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Indian Rupee is likely to touch 79.5 INR/1 USD in 2022.The Indian Rupee has fallen to an all-time low against the US dollar, reaching levels of 1 USD to INR 76 in the recent past. UBS strategists expect the INR to weaken to 77 per dollar by the end of the year - more than 5% weaker than current levels - and depreciate further to 79.5 per dollar by September 2022.If you are sending money to India from the US, a weaker rupee means more value for the same amount of dollars. Set up exchange rates alerts to get notified when the USD vs. INR reaches 79 rupees per dollar.India received $83 billion in remittances in 2020, according to the World Bank. India is the top recipient of remittances globally, followed by China, Mexico, and the Philippines. Despite the worrying forecast, remittances to India continue to out-perform. Compare multiple money transfer specialists before sending money from the US to India or from India to the US.The fall of INR vs. USD is driven by several factors, including weak export numbers, a drop in domestic consumption, increased energy prices, and fear of soaring inflation, among other reasons.Here are some of the major factors that have impacted the fall of the Indian Rupee against the US dollar:Rising Current Account DeficitThe Current Account Deficit refers to the net amount of a nation's imports minus the exports during a year, also known as External Balance.The Current Account Deficit is considered an important metric for gauging a country's economic health and stability. It gives you the difference between the inflow and outflow of foreign currency. A large trade deficit signals greater reliance on foreign capital inflows and further weakens the Indian rupee in the Forex market.Even as all the economies in the world are going through an economic slump, an disproportionate trade deficit will result in creating a weak rupee value against the US dollar.India's current account balance posted a surplus of $6.5 billion, which is 0.9 percent of Gross Domestic Product (GDP) in the first quarter of the financial year 2021-2022 (Q1: FY 21-22) as against a deficit of $8.1 billion, which is one percent of GDP in the fourth quarter of the financial year 2021-2022 (Q4: FY 21-22).The current account surplus was $19.1 billion, which was 3.7 percent of GDP in the previous financial year (Q1:FY20-21) for the same period, according to the Reserve Bank of India (RBI).Significantly narrower current account deficits than in the first half of the last decade, and foreign exchange reserves at historically high levels have strengthened India's external position and reduced its vulnerabilities to external shocks. However, it remains vulnerable to volatile global crude oil prices as approximately 45% of all imports are energy-related.Given that net exports are projected to drag on growth over our forecast horizon, the current account deficit is likely to remain an important factor driving INR performance relative to USD over our forecast horizon.India's current account deficit is expected to rise due to increased crude oil prices, expansionary fiscal policy, and low GDP growth.Impact Of Crude Oil Prices On USD vs. INRHistorically, the price of oil has been inversely related to the price of the U.S. dollar. The explanation for the relationship between oil prices and currencies is based on two primary factors:Crude oil contracts are in USDUSD is the most traded currency in the worldTo trade crude oil, countries around the world use barrels for units and USD in currencies. Post-Covid restrictions, as economies start their long journey to recovery, crude oil prices reached a 3-year high.For a country like India that is highly dependent on crude oil imports, it has a negative impact on the Indian rupee against all major foreign currencies, especially against the USD.When the USD is strong, you need fewer USD to buy a barrel of oil and vice-versa. India needs USD to buy crude oil, so a weaker rupee means you need more rupee to the same amount of USD and barrel of crude oil. Therefore, when the INR falls against the USD, these import costs rise.As a net importer of oil, INR has a huge impact caused by any fluctuation in USD and crude oil prices.Impact Of Interest Rates On USD vs. INRThe first question that comes to our mind is - what is the relationship between interest rates and exchange rates?Let's understand the definition of both interest rates and exchange rates before we explain how it impacts USD vs. INR.Interest is the amount a lender charges to a borrower as a portion of the loan given by the lender, usually expressed as a percentage for a particular period of time.The foreign exchange rate is the value of one currency in relation to another. The relationship is stated as Currency 1/Currency 2, such as USD/INR, where the exchange rate shows the price of the USD in relation to INR.For investors, a high-interest rate means a higher return vis--vis other currencies. To take advantage of the yield, investors will most likely move their investments* to countries with higher returns, which will increase the demand for the currency and further strengthen it vis--vis other currencies.