Building a cross-border future for the post-pandemic economy

R. Fresson

One year on from the spread of Covid-19 across the world, face masks are now an essential item – available in every supermarket, pharmacy and craft store.
To keep up with demand, manufacturers have had to forge new cross-border relationships in order to source essential mask-making supplies – particularly non-woven polypropylene, a textile essential to the production of surgical masks that is predominantly manufactured in China.


“When people go to buy something from their local store, it’s often not obvious to them that parts of that product could have been made somewhere hundreds of thousands of miles away,” says Stephen Grainger, Mastercard’s executive vice president for cross-border services.
The pandemic may have revealed the extent of our collective dependence upon these international trade networks, but it has also proved their resilience and adaptability. Forecasts of global supply chain collapse largely failed to materialise, and while small businesses have been severely hit by the pandemic, 73 per cent agree the fact that the global payment network kept functioning throughout the pandemic helped their business to survive. According to Mastercard research, across China, India and the US, businesses are now making more cross-border payments than prior to the pandemic, and 68 per cent intend to engage in more international trade than they did before.
“The domestic supply chain of a typical manufacturer in these countries has changed significantly.” Grainger explains. “Even if pre-pandemic they were pretty self-sufficient, now many are increasingly sourcing goods and services materials from outside the country.”
International trade is no longer the exclusive province of large manufacturers and bulk suppliers, either. Today, a typical cross-border payment is as likely to involve a US-based Etsy-seller purchasing 100 hand-carved buttons from a craftsperson in India, as an automotive company placing a bulk order for 5,000 carburettors.


The problem is that the global payments network wasn’t built for such small transactions. Historically, cross-border payments have depended upon a complex and decentralised network of one-to-one banking relationships, negotiated and maintained between individual banks. Such relationships are time and cost-intensive to maintain, requiring the ongoing management of different local regulations, currencies and banking schemes.
“That model works really well for high-value payments,” Grainger explains, “but trying to move £50 through the historic cross-border mechanism, which was designed to move millions of dollars under a single payment, just isn’t efficient.”
For small businesses this can result in complexity, unpredictable processing times and fees, and a lack of certainty. For Manvir, a spice producer in Agra, India, this means resorting to complex workarounds and multiple-payment platforms that make it difficult to keep track of the business’ finances.“We have to follow up by email, via WhatsApp,” he explains. “If I need to send money within India, it takes a click of a button… and that person can receive money in their account in minutes. But if I need to send money just one kilometre across the international border, it takes so many days and lots of documentation.”Mastercard is meeting the challenge with a portfolio of solutions called Cross-Border Services that enable banks and other partners to reach 90 per cent of the world’s population in over 100 countries, improving predictability, speed and certainty for international transactions.
“Through one connection point we can send payments to cards, to accounts, to wallets – even cash,” Grainger says. “We encourage and enable a digital economy at Mastercard; but reaching everyone in the world means providing them with payment choice.”


With 73 per cent of small businesses saying they would make more cross-border payments if the system was faster, Grainger believes that removing the friction points can support a stronger and more diverse future for international trade.
“It’s going to be the SMEs who will drive the growth back into our economies, and cross-border payments mustn’t hold them back,” he says. “This is one of the most exciting challenges that we face: to find ways that we can improve cross-border payments to drive much greater levels of growth and greater levels of global financial inclusion.”

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