When COVID-19 began to spread, businesses across multiple industries struggled to predict their futures. With closed borders and a sudden reduction in face-to-face communication, the world as we knew it became an unknown territory. Throughout this past year certain industries have flourished while others have experienced a dramatic decline. As the world starts to open up and live with COVID-19, it will be interesting to see what changes we see in the financial world and beyond.
Here are three key areas the international trading space should keep an eye on right now:
More cross-border trade boosted by global DTC commerce
A key trend following COVID-19 was the growth of eCommerce, increasing globally by 10% last year. Whilst large resellers such as Amazon and eBay continued to grow, retailers also began to create and/or prioritise their online branding and stores, to optimise sales.
This shift meant those within financial services were able gain more business as there was more to assist with. Traditional DTC commerce is usually local, where sellers can offer products to local clients and only local acquiring and settlement is required. Increasingly however, local consumers can be sold products by sellers from around the globe and this leads to greater cross-border trading. As a result, more payment services are now required, and this extends the payments value chain. Whilst it previously ended at a local stage, the progression now goes from local acquiring into local collection/settlement and then to cross-border suppliers. Multiple payment service providers may be responsible for each part of the payment chain and this elongated chain involves a large range of financial services, where only a few were needed before.
The digitisation of cross-border B2B trade
Growth has been stable in the B2B cross-border trade space over the past year and this trend is set to continue. Reports by EY predict global cross-border B2B payment flows will reach $150 trillion US dollars in 2022, showing that cross-border B2B trade will further accelerate cross-border payments.
A recent PwC report also found 94% percent of financial service companies believe financial technology will help to grow their company’s revenue. It is because of this, that banks are expected to partner with more fintechs to innovate their systems and there are many benefits for doing so. We have already seen this trend blossom with platforms such as Trusple. A digital trade and finance platform, Trusple provides a marketplace for SMEs and financial institutions by connecting them with domestic and international banks, as well as logistics and supply chain professionals. With platforms such as these, we can see the growing efforts to innovate cross-border B2B trade, which is also trickling into innovations in the payment technology space. Payment technology platforms are now able to offer faster B2B payments and automated transaction processes, which had not been possible in previous years.
The recovery of travel as COVID-19 slows down
Worldwide, the race to vaccinate the public is accelerating and, in many countries the rate of COVID-19 is slowing down. Last year, airline spending around the world took a $352 billion hit, taking the industry back to levels not seen in over 15 years - but there is hope. A recent MasterCard report found global business travel is showing recovery signs, with Australia corporate travel bookings matching the recovery in consumer travel, and the US now 60+% of pre-Covid levels. Here, we can see financial services within the cross-border business and travel space on their way to recovering. Based on the anticipated recovery of travel, we predict it will become one of the key growth drivers for payment fintechs who focus on B2B payment innovation, such as card solutions, in the travel industry.
With these key trends in mind, financial services in the B2B space can optimise their offerings to get ahead of the curve in future. As well as digitisation, there will always be more opportunities for the financial landscape to adapt as we enter a post-COVID world. Businesses must therefore ensure they are prepared for any and all unpredictable changes in this space.
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