The Rapid Pace of Innovation in Cross-Border Payments and Its Uneven Adoption Among Commercial Users
The rate at which innovation is advancing within the cross-border payments sector remains unrelenting, with frequent introductions of cutting-edge technologies and new strategic partnerships. Despite this ongoing evolution, the uptake of these solutions by commercial entities has lagged behind expectations, appearing slow and inconsistent. As shifting tariffs compel global businesses to reassess their supply chains, financial institutions present a potential source of guidance and customized solutions designed to address the swift alterations in cross-border payment requirements.
Insight into Tariff Impacts from Hugh Thomas
In the Tech Meets Tariffs: Cross Border Payments in 2025 report, Hugh Thomas, the Lead Commercial Payments Analyst at Javelin Strategy & Research, dissects the consequences of tariffs across various industries. He also explores strategies for financial institutions to mitigate potential declines in cross-border revenue and highlights emerging opportunities.
Adapting to Tariff-Driven Supply Chain Shifts
Many cross-border payments providers are likely assisting clients who are contemplating relocating their supplier bases back to domestic partners as a means of evading tariffs. For example, a U.S.-based company with an established Canadian partner might now be assessing the feasibility of enduring a 10% price hike for maintaining this partnership versus switching to a local provider.
The diverse impacts of tariffs on different industries mean that these decisions can become intricate and multifaceted. According to Thomas, “In the U.S. oil and gas industry, around 30% of oil and gas inputs originate from Canada. The supply chain is structured specifically for handling Canadian oil sands; hence, alternatives are limited, making it challenging to change this industry’s supplier base.” Conversely, in the grocery sector, where a significant portion of produce comes from Mexico, companies may face fewer constraints when considering alternate domestic sources.
Moreover, industries with higher levels of inventory days, such as construction, which relies on cross-border supplies for about 10% of its inputs but maintains over 130 days worth of stock, can potentially weather tariff-related challenges if these costs prove temporary and subject to negotiation by financial institutions.
Navigating the Tariff Storm Through InnoVative Solutions
Should tariffs persist and more U.S. companies opt for domestic suppliers, financial institutions might experience a reduction in cross-border payments revenue. However, several strategies exist for adapting to this scenario.
One approach involves leveraging escrow mechanisms where the first six months of payments can be conditional on delivery of goods, particularly for significant purchases. Another strategy is to transition some customers to commercial cards, which reduces Know Your Supplier (KYS) expenses and potentially earns card provider rebates. Additionally, enhancing cross-border payment efficiency is crucial. Historically, these transactions have faced issues like high fees, slow processing times, fraud, currency conversions, and regulatory hurdles. Recently, a plethora of systems and solutions have emerged to streamline these processes, including those managed by credit card networks and projects led by a consortium of central banks.
Some believe that integrating real-time payments globally could offer the most effective cross-border payment solution. Digital assets like crypto and stablecoins are also posited as ideal due to their decentralized nature and blockchain security features. Despite these potential benefits, broad adoption remains slow, often described as ‘glacial’ by Thomas.
Thomas further notes that “the people managing business payments, domestic or cross-border, focus most on daily operations—‘making the donuts’—and have little time to refine existing processes.” Financial services providers must thus offer products that deliver immediate impact with minimal build-out or customization. Identifying the right use case and implementing suitable solutions can position these institutions well for supporting their commercial customers during this critical period of potential supply chain restructuring.
Driving Forces Towards Change
The ongoing supply chain reassessment due to tariffs, coupled with a broader push towards globalization, creates forces that could compel businesses to reevaluate their current operations. These crisis moments can act as catalysts for change in how processes are handled. As financial institutions identify and address these use cases effectively, they will be well-placed to assist commercial customers navigating this transformative phase.
Thomas concludes, “This unprecedented situation of potential supply chain reevaluation, combined with the persistent drive towards global business, can push people to reconsider their current practices. Maybe all this disruption can help us recognize that how we did things yesterday will not be how we operate tomorrow.”