Perhaps no word better describes the impact from President Donald Trump’s tariffs over the past few weeks than “uncertainty.” Starting with the oscillation from high to low tariffs coupled with the 90 day pause, not to mention the trade war between the U.S. and China, the events of the last few weeks have left the business world reeling.
Because business leaders still can’t predict what the future status quo will ultimately look like, developing any kind of strategy involving cross-border trade becomes nearly impossible. From banks to fintech startups, the companies that facilitate payments for global trade are obviously highly exposed to changes in payments flows, such as those that may occur when the cost of goods from a given country change significantly overnight. However, while the Trump administration is creating unique challenges for the fintech space, there are also potential benefits, with some players already seeing some initial effects.
The Tariffs’ Cross-Border Payments Headwinds
The most salient, potentially negative, impact from the tariffs would be a reduction in cross-border payments flows. If that outcome happens at all, it would likely result in lower revenues for companies delivering those payments.
However, how much of a hit – if any – flows are set to take is not yet clear. Tangible numbers will only begin to appear when companies report their Q2 2025 earnings in around three months’ time. Furthermore, not all companies will be impacted equally.
When the tariffs were first announced, almost every publicly traded company touching the cross-border payments industry, as well as many outside of it, saw a drop in their share price. However, for those providing consumer money transfers, the long-term impact is likely to be negligible. The tariffs only impact goods. So a migrant sending money home to their family, or a person moving across borders to pay for their child’s tuition at an international school, is not going to be effected by tariffs directly.
That may change if the macroeconomic environment does lead to a significant economic downturn, as a recession or any similar situation would probably lead to lower consumer spending. However, the Covid-19 pandemic showed us that, while tougher financial conditions impact consumer spending abroad for luxuries, migrants generally prioritize remittances over other expenses.
Those who provide cross-border payments services to companies buying and selling goods across borders, as well as those who provide the networks those payments are sent over, are more likely to be directly affected. This is especially true if sustained tariffs on specific goods directly impact a high portion of their client base.
This places the transaction banking portion of major banks and business-to-business payment providers at potential risk, as well as those who offer such services to small-to-medium businesses. However, certain companies may be more exposed than others. For example, a business that largely caters to U.S. businesses paying for goods from China, or cars from Mexico, is going to be far more exposed than one largely serving businesses outside of the U.S. paying for goods and services beyond America.
Similarly, those trading with tight margins are likely to be effected sooner, as they will be less able to absorb additional costs incurred as a result of the tariffs, than those with higher margins. A wider challenge across the industry, however, is the growing amount of corporate credit risk. Multiple organizations, from the International Monetary Fund to Standard & Poor’s., have warned of increased global credit risk as a result of the current financial conditions, with the IMF describing a “sharp repricing of risk assets” in its most recent Global Financial Stability Report, published on April 22.
This economic environment makes gaining access to credit more challenging for some businesses. It may also make general operating conditions in the sector tougher, reducing operating margins.
The Tariffs’ Cross-Border Payments Tailwinds
While a reduction in global payment flows is a potential challenge over the next few months, the initial industry reaction has included some more positive elements – and there are opportunities ahead for many in the sector.
For many of the organizations my company works with, the initial impact was an increase in trading activity, as well as increased demand for financial services. This included an increase in demand for hedging products, which reduce a company’s exposure to currency volatility.
This type of product, in particular, creates a key opportunity for many companies on the B2B side, especially those serving larger corporations and enterprises. If such uncertainty continues, demand for additional services that reduce risk is likely to go up. Some companies are already anticipating sustained increased demand in this area.
Citi is one such organization, with CEO Jane Fraser issuing a public statement that the company expected to be “very busy” facilitating both changing cross-border trade flows and “hedging and associated financing activity.
For SMB-targeted businesses, however, there is less opportunity for such solutions. That’s because typical SMB products are far simpler and do not involve risk-based additions.
There is still potential for, wherever money moves globally, to shift flows rather than just reduce transactions. This would create opportunities for additional services, to support clients entering new markets, and also to support the use of previously less popular currency pairs, which in some cases may attract greater margins.
Shielding The Fintech Industry From Risk
While there are potential benefits of the new tariffs, there is also a need to ensure that the industry is protected (as much as possible) from any macroeconomic shocks. Initial earnings calls have seen multiple banks, including Goldman Sachs and the Bank of America, remain reluctant to project a severe financial impact. Yet these companies are also urging the Trump administration to adopt a strategy that reduces uncertainty.
“We are encouraged by the administration’s recent actions to pursue a more gradual policy process that allows for considered negotiations with many countries, but how policies will evolve is still unknown,” said David Solomon, Chairman and CEO of Goldman Sachs.
“We are hopeful that feedback from companies large and small, institutional investors and ultimately consumers will support an approach that will lead to greater economic certainty and long-term growth.”
There are also movements from beyond the U.S. that aim to tackle vulnerabilities in the financial system. On April 23, Klaas Knot, Chair of the Financial Stability Board, released a letter to the finance ministers and central bank governors of the G20. In this letter, he argued leaders need to “take measures to protect and enhance the resilience of the global financial system.”
Alongside climate change-related financial risks, he highlighted cross-border payments as an area with “immense potential” for improvement, particularly aided by digital innovation. However, he acknowledged it’s now unlikely that the industry will reach the 2027 targets laid out in the G20 Roadmap for Enhancing Cross-Border Payments. In the letter, Knot called for “significant work up to and beyond 2027” to improve cross-border payments infrastructure and services, particularly in parts of the world where options remain limited.
While such concerns are a global, industry-level challenge, on an individual level many companies have considerable opportunities to profit from the current uncertainty. At the same time, fintech companies are also at risk of being highly exposed. Companies that can react to quickly to changes, maintaining a broad geographical mix of options and services, are in the strongest position to make the most of the year ahead – no matter what it may present.