*Investments with a forward cover to protect returns in absolute termsAmid the inflationary pressure, the Federal Reserve is looking at interest hikes as a measure. This will, in return, have an impact on all USD currency pairs, including USD/INR.Keep in mind that beyond the US, interest rate differences between India and other emerging markets beyond the US could also have additional pressure on INR.Other major factors that impact the interest rates are central banks' policies, financial system, government spending, unemployment rates, and inflation.Fiscal Deficit Impact On USD vs. INRA Fiscal Deficit is defined as a net negative in the government's income compared with its spending. A fiscal deficit is usually calculated as a percentage of GDP or total amount spent in excess of income.Current Fiscal Deficit is when the government borrows more money to fund expenses instead of collecting revenues from taxes and other sources. This leads to a decline in total tax revenue, which could impact economic growth.The Current Fiscal Deficit is considered a leading indicator of a country's creditworthiness. When there is a spike in the Current Fiscal Deficit combined with negative exports growth, it may indicate that an economy may be entering a recession, and a higher cost of borrowing is guaranteed.A deterioration of the current fiscal deficit can happen for many reasons. It might simply reflect lower tax revenues due to weak economic conditions. Alternatively, it could also mean that governments are taking advantage of low-interest rates to increase spending.To reduce the deficit, the government needs to decrease spending and increase income. In any case, a spike in fiscal deficit has a negative effect on USD vs. INR.In conclusion, USD and INR are both floating exchange rates, meaning that a currency price of a nation is set by the supply and demand relative to other currencies in the Forex market. However, central banks have various measures to intervene to keep a check on a free-falling or a spike in their exchange rates.Central bank interventions through buying and selling of foreign currencies and setting new interest rates for the country to bolster export competitiveness, help increase foreign exchange earnings, and shore up reserves.Regardless of the steps to stabilize its currency, its fortunes are tied to external factors. The continued weakness in domestic demand growth is likely to keep pressure on INR. Further selling pressure on INR is likely amid rising crude oil prices and a widening trade deficit.If you send remittances regularly, we recommend using a money transfer specialist who offers the highest exchange rates.

Peer-2-peer (P2P) payment apps, also known as money transfer apps or mobile wallets such as Paypal, Venmo, or Cashapp, are popular online payment platforms for business - they are convenient, easy to use, and are highly efficient ways to transfer money. However, with new regulations, using P2P payment apps for business transactions will be subject to taxation in the United States.In this article, we will discuss what is Form 1099-K, who is required to file taxes under the new rule for P2P users, and what information should be included in declaring to the Internal Revenue Service (IRS).New P2P Tax Laws of 2022 in the US SimplifiedLet's first understand the current tax rule to get a broader picture of the changes.For the current or the old tax rule on 1099-K tax returns filed prior to 2022, the IRS has set thresholds as follows: You have received over $20,000 in gross payment in a calendar year, andYou have settled more than 200 transactions in a calendar year.Now, the new tax rule on P2P Apps for calendar years after 2021, the IRS has changed the threshold as follows:You have received a gross payment that exceeds $600, andApplicable on any number of transaction/s.Put simply - you are required to report your earnings on the sale of goods and services if $600 or more was processed through these platforms. If you cross the threshold, the IRS expects the third-party networks in this case the P2P Apps to issue Form 1099-K to you to report payment transactions.Even if you do not receive a 1099-K, you are required to file the earrings in your income tax return. These new P2P tax laws will impact many users such as gig workers, online sellers, self-employed business owners, freelancers, etc.The new taxation rule for third-party payment networks has been implemented under the American Rescue Plan, the $1.9 trillion stimulus package that came into effect in March of last year. The change doesn't impact 2021 taxes but will impact 2022 tax returns filed in 2023.P2P Payment Apps 2022 Tax FAQsWhat Are the New Tax Reporting Requirements?To reiterate, beginning January 2022, if you receive $600 or more payments for goods and services in the current year, through a third-party payment network, such as Venmo, CashApp, or Paypal, your earnings will be reported to the IRS through Form 1099-K sent by the P2P platforms and income tax return.The tax rule only applies to payments received for sales of goods and services and does not include payments to friends and family.Read Comparison between PayPal, Venmo, and Zelle.What Is a Form 1099-K?Form 1099-K, Payment