The money transfer segment of the commercial financial services sector is vast, with transactions taking place on both a domestic and international cross-border basis. A recent Juniper Research market study found that global cross-border B2B money transfers totalled $136 trillion in 2017.
Yet, to date, the B2B money transfer industry has not experienced the start-up innovation and disruption like other areas in the finance and commerce space. That being said, we can anticipate that 2018 will be pivotal, as more fintech entrepreneurs pursue this previously untapped opportunity.
B2B Money Transfer Market Development
New study findings have concluded that the cross-border B2B money transfer market is ripe for disruption, as new technologies and legislative changes redefine traditional banking practices across the globe. Cross-border B2B transactions will exceed $218 trillion by 2022, up from $150 trillion this year.
In comparison, global GDP was placed at just $77 trillion last year, rising by 3 percent in 2018. The new market research found that fintech was starting to have a profoundly disruptive effect on traditional cross-border B2B transactions.
"Whilst traditional banks still facilitate the vast bulk of B2B cross-border transactions, new technologies, such as virtual accounts, eInvoicing, and blockchain technology will aid in driving businesses to solutions which provide savings in time, efficiencies, and transparency," said Lauren Foye, senior analyst at Juniper Research.
The proportion of cross-border B2B transfer values facilitated by newer fintech start-ups and disruptive technologies, will grow from 7.5 percent in 2017 -- equating to $10.4 trillion, to reach 13.3 percent or $29 trillion by 2022. This will occur as more businesses utilize these efficient and transparent methods in a notoriously cloudy industry.
Juniper identifies payment facilitators Visa and Mastercard as beacons in this space. Visa has partnered with fintech start-up ‘Billtrust’ to provide virtual cards for B2B transactions, as well as offering its own ‘Visa B2B Connect’ service which utilizes Chain Core, an enterprise blockchain solution. Likewise, Mastercard is working with Optal, to offer virtual accounts to businesses.
Outlook for B2B Money Transfer Growth
Juniper believes that banks are well placed to benefit from the opportunity posed in B2B transfers. For instance, legislative changes such as PSD2 in Europe, serve as a perfect opportunity to partner with fintechs to deliver innovative services to companies; lest institutions fall behind and see fintechs ultimately out manoeuvre them.
Meanwhile, proactive banks will seek to implement blockchain technology -- with Ripple now hosting more than 100 banks on its network. Clearly, the market outlook is very promising for the most progressive technology vendors and service providers.