The Unyielding Pace of Innovation in Cross-Border Payments
The rate at which innovation occurs within cross-border payments continues to accelerate, marked by frequent announcements of new technologies and strategic partnerships. Despite the evolving landscape, the uptake of these innovations by commercial enterprises has been sluggish and inconsistent. As fluctuating tariffs compel global businesses to restructure their supply chains, financial institutions now have an opportunity to offer tailored guidance and solutions designed to address rapidly changing cross-border payment requirements.
Insights from the “Tech Meets Tariffs: Cross Border Payments in 2025” Report
According to a detailed report titled Tech Meets Tariffs: Cross Border Payments in 2025, Hugh Thomas, Lead Commercial Payments Analyst at Javelin Strategy & Research, delves into the implications of tariffs on various industries. The report explores strategies for financial institutions to mitigate potential revenue losses from cross-border payments and identifies opportunities for innovation.
Weathering the Tariff Storm
Many companies serving cross-border payment customers might consider relocating their supply base closer to home to avoid tariffs. For instance, a U.S. company with an established Canadian partner may be debating whether to absorb a 10% cost increase or switch to a domestic supplier.
The impact of tariffs varies significantly across industries. In the U.S. oil and gas sector, about 30% of inputs come from Canada, making it challenging to reconfigure supply chains. Conversely, the grocery industry, which sources much of its produce from Mexico, faces fewer barriers when considering domestic suppliers.
Another factor influencing these decisions is the level of inventory held by companies. The top 10% of construction inputs are cross-border sourced, carrying about 130 days of inventory. Thomas suggests that if tariffs are temporary, providers can support their clients through this transitional period.
Adapting to Tariffs
Even if U.S. companies switch to domestic suppliers due to lingering tariffs, financial institutions could still capitalize on the situation by offering alternative services. For example, they could facilitate new supplier agreements with payment contingencies or encourage customers to use commercial cards to avoid Know Your Supplier (KYS) costs and potentially generate rebate revenue.
Improving cross-border payments efficiency is another key strategy. Long-standing issues such as high fees, slow settlement times, fraud, currency conversions, and regulatory barriers have spurred the development of new systems and solutions aimed at making these transactions faster, cheaper, more automated, and transparent.
Some view connecting real-time payments globally as a promising solution. Additionally, digital assets like cryptocurrencies and stablecoins are proposed due to their decentralized nature and blockchain-based security features. However, widespread implementation remains slow.
Driving Forces for Change
Given the operational priorities of many enterprises, financial services providers must offer products that deliver immediate impact without extensive customization. Identifying a vital and practical use case is crucial. Once these solutions are implemented, they can support commercial customers during an anticipated shift in supply chains.
Thomas posits that crisis moments like current tariff situations could drive fundamental changes in how businesses operate. The confluence of global restructuring pressures and ongoing technological advancements presents both challenges and opportunities for financial institutions to lead the transformation.