Card, and Third Party Network Transactions is an IRS form used to report payments for goods and services transactions to improve voluntary tax compliance.Payment settlement entities such as debit/credit card companies including PayPal, Venmo, Stripe, Etsy, and others are required by law to file them with the IRS and share copies with the payment recipient.You would receive Form 1099-K by January 31st of the following year if you received payments in the previous calendar year.What Is Included in Form 1099-K?Your Form 1099-K includes the gross amount of all reportable payment transactions, excluding any adjustments for credits, discounts, fees, or refunded amounts.A Form 1099-K will be sent to you from each payment settlement entity from which you received payments in settlement of reportable payment transactions. A reportable payment transaction covers a payment card transaction or a third-party network transaction.The minimum reporting threshold is meant only for transactions settled through a third-party network. There is no threshold for payment card transactions.What Additional Information May Be Required for Form 1099-K?Your third-party payment provider may request tax information such as your Employer Identification Number (EIN), Individual Tax Identification (ITIN), or Social Security Number to report payments on Form 1099-K properly. Once this information is confirmed, your tax forms can be issued without a hassle.If you cross the reporting threshold for the sale of goods and services on the payment apps, the Form 1099-K will be issued to you at the beginning of the 2023 tax period, and a copy of it will be sent to the IRS.You can also download account statements for any reporting obligations, even if payments received are within $600. If needed, seek a licensed tax expert to assist you.How Can Information on Form 1099-K Be Used for Income Tax Returns?You must report any income listed on your Form 1099-K from your business on your income tax return.Since Form 1099-K may include both taxable and nontaxable income, keeping good records is very crucial. If you receive money from a nontaxable source, such as money received as gift or splitting bills, you need not report on your tax return.Also, make sure that your business books and records mirror your business income. Business income is generally referred to as the gross receipts on income tax returns. Your business income can be in the form of cash, checks, and debit/credit card payments.So consider the amounts shown on Form 1099-K, along with the other payments received, when calculating gross receipts for your income tax return.How to Maintain a Good Record for Tax Reporting?Record keeping is vital for accurate tax reporting. If you receive the Form 1099-K at year-end, you can check your accounting records to see if the income reported to the IRS is accurate. Even if you don't receive Form 1099-K, the income still needs to be reported on your tax return.Go for a record-keeping system that reflects your income and expenses. Also include accounting and payroll records, bank statements, receipts, tax forms, returns, and relevant business-related financial records.Most importantly, set up a business account if you are receiving business payments through a P2P payment platform.Maintain a separate account for business and personal transactions.Having a separate business account and keeping good records can be practical when showing both taxable and nontaxable income sources if the IRS audits your income tax return.If you pay your business expenses using any of the payment platforms, get the invoice or a receipt from the vendor or the contractor to record the amount paid and the details of the business expense. This will serve as evidence for your expenses if the IRS questions the legitimacy of your business expenses.1099-K Guide: What if Multiple Payment Platforms Are Used?The IRS tax rules are the same for all the P2P platforms, including PayPal, Stripe, or Venmo, though it might be enforced differently. If you are receiving business payments from multiple platforms and the collective amounts from sales on these platforms exceed $600, consider speaking to a licensed tax professional for best practices.You can find the contact details on Form 1099-K if you have any questions on the matter.Are Transactions on Zelle Taxable?While this rule applies to most third-party payment networks, Zelle is not included. Only the P2P payment companies that deal with the settlement of funds in business transactions are required to issue 1099 forms to users. Zelle doesn't process payments but facilitates communication via messages between a financial institution and people making the payments.Zelle states that it does not report transactions made on its Network to the IRS, even if the total is more than $600. The new law to provide forms 1099K for information reporting does not apply to the Zelle Network, it added.Will I Be Taxed in the United States for Sending Money Abroad Through a Payment App?Most digital wallets or P2P payment platforms do not support international money transfers. The best way to send money from the U.S. internationally is through online money transfer companies such as Xe money transfer, Remitly, and Western Union.In general, when you send money from the United States, the first $15,000 USD, per recipient will be exempt from taxes by the IRS under the Gift Tax policy. Although sending money as a gift is not taxable, you may need to report it to the IRS. In conclusion, from the beginning of the 2022 tax year, P2P platforms will be required to send Form 1099-K to users and the IRS to report payment transactions totaling $600 or more in a financial year. While this does not have any impact on international money transfer yet, existing laws that govern cross-border transactions will be applicable including Gift Tax.

