Mastercard study shows SMEs in LAC rethinking cross-border payment solutions

Small and medium-sized enterprises in the Latin America and the Caribbean region are looking beyond for cross-border payment solutions, according to recent research from Mastercard and FXC Intelligence, and banks could be left behind.

 

The research highlights that more and more small and micro enterprises (SMEs) have reallocated international payment flows in search of greater predictability, transparency, and operational efficiency. With bank and payment company revenues from servicing these cross-border transactions estimated to be approximately US$23 billion annually, SME cross-border payments represent a significant and growing opportunity in Latin America and the Caribbean.

 

Coming out of the research, a qualitative SME panel conducted across Mexico, Brazil and Colombia indicated that of 10 businesses interviewed, nine said they would consider switching cross-border providers.

 

“Together, those businesses indicated that up to approximately 70 per cent of their cross-border payment volumes could be open to migration as expectations around payment performance continue to rise,” Mastercard shared in a press release.

 

While many SMEs in the region continue to depend on their core banking relationships for domestic services such as credit, payroll, and collections, some have rerouted their cross-border payments. As a result, traditional financial institutions risk remaining the “primary bank” in name, while losing economically meaningful wallet share in practice.

 

As cross-border payment volumes grow, so does their operational complexity. SMEs are, therefore, concerned about several recurring challenges that extend beyond cost alone. The study highlights:

• Operational friction: A typical cross-border payment requires multiple manual steps and internal coordination.
• Exception handling: Approximately one in nine payments requires investigation, repair, or follow-up.
• Time burden: Problematic transactions can consume up to 3.5 hours of staff time.
• The “uncertainty tax”: SMEs often lack clarity on when payments will arrive, how much will be received, and what deductions will apply.

 

As these challenges become more frequent, SMEs are becoming keener with regards to their selection of financial providers. Businesses are no longer relying on a single institution. Instead, many are:

·       Routing payments across multiple providers.

·       Allocating flows based on reliability and predictability.

·       Testing alternative options corridor by corridor.

 

“Cross-border payments are no longer just a transaction. They are a decisive moment in the customer relationship,” noted Walter Pimenta, executive vice president, Commercial and New Payment Flows, Mastercard Latin America and the Caribbean.

 

“This new research sends a clear signal to banks and providers. When SMEs cannot rely on predictability and visibility, they begin to reallocate payment flows. When that shift starts, it can extend beyond payments into the broader banking relationship,” she said. 

 

The research indicates that every one per cent movement in cross-border payment flows could represent approximately US$230 million in annual revenue at stake for banks and payment companies across the region.

 

“Cross-border payments are where many SME banking relationships start to fragment,” said Daniel Webber, CEO, FXC Intelligence.

 

“When payments are slow, opaque or difficult to resolve, businesses do not wait for the system to improve. They start moving flows to providers that give them more certainty.”

 

What can banks do?

 

With cross-border trade expected to continue expanding and SME participation increasing, financial institutions face growing pressure to modernise their capabilities and deliver more reliable, transparent payment experiences.

 

To address this, Mastercard Move allows financial institutions and payment providers to improve payment visibility and tracking, deliver more predictable settlement outcomes, reduced manual processes and exception rates, and enhancing transparency around fees and final payment amounts.

 

By enabling a more seamless and reliable cross-border experience, Mastercard is helping institutions strengthen relationships, retain payment flows, and support SME growth across Latin America and the Caribbean.

- JS