insider Studios with Mastercard.