The global economy continues to be resilient despite geopolitical turmoil and a prolonged health crisis. A strong global GDP and associated trade growth will keep accelerating the demand for cross-border payments, which is estimated to reach US$ 156 trillion by 2022. Cross-border payments are currency transactions between people or businesses that are in different countries. The existing cross-border payments channels are the lifeblood of the globalized economy, facilitating the expansion of global e-commerce, the rise of complex international supply chains, and remittances sent by migrant workers in billions of dollars each year. 1. Growth Of Digital Remittances And Financial Inclusion Remittances are a vital source of foreign income in many developing countries, frequently surpassing foreign direct investment and overseas development assistance. According to World Bank data, total global remittances totaled $702 billion in 2020, despite the economic slowdown due to the pandemic.More consumers are now connected to the internet and are more comfortable with digital payments than ever before. So the demands for fast, cheap, safe, and convenient digital payments solutions are increasing. Over the last several years, digital remittances have been on the rise, coinciding with the entry of digital-first money transfer organizations (MTOs). According to Pew Research Center, mobile phone ownership among adults in emerging economies now stands at 83%, driving financial inclusion by increasing access to banking services and digital payment solutions. 1.7 billion people globally are still unbanked. As per the Global Payments' 2021,  mobile wallet usage at the point-of-sale is projected to rise to 30% in 2023 from 22% in 2019 globally, and mobile wallet usage in global e-commerce is expected to grow to 52% in 2023 from 42% in 2019. The changing landscape of cross-border payments is driven directly by the rapid change in consumer demands. Consumers are less willing to use banking services due to various disadvantages. Alternative payment methods (APMs) for remittances provide faster, cheaper, and more transparent cross-border payment services than traditional banks. The new entrants are putting pressure on traditional money transfer operators such as Western Union, MoneyGram, Ria, etc. Such incumbents may have a large physical network, but with high fees for sender and receivers. With rapid digitization and mobile penetration, especially in emerging markets, digital channels will gain traction as a medium for remittance payments. Secondly, the shift from cash payments to digital payments is growing, a trend becoming more prevalent in developing economies. For instance, the RBI reported that the use of ATMs in India fell by 47% in April 2020. This trend will continue to increase the volume of remittances sent by the migrants to their families in their origin countries and also bring millions of consumers into financial inclusion and accessibility that were previously closed off from the financial markets.2. Boost In Global Cross-Border TransactionsCross-border e-commerce payments are the fastest-growing segment of cross-border payments. Juniper Research projects a $35 trillion B2B cross-border payment by 2022, a 30% increase from 2020.Overall, global cross-border trade is expected to grow 5% (CAGR) between 2018 and 2022, much of which comes from emerging markets, whose growth is estimated at 11% (CAGR). However, barriers to open market opportunities in developed markets are expected to slow the growth to around 2% (CAGR) between 2018 and 2022. The push for more transparency in payments, coupled with robust trade and international supply chain finance platforms, and improved logistics, will make the international payments industry more competitive. Of the total projected total global payment flows, Business-to-Business (B2B) make up the highest proportion, expected to account for US$ 150 trillion in 2022. For high-value B2B transactions (higher than US$50,000), banks are still expected to dominate the space as costs are comparably low and the correspondent banking networks are still efficient and reliable.Collaborations between aggregators (back-end networks provider) and banks, money transfer operators, or mobile wallet providers enable interoperability within cross-border payments. These partnerships are great for low-value B2B transactions and transactions within Consumer-to-Consumer (C2C), Business-to-Consumer (B2C), Consumer-to-Business (C2B) segments. The back-end networks provide faster, cheaper, and more transparent transactions as compared to the correspondent banking network.Also, platforms like FIS's RealNet will enable real-time payment settlements for corporations, gig workers, and companies.The new entrants in the cross-border payment industry are mostly focused on low-value transactions, which banks and traditional payment service providers do not cover. Especially, the low-value transactions from, to, and between emerging markets have the highest potential to be disrupted by digital-enabled payments providers due to changing customer behavior, increased trade with emerging markets, and higher financial inclusion. 