The concept of payments without borders – which uses the internet and other electronic channels to lower the overheads associated with international payments – has been increasingly embraced in recent years.
The approach reduces the fees charged for making financial transactions between different countries and simplifies the payments process, making it easier and more secure for small businesses to operate internationally.
Examples of this in action include Singtel’s cross-border mobile payments alliance, Mastercard’s international remittance service and a partnership between payments provider UnionPay and payment app provider NETSPay that paves the way for Singapore-based consumers to make digital payments abroad.
But while these initiatives are reducing the friction around international payments, significant challenges remain for small businesses looking to operate outside their home market. The above examples are largely driven by the private sector. And they don’t directly address the challenges related to the specific business practices, legal provisions and financial rules in other countries – not to mention cultural norms that need to be respected.
A potentially significant development in this context is the beginning of negotiations between Singapore and Australia to create a digital trade pact between the two countries.
With many examples of cross-border payment initiatives involving Singapore, and with the country at the forefront of the drive toward cashless economies, its involvement in this latest move is little surprise.
The pact aims to drive “greater connectivity” and bilateral economic relations, with the cooperation encompassing areas such as fintech, digital identity, artificial intelligence and digital trade enablement.
When the pact was first announced in June, leaders of the two countries said the concept marked the start of a “landmark agreement” that will look to tap digital transformation and technology to expand trade and economic ties in the Asia-Pacific region.
Through the agreement and a series of trials, the countries hope to encourage digital trade and business in a number of ways, including digital identities, connection of single-window customs systems, e-invoicing and digital payments. The plan is for the agreement to be finalised by early 2020.
Once the agreement is in place, the digital trade pact should have a positive impact on development of payments without borders between Singapore and Australia. If successful, it could create a blueprint on which similar agreements could be built in the future to increase the spread of frictionless digital trade between other countries.
Australia’s trade minister, Simon Birmingham, suggested the agreement “will ultimately deliver practical improvements that lower the costs and increase the efficiency of doing business”. This is what payments without borders is all about: making it as easy and seamless as possible to transfer money between countries.
The advances being made in digital payments mean expensive and time-consuming wire transfers should become a thing of the past. And this means businesses – large or small – and individuals can make and receive payments quickly and cost effectively.
The fact that national governments are working toward similar goals suggests payments without borders could gain greater traction over the next few years, meaning digital payments could soon power a whole new era of economic growth.