Cross-border Payments – The Significance for B2B Companies

With the rising competition in the regional spheres as well as to establish their presence widely across the globe, businesses are striving to venture into cross-border operations. With quite a versatile consumer base with a highly curated buying pattern, cross-border eCommerce has been gaining ground rapidly. And, with cross-border eCommerce, comes cross-border payments, which need strategic thought processes from the businesses, especially belonging to retail, and consumer goods. In this blog, we will be discussing all about cross-border payments, and their significance, and other associated implications for B2B companies.

What are cross-border payments?

Cross-border payments are essentially the payment made between the payee, and the recipient, who belong to different countries. Cross-border payments are often retail, wholesale or recurring in nature, and are made through a host of monetary transactional mediums enabled by the internet.

What are the conventional cross-border payments methods?

Cross-border commerce or any sort of transaction is not a nascent concept; it has been in effect for decades.

The conventional cross-border payments methods include:

• Wire Transfer
• Payment Service Providers

Wire Transfer

Wire transfers or popularly referred to as remittances are the oldest forms of initiating international payments wherein the payment is wired from the payee’s bank account to the beneficiary or the recipient. In this method, the payee has to visit his/her local bank branch and furnish the recipient’s requisite details such as bank account number, name, recipient country’s currency, SWIFT code, IBAN (International Bank Account Number), bank address, amount to be transferred, etc. Apart from these, the payee is also required to pay the service tax, conversion, and other applicable charges. Before processing the payment, the bank fixes the currency rate and shares the details with the recipient’s bank. The recipient’s bank then credits the amount to the recipient.

Payment Service Providers

Payment service providers act as the intermediary between the payee and the recipient. The payee visits the PSP with relevant information and submits physical cash to be paid to the recipient. Similarly, the recipient visits the PSP in his/her location and collects the payment after providing valid ID proof. PSPs also have their online platforms for payment transactions, in which the payments are done with just a few clicks.

Cross-border Payments – Today and Tomorrow

Cross-border payments are here to stay and attain more significance given the rise in international commerce. The B2B cross-border payments market is expected to reach $63,084 billion by 2026. Most B2B buyers today are digital natives, and amply tech-savvy, and thus they are relying on digitally disruptive cross-border payment mechanisms and platforms.

Considering the flourishing demand, it is imperative to understand the versatile range of cross-border mechanisms that are in effect, lately.

Credit Cards – This reliable mode of payment eliminates the need to carry physical cash, and offers a host of benefits such as interest-free loan periods, reward points, easy EMI options, coupons, and other sales-related offers, etc.

Forex Cards – Just a single FOREX card is enough to seamlessly carry out international transactions without worrying about currency exchange fluctuations.

Digital Wallets – Virtual wallets or digital wallets offer greater convenience, and flexibility for all the stakeholders involved in cross-border transactions. These can store all the relevant information on the cloud, which can be accessed anytime and anywhere, and with greater safety.

MasterCard Send – This method allows real-time cross-border payments to the recipient’s debit card number without the need for the recipient’s bank account number.

Swift GPI – This global payment initiative aims for transparent and faster cross-border payments by breaking down all the costs involved.

Open Banking APIs – Open Banking APIs aim at simplifying cross-border payment procedures by democratizing access to customer data.

Decentralized Ledger Technology – This blockchain-enabled technology aims at accelerating backend processes, offering greater transparency throughout the payment lifecycle as well as reducing compliance-related costs.

Best Practices for Ensuring Seamless Cross-border Payments

Let’s look at what actions need to be taken at present to reshape the future of cross-border payments from the B2B perspective.

• Real-time payments to be brought into effect to ensure greater transparency and real-time tracking of payment status
• The time taken for cross-border payments must be minimized as much as possible to assist B2B companies, especially SMBs to have access to a steady cash flow
• A flexible, and highly secure ecosystem for cross-border monetary transactions that offers actionable insights into transaction history, audit, and reconciliation is the need of the hour
• Prices need to be exhibited in local currency and preferred payment methods by location should be enabled

Got more questions on cross-border payments from the B2B perspective? Do connect with the experts at Vinculum to know more!