3. Global Expansion Of Small And Midsize Enterprises (SMEs)For businesses to grow globally, cross-border payments have become increasingly important. . Cross-border e-commerce is now the fastest-growing sub-segment in the cross-border payments industry. Juniper Research estimates that business-to-business cross-border payments will reach $35 trillion by 2022 and as of 2021, 83% of global businesses of all sizes found it easy to send or receive cross-border payments. Thanks to the emergence of new technologies that streamline that enable faster and easier cross-border transaction processes to meet the needs of the digital world.Payment solutions like SWIFT's gpi (stands for Global Payments Innovation) and Mastercard's B2B Hub provide the necessary flexibility and SME-appropriate payment options. Other solutions such as Visa Direct, a real-time push platform that expanded with Visa Direct Payouts, simplified cross-border transactions for small businesses.In 2020, 43% of small and midsize businesses handled international business compared to 34% in 2019, according to Visa.As the open market trade unlocks several opportunities and benefits for small and midsize businesses, their needs for cross-border payments will increase. 4. More Investment Appetite For FinTech CompaniesFinTech, the short form of financial technology, integrates technology in the financial services industry to improve financial products and services delivery to consumers. The adoption of FinTech companies and products has grown significantly worldwide. The volume of investment into the FinTech companies has dramatically increased between 2010 and 2019, reaching 215.4 billion U.S. dollars. Global FinTech investment was $105 billion in 2020-the third-highest year on record, despite a significant drop from $165 billion in 2019.FinTech investments have hit $91.5 billion in 2021. The Americas were the region attracting the most investments in the global FinTech sector, accounting for nearly 80 percent of the total. The number of companies operating under the category FinTech has also grown in EMEA (Europe, the Middle East, and Africa) and APAC (Asia Pacific). According to a 2019 survey by Ernst & Young, the most widely adopted FinTech category among consumers was money transfer and payment services. 75% of consumers worldwide adopted some form of money transfer and/or payment service.  Many companies in the payments sector went public last year. For instance, Remitly, the Seattle-based money transfer start-up went public in September while Wise (formerly TransferWise), the London-based money transfer provider got listed in the London Stock Exchange in July.  Remitly sold 7 million shares, raising $300 million through its IPO on the Nasdaq under the ticker RELY. The company is now valued at $6.9 billion.Wise was valued at $11 billion under direct listing, becoming London's biggest tech company by market capitalization.With increasing digitization and customer adoption rate, FinTech investment is likely to continue in 2022.5. Central Bank Digital Currencies For Cross-Border PaymentsCentral Bank Digital Currency (CBDC) is the virtual form of fiat currency. It is issued and regulated by a country's central bank. In short, CBDC is a legal tender issued by a bank in a digital format.In 2019, China became the first major country to launch a large-scale pilot of digital currency, known as e-CNY (or digital renminbi). As of October 2021, 83 countries have been exploring and announcing the idea of a central-backed digital currency of their own to improve cross-border trade.CBDC hasn't been formally used to date, but many countries are running pilot programs to determine its viability and usability in their economy, including India, the highest remittance-receiving country. While the digital currency plans for India seems to be on hold, the government recently announced that income from all digital assets will be taxed 30%, which is being dubbed the "Crypto tax".In 2022, we expect to see more countries launching their own CBDCs. We can expect exponential growth in digital currency payments as the technology matures and regulatory requirements are in place.CBDCs will not only make payments faster and more cost-effective, but with the right technology, it will also increase interoperability between payment platforms and various financial institutions.Essentially, the idea of CBDC comes from cryptocurrencies which are digital or virtual currencies secured by cryptography, which makes them difficult to counterfeit. They are based on blockchain technology, a decentralized, distributed digital ledger that