Low-Value Cross-Border Payments Generate One-Third of Global Revenue Pool, McKinsey Reports

Jevgenijs Kazanins recently highlighted a significant finding from McKinsey regarding the global cross-border payments landscape. According to McKinsey's 2024 Global Payments Report, as shared by Kazanins, > "Lower-value flows (including P2P, consumer-to-business or C2B, B2C, and low-value B2B) account for about 10% of global cross-border payments... However, these lower-value flows make up close to one-third of the total revenue pool." This disproportionate revenue generation from smaller transactions underscores a lucrative and evolving segment within the financial industry.

This notable insight, derived from McKinsey's comprehensive Global Payments Map covering over 25 payment products across 48 countries, reveals a critical dynamic. The substantial revenue share from these lower-volume transactions is primarily driven by the higher margins they command, particularly within the peer-to-peer (P2P) payment sector, where profitability can reach up to 3 percent. This makes the segment highly attractive for new market entrants.

The profitability of these lower-value flows has spurred aggressive competition from non-traditional payment providers. McKinsey's 2024 analysis indicates that challenger fintechs and specialized solution providers captured up to 65% of the international P2P transfer value, offering more competitive pricing and streamlined customer experiences. These agile players are also increasingly making inroads with small and medium-sized enterprises (SMEs) and mid-corporates, challenging the long-standing dominance of traditional banks.

Traditional financial institutions, historically strong in high-value corporate transactions, face growing pressure in this segment due to their comparatively higher fees, less favorable foreign-exchange rates, and often more cumbersome client experiences. McKinsey's report suggests that incumbent banks may find it strategically beneficial to accept some market share loss rather than engaging in a direct price war, given the significant price differentials offered by new entrants.

To reclaim and expand their presence in the lucrative lower-value cross-border payment market, banks are advised to innovate beyond mere pricing. This includes prioritizing specific use cases and geographic corridors, developing product enhancements such as multi-currency wallets for individuals, and offering sophisticated foreign-exchange hedging tools for SMEs. Adopting more integrated and agile operating models is also crucial for competing effectively with the rapid pace of fintech innovation in this space.