Challenges of cross-border payments for non-EU countries in Europe and future regulatory changes

Ognjen Vlacinaresponsible for payments and cash registers IKEA Southeast Europedetails the main cross-border payment challenges encountered in non-EU countries in Europe and future regulatory developments

Over the past two years, in part due to COVID-19 restrictions, e-commerce transactions in retail have seen an overall increase over in-store transactions. Of the total share of e-commerce transactions with omnichannel, global retailers have reached 30, even 40% and more, compared to the beginning of this period, when it started at 5-20%, depending on the market and others. influencing factors, such as type of goods, price, logistics, retailer capacity, delivery network capabilities, etc.

Moreover, experts predict that almost 20% of all e-commerce transactions will be cross-border by 2023. This leads us to the conclusion that cross-border transactions will become increasingly important and interesting for merchants, banks and the fintechs.

A few points of view

In peripheral European countries that are not part of the European Union (such as Ukraine, Serbia, Montenegro, Bosnia and Herzegovina), the interchange fees of the main card network players are not strictly regulated and are significantly higher than in the European Economic Area (EEA). In addition, other corresponding costs (currency conversion, account maintenance, etc.) must be taken into account. What does this mean, concretely? The average cross-border e-commerce transaction for one of the markets mentioned above is sometimes 2.5 times more expensive than a typical local transaction with the same card network!

As an illustrative example, if your overall annual turnover is 60 million euros, and in two years you reach 30% of the turnover of e-commerce on the total turnover of the market ( and you started with 10%), your fee spend will increase to EUR 276,000 in the above-mentioned markets – instead of EUR 50-100,000 in the EEA. The conclusion is therefore overwhelming: markets with less purchasing power have higher cross-border payment costs. In practice, this usually results in higher product/service prices for end consumers.

Additionally, domestic diaspora/economic migrants are further fueling this trend by using this payment channel to transfer money to relatives in their home country. Research shows that annual remittances from the diaspora to Bosnia and Herzegovina amount to €2.5 billion, or about 14% of the country’s annual GDP.

Given this, as well as the slowness of cross-border transactions and their transparency and accessibility, there are many opportunities for business disruption in this payments market niche. We expect to see substantial changes very soon from nimble fintech or even instant payment initiatives such as Immediate Cross-Border Payments (IXB), which aim to speed up cross-border money transfers – currently under development POC and for which EBA CLEARING, SWIFT and The Clearing House (TCH) have joined forces. For now, large merchants might consider solutions such as dynamic checkouts or similar state-of-the-art solutions to optimize this niche of the payments market.


In line with this inescapable trend, there is finally a strong and comprehensive response from global regulators, summarized through the Financial Stability Board (FSB) progress report. It was published in October 2021 and summarizes the progress made during the first year of the G20 roadmap to improve cross-border payments, as part of a set of broad and interconnected initiatives. In other words, at the international level, the FSB coordinates the work of national financial authorities and international standards bodies. This is necessary for the qualitative development and promotion of effective policies for the financial sector, in particular with regard to regulation and supervision. Two of the four main challenges identified in this space are the high costs and low speed of cross-border transactions, while other complex topics worth mentioning include KYC and AML, harmonization of API protocols, message formatting payment, liquidity problems, etc. to.

The roadmap, drawn up by the FSB in coordination with the CPMI and other relevant organisations, contains five focus areas, illustrating the payments complexity we live with:

  • axis A: engage in a joint vision of the public and private sectors to improve cross-border payments;

  • focus area B: coordination of regulatory, control and surveillance frameworks;

  • focus area C: improving existing payment infrastructure and arrangements to meet cross-border payment market requirements;

  • priority area D: improving data quality and straight through processing by improving market data and practices;

  • focus area E: exploring the potential role of new payment infrastructure and modalities.

Source: CMPI

Of course, there are other ongoing and correlated topics such as cryptocurrency payments and central bank digital currencies (CBDCs) for cross-border payments that complicate the game for regulators. However, ordinary people and traders do not see these aspects. They only have the consumer/merchant perspective of financial services and the price to pay.


All of the developments noted above will hopefully have the desired results in the global cross-border payments market, while bringing inclusion to smaller or peripheral markets when it comes to highly relevant topics, such as fee structure and accessibility.

In conclusion, if the FSB objectives encompassed in the final report which addresses the challenges of cross-border payments cost/fee level and structure are met, the trader in our illustrative example shown above would save over EUR 160,000 annually in fees and be able to invest this amount in other areas. Wonderful, isn’t it?

This editorial was first published in our Cross-Border Payments and E-Commerce Report 2021-2022which taps into the fast-growing cross-border market and provides a comprehensive overview of the trends and developments that are essential in this space, being the ultimate source of information for e-commerce businesses wishing to expand globally.

About Ognjen Vlacina

With over 15 years of experience in retail, banking and the financial industry, Ognjen is a passionate payment leader at IKEA South East Europe, breaking payment dogma, listening to customer needs, participating to setting global payment trends and creating a positive payment experience. Expertise mainly in multi-channel payments, implementation of new projects, collaboration with PSPs, commercial banks and payment networks. Advise stakeholders on the ever-changing and complex payment ecosystem.

About IKEA

We share IkeaThe IKEA vision and values, and the IKEA culture established by our founder remain at the heart of everything we do. Since the Ingka Group was founded, we have brought the IKEA brand to 32 countries and into millions of homes. As we grow, we make it easier for more people to afford a better life at home than ever before.

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