Sibos 2024: The rise of digital wallets and the future of cross-border payments
Cross-border payments are evolving rapidly, with digital wallets becoming a crucial element in the global financial ecosystem.
Digital wallets were a key topic at Sibos 2024 in Beijing, China last week
Digital wallets were a key topic at Sibos 2024 in Beijing, China last week, where thousands of global payment and banking professionals gathered to discuss issues within the international financial ecosystem, particularly emerging paytech solutions.
The increasing penetration of digital wallets has been hailed as a driver of progress, improving the customer journey.
At Sibos, Dawei Wang, Head of Strategic Partnerships at Thunes, a digital wallet aggregator, highlighted the exponential growth of wallets as financial tools, noting that their usage now extends beyond borders.
“The wallet ecosystem is growing at 20% year-on-year in both registered users and transaction flows, with cross-border payments increasing even faster at 30% annually,” Wang explained during a panel discussion on enhancing cross-border trade with digital wallets.
He pointed out that wallets offer untapped opportunities for banks. “This isn’t about reclaiming lost business, it’s about accessing entirely new markets,” he added.
Digital wallets, according to Wang, are now integral to multi-tiered financial ecosystems, complementing other payment methods like bank transfers and cash.
“If you don’t include wallets in the ecosystem, you’re missing out on several massive opportunities,” he said. “It also fundamentally takes away a core capability from your business.”
Promoting speed and inclusion with digital wallets
Representing GCash, a leading finance app in the Philippines, Paul Albano explained how the platform serves the country’s unbanked population and supports cross-border remittances for millions of Filipinos working abroad.
“With 94 million users, GCash connects eight out of 10 Filipinos, including millions of overseas workers sending money home to their families,” Albano, general manager of GCash, said.
For overseas Filipinos, real-time transactions are crucial for remittances back home. And this is where digital wallets can make a big difference compared to traditional wire transfers. “Through GCash, the transaction happens in seconds, instead of days or weeks,” Albano noted.
In addition to speed, wallets also help to elevate financial inclusion for the unbanked or underbanked populations in developing nations like the Philippines.
Albano said the users of GCash, particularly those from lower-income brackets, need access to banking and payment solutions for everyday expenses, savings, and investments.
In view of new opportunities, GCash has also ventured into B2B payments, offering solutions for gig workers and freelancers to get paid by their employers, who sometimes hire remote workers.
Partnerships with aggregators like Thunes enable GCash to connect with financial institutions worldwide, accessing the clearing networks necessary for such endeavours. This ensures seamless payments regardless of the source—whether from banks, wallets, or debit cards.
“The goal is to simplify payments and ensure convenience and security for all users,” Albano added.
Challenges for banks: compliance, margins, and net economics
Rhidoi Krishnakumar, Co-Head of Financial Institutions Sales at DBS Bank, detailed the challenges banks face when integrating wallets into their payment models.
“Customer expectations for cross-border payments are now the same as for domestic transactions—instant and seamless,” he said.
However, this can prove tricky, since regulatory and compliance requirements complicate cross-border wallet transactions.
“Banks need a lot more information to complete cross-border payments while ensuring compliance with local regulations,” Krishnakumar said.
He went on to advise banks to tailor their approaches to wallets depending on circumstances.
“For high-volume corridors like China, we prefer direct integration with wallets such as Alipay to manage fund flows and track transactions effectively,” Krishnakumar noted. “In other cases, we rely on aggregators to access multiple wallet endpoints efficiently.”
While digital wallets do unlock new opportunities, there are also challenges related to profitability. Krishnakumar warned of the thin margins sometimes associated with wallets: “Managing net economics is critical because, at the end of the day, this is a business.”
The solution lies in maintaining favourable unit economics across multiple payment corridors. In the case of wallet transactions, they typically involve smaller ticket sizes, resulting in lower fees and tighter margins compared to traditional banking products.
“When we launched GCash payments, the average transaction size was around SGD 80-90 ($60-68),” Krishnakumar recalled.
Managing multiple wallet corridors also adds to the operational load. Each new wallet or market introduces costs related to compliance, FX hedging, and infrastructure maintenance.
Krishnakumar outlined two strategies to address the net economics issue. One is to take a portfolio approach, whereby banks spread costs across multiple e-wallet corridors, balancing thin margins with higher transaction volumes.
The other is to charge small transaction fees for low-ticket payments to maintain service viability without compromising user experience, he suggested.
Partnerships as a path to scalability
Forging partnerships provides banks with another way of spreading the costs of multiple corridors associated with digital wallets.
Working with aggregators such as Thunes allows banks to access multiple markets without investing heavily in direct integrations. This hybrid model promises both efficiency and cost-effectiveness, Krishnakumar said.
Wang echoed this sentiment. “Businesses like ours exist to help banks scale by providing global infrastructure and expertise,” he said.
Besides this, he also stressed the role of education in fostering collaboration between aggregators and banks, given that there are over 300 wallets worldwide.
“Banks are familiar with how to do FX or make last-mile payments into bank accounts. But with wallets, is that the same?” Wang asked.
Amid a proliferation of wallets, banks in his opinion need guidance and education on how to navigate local regulations.
Albano agreed on the importance of strong partnerships to remain competitive. “With globalisation, it’s essential to stay connected across multiple financial systems,” he observed.
Under his stewardship, GCash is expanding internationally, launching in the US and soon in Europe and the UK: “Our goal is to offer seamless fund transfers, whether from banks, wallets, or other financial instruments,” he stated.
The discussion concluded with a forward-looking view of cross-border payments. Krishnakumar advocated for interoperability among wallets, banks, and financial platforms to meet the growing demand for instant, low-cost transactions. “Banks cannot do it alone,” he noted.
“We have ancillary services built in, like verification, tracking, and reference data validation. But clearly there will be a time when we want to work with reputable aggregators to give us access to the next step,” he said. “That’s going to be the model going forward.”
For his part, Albano highlighted the importance of giving users control over their finances. “Through our app, users can not only send money but also pay bills, save, and invest for the future,” he explained. “This level of convenience and control will become the key differentiator as financial ecosystems evolve.”
