The Unrelenting Pace of Innovation in Cross-Border Payments
The rate at which innovation is transforming cross-border payments is relentless, with continuous announcements of new technologies and partnerships. Despite the evolving ecosystem, commercial users have adopted these solutions slowly and inconsistently. As changing tariffs necessitate global businesses to restructure their supply chains, financial institutions can provide guidance and tailored solutions to address rapidly changing cross-border payment needs.
According to the
Tech Meets Tariffs: Cross Border Payments in 2025 report, Hugh Thomas, Lead Commercial Payments Analyst at Javelin Strategy & Research, analyzes the impact of tariffs across various industries. He explores how financial institutions can mitigate potential revenue declines and highlight opportunities for new approaches.
Weathering the Tariff Storm
Many cross-border payments providers may find their customers considering relocating supplier bases to domestic partners to avoid tariffs. For instance, a U.S. company with an established Canadian partner might now be assessing whether it’s worth absorbing a 10% cost increase or switching to a local supplier.
Due to differing impacts across industries, these decisions can become complex quickly.
“In the U.S. oil and gas sector, approximately 30% of inputs come from Canada,” Thomas stated. “The supply chain is designed for Canadian crude, and there are no other sources currently available to replace it, making changes in that industry unlikely.”
Conversely, the grocery industry depends heavily on Mexican produce. Companies face fewer barriers when switching suppliers or adapting product offerings.
Another factor is the inventory levels maintained by industries, with the top 10% of construction inputs sourced cross-border and carrying around 130 days of inventory.
“If tariffs are temporary, businesses can ride out this storm,” Thomas added. “Financial institutions should consider supporting their clients to manage through these challenges.”
Making the Donuts
If tariffs persist and force U.S. companies to switch to domestic suppliers, financial institutions may lose cross-border payment revenue. However, several strategies can be implemented.
“One approach is introducing escrow mechanisms for new suppliers where payments are conditional on delivery,” Thomas suggested. “Another way is moving customers to commercial cards to avoid Know Your Supplier (KYS) expenses and potentially earning some rebate revenue from card providers.”
Improving cross-border payment efficiency has been a longstanding challenge, with issues like high transaction fees, slow settlement times, fraud, currency conversions, and regulatory barriers affecting these transactions.
Recently, there has been an influx of systems and solutions designed to simplify cross-border payments by making them cheaper, more automated, and transparent. These include programs managed by credit card networks and projects driven by a consortium of central banks.
Some argue that integrating real-time payment systems globally could provide the most effective solution.
Digital assets such as cryptocurrencies and stablecoins have been proposed as ideal cross-border solutions due to their decentralized nature and blockchain-based security.
While each solution offers distinct advantages, widespread implementation remains slow.
“Adoption of these technologies is moving at a glacial pace,” Thomas commented. “This is because businesses focused on managing payments have limited time to innovate.”
Two Forces Driving Change
With operational priorities often taking precedence, financial services providers must offer impactful solutions that require minimal build-out or customization from their clients. Additionally, the business case for any cross-border solution must be both essential and practical.
Once financial institutions identify the right use cases and appropriate solutions, they will well-position themselves to support commercial customers during a potential supply chain reevaluation.
“Crisis moments can drive significant change if they force businesses to reassess their processes,” Thomas observed. “The unprecedented evaluation of global supply chains along with the broader push towards more global operations are powerful forces at work now.”
“There’s an opportunity here for these technologies to be taken more seriously, and this disruption could finally get people to rethink how they do business,” he concluded.