The Pace of Innovation in Cross-Border Payments

The rate at which innovation drives the cross-border payments sector remains high, with frequent announcements of new technologies and partnerships. Nevertheless, despite these advancements, commercial users’ adoption of such solutions proceeds at a slow and inconsistent pace. As shifting tariffs compel global businesses to reconfigure their supply chains, financial institutions have the opportunity to assist through tailored guidance and innovative solutions designed for quickly changing cross-border payment needs.

Insights from Tech Meets Tariffs: Cross Border Payments in 2025

According to Hugh Thomas, Lead Commercial Payments Analyst at Javelin Strategy & Research, as detailed in the

Tech Meets Tariffs: Cross Border Payments in 2025

report,
Hugh Thomas
explores how tariffs impact various industries, examines strategies for financial institutions to mitigate potential declines in cross-border revenue, and highlights opportunities for new approaches.

Weathering the Tariff Storm

Many providers of cross-border payments likely serve customers considering re-shoring their supplier base to domestic partners to avoid tariffs. For instance, a U.S. company with an established Canadian partner might now be evaluating whether it is worth absorbing a 10% cost increase to continue the relationship or switch to a domestic supplier.

Due to the differing impacts of tariffs across industries, these decisions can quickly become complex.

“In the U.S. oil and gas industry, about 30% of inputs come from Canada,” Thomas stated. “The supply chain is structured to handle Canadian oil sands, and there are limited alternative sources for that type of crude. Therefore, changing this supply chain in that industry would be highly unlikely.”

In contrast, the grocery sector sources much of its produce from Mexico, making it easier for companies to switch suppliers or pivot to different products.

Another factor is the level of inventory days. For example, the top 10% of construction inputs come from cross-border sources, but these firms typically carry about 130 days worth of inventory on their books.

“If tariffs are temporary and can be negotiated away by industry or company, providers should focus on supporting customers who heavily depend on cross-border supplies,” Thomas added. “Their ability to withstand the storm hinges on these factors.”

Adapting Financial Institutions

As tariffs persist and push more U.S. companies toward domestic suppliers, financial institutions may experience a loss in revenue from cross-border payments. However, several strategies can help these institutions adapt.

“One approach is to facilitate the onboarding of new suppliers with an escrow mechanism where initial payments are contingent on goods delivery for major purchases,” Thomas suggested. “Another option is to encourage customers to use commercial cards, which can reduce Know Your Supplier (KYS) expenses and possibly generate rebate revenue from card providers.”

Additionally, making cross-border payments more efficient addresses longstanding issues such as high transaction fees, slow settlement times, fraud, currency conversions, and regulatory barriers. Recent innovations include systems managed by credit card networks and projects driven by a consortium of central banks.

Some believe that connecting real-time payment systems globally could offer the most effective solution for cross-border payments.

Cryptocurrency and stablecoins have also been proposed as ideal solutions due to their decentralized nature and blockchain-based security.

Despite these innovations, widespread implementation continues to lag.

“Adopting these technologies is progressing at a glacial pace,” Thomas remarked. “It’s because payments professionals focus primarily on day-to-day operations and lack time to explore new methods.”

Driving Forces for Change

For financial services providers, offering products that deliver immediate impact without requiring significant customization is crucial. The business use case for cross-border solutions must be both critical and practical.

Once institutions identify the right solution and its use case, they will better support their commercial customers during potential supply chain disruptions.

“These crisis moments can push businesses to reevaluate processes,” Thomas explained. “With ongoing supply chain reassessments and the broader move toward a globalized market, despite tariff barriers, two significant forces are at play.”

“This disruption could prompt everyone to reconsider how they operate today and prepare for tomorrow’s business needs,” he concluded.