records transactions across a peer-to-peer network. Cryptocurrencies' use is increasingly gaining popularity in the payments world as it enables direct transfers without any intermediaries, bringing speed, efficiency, and cost benefits. In 2021, the crypto industry boomed, with Bitcoin prices going up from $29,000 at the beginning of the year to $68,000 in October, up 130%. US cryptocurrency exchange Coinbase had a successful IPO on the Nasdaq last year, boosting the credibility of crypto trading and traders.One of the notable trends in the crypto industry last year has been the adoption of cryptocurrencies as a means of payment and institutional investors offering crypto services to their clients. However, several regulatory and scalability challenges still need to be addressed before it is adopted at scale. Cryptocurrency has the potential to disrupt and simplify the existing payment system. Some experts think the development of CBCD will be a "major catalyst" to the eventual adoption of crypto payments into the domestic and cross-border money transfer market.6. Incumbents And Big Banks Are Fighting BackThough pressured by the emergence of several FinTech startups and blockchain-based remittance services with the potential to disrupt the cross-border payments space, incumbent players like Western Union and MoneyGram seem to be up for the challenge. The company has been heavily investing in bringing its digital operations on a par with the new entrants.The payment giant's investment in its digital expansion has been a decade-long journey. According to the company's report, in 2020, its overall digital money transfer revenues went up to more than $850 million, from over $600 million in 2019, a 38% increase.Transactions via its digital channels were 29% and made up 20% of revenue from its C2C business, up from 16% and 14%, respectively, in 2019. The company's online transactions site saw a nearly 30% gain in annual active customers to 8.6 million in 2020.Western Union has been in the cross-border payments space for more than 150 years. It is a globally trusted brand. Still today, it claims to hold the largest cross-border, digital, peer-to-peer payments network in terms of scale, revenue, and channels. The idea of everyday innovations that improve the existing products and services has helped the company stay on top of the game.What mainly started as disruption in the payments space has expanded to banking services. The narrative is that FinTech startups use new financial technology to disrupt incumbent banks. In doing so, they are highlighting traditional banking institutions' weaknesses in digital user experiences and operational efficiency.  FinTech startups mainly focus on unbundling banking services, offering one type of product/service, and zero in on doing it very well. 62% of the startups pursue the retail banking segment, and only 11% concentrate on extensive corporate banking services as per one McKinsey analysis. The most popular area for technology disruption is the payments sector. However, it is hard to imagine banks facing their own Kodak moment anytime soon. Banks remain reliable, widely used, and profitable. Banks still dominate the space for large business transactions. Additionally, the back-end of a FinTech startup still uses the legacy banking infrastructure, which is the payment rails of the industry such as clearing (NSCC), payment (ACH), and messaging (SWIFT) systems. To disrupt the banking industry, FinTech startups will have to develop a new technologically-led back-end of finance. For the time being, the innovation is primarily focused on the front-end side, mainly customer-facing facets of the financial services industry, such as providing better branding, better customer services, and cheaper prices. Suppose the tech-led front-end innovation continues with a rented process-led back-end designed years ago. In that case, the result will be sustained margin compression and high operational risks for the startups.In conclusion, the accelerated growth of the cross-border payment industry is being driven by multiple factors. The big trends in the cross-border payment industry are propelled by the emergence of new payments technologies, an increase in cashless transactions in developing economies, increased access to digital payment tools to the underbanked population, and growth of small and medium-sized businesses. Challenger banks, also known as neobanks are growing at a rapid rate, but big banks are fighting back. Over the last few years, many incumbent financial institutions have invested in different FinTech startups, set up their FinTech R&D projects to create proprietary solutions, digitized existing infrastructure, partnered with FinTech, and developed an increasing interest in mergers and acquisitions.Although there are no widespread developments to disrupt the legacy back-end processes, the potential application of new technologies such as blockchain technology and CBDC are massive. At this rate of innovation and competition, the remittance industry might be able to meet the SDG (Sustainable Development Goals) target to bring down the cost of sending money internationally to less than 3% of the transaction cost.