Exploring the Latest Advancements and Challenges in Cross-Border Payments: Revolutionizing Trade Across the Middle East and Beyond

Cross-border payments are a main driver in the transformation of global commerce. The Arabian region is at the forefront of this as its trade volumes are rapidly increasing. Instant payment systems and settlement platforms combined with blockchain-based innovations have been instrumental in cost savings and quick delivery of services. Still, geopolitical tensions and regulations remain some of the major challenges to be solved. UAE, Saudi Arabia, and many more companies are not only embracing these technologies but are also aggressively competing on the global market.

Leading Ripple and Stellar networks are the main figures in the market of real-time transfers, where they have been able to reduce transaction fees from an average of 6- 7% to less than 1% figure. The UAE’s instant payment facility, which is capable of processing huge amounts of transactions every month, is the one that is currently most integrated with the other GCC countries for fewer transactions. However, the decline in correspondent banking caused by the high compliance costs has led to a slow pace in some corridors.

Among the challenges are the risks of currency volatility and the strict KYC/AML requirements, which cause remittances to be delayed. On paper, a recent SWIFT upgrade is supposed to serve as a tool against the issue at hand, but the reality is that the level of adoption remains low in less digitized regions such as Yemen. In the long run, the positives far outweigh the negatives, and this is true even for e-commerce giants such as Noon, which can now easily pay their suppliers worldwide 24/7.

Central banks are conducting experiments with CBDCs in order to make their cross-border transactions more efficient; The trial between Saudi Arabia and China is one of the examples showing the line of thought. Telr, a fintech startup, has a multi-currency wallet, which is a great tool for small and medium-sized enterprises. On the other hand, the existence of fraud through mule accounts is still a problem that is forcing companies to invest in AI-driven fraud detection.

There is no doubt that the future is beaming with joy as ISO 20022 standards will be the one unifying the messaging.

Regional hubs like the Abu Dhabi Global Market (ADGM) are becoming the payment gateways of the future, therefore, a catalyst in the process of economic diversification. The parties of interest must, therefore, ensure a harmonious balance between innovation and security if they wish to make the growth sustainable.