Member Article

Looking to expand your business across borders? 6 things to consider for your cross-border payments strategy

By Chris Harmse, Co-Founder and VP Revenue, BVNK

Over the pandemic, we witnessed a huge growth in B2B cross-border payments as small and medium sized businesses (SMBs) became more comfortable trading online and expanded into new markets. According to analysts FXC Intelligence, the global cross-border payments market will grow from $190 trillion today to $290 trillion by 2030 and in the not too distant future SMBs’ cross-border footprint will be as big as large corporations.

Businesses looking to develop their cross-border payments strategy have lots to consider.

They should start by deciding how ‘local’ they want to go with payments. Markets around the world are very different regarding payment preferences, technological and commercial maturity, and regulations. A ‘one-size-fits-all’ approach is inadvisable, but equally being too tailored will be inefficient and unworkable. Understanding the potential of each market and their similarities can help you find the right balance.

While banks are still the legacy providers of cross-border payments, there are an increasing number of global fintechs offering ways to move money across borders that are often cheaper and faster, leveraging new technologies like blockchains to accelerate settlement. As a result, we’re likely to see the same trends in B2B as we’ve seen in B2C, with businesses switching their cross-border payment providers to get a better experience and faster movement of funds, to respond to rapid global demand.

Those fintechs can also save businesses time and resources by helping with a range of operational elements such as enabling the right technology; creating a high quality customer experience; maintaining the necessary regulatory know-how; and continually staying on top of innovations and rule changes. As with any partner, it’s important to choose carefully, but especially when they’re responsible for processing your hard-earned customer funds.

So here are 6 factors you should consider when you’re assessing partners for cross-border payments

Ensure wide-ranging coverage

Select a payment provider that has a global reach but can also accommodate local market customisations. As a start they should have all the necessary licences, memberships or regulatory coverage to acquire and process payments in each of your markets. They should also ‌be able to offer a good range of international and local card brands, bank transfers, e-wallets, e-cash, mobile, and cryptocurrency payments.

Aim for a holistic service that doesn’t compromise on quality

A mature cross-border payments operation is not simply about moving money from A to B. It’s also about the checkout experience, managing fraud, optimising settlement times and costs, access to data and insights, and complying with regulations. It can be more efficient to get all these capabilities within ‌one platform, though not at the risk of access to best-in-class tools and operational resilience.

Make sure it’s easy to deploy

APIs and plug-and-play services make it easy to get started with a partner, integrate third-party solutions and scale. Look for compatibility with your website, mobile apps, or point-of-sale (POS) systems. Seamless integrations will make the payment process smoother for your customers.

Processing times and fees

Have a clear understanding of how a payment partner makes their money, and the SLAs they commit to in terms of settlement times. Both of these have a profound impact on cash flow. For example, if a fintech is using the international banking network Swift to move money for you, settlement can take up to 5 days depending on the markets and currencies involved. If you’re crediting customers instantly meanwhile, or you need those funds elsewhere, it can create serious cash flow issues.

Check for round the clock client support

Cross-border payments are a highly technical exercise, and you should have immediate access to support to fix things when they go wrong – for instance, if funds get held up with an international bank. Look for providers that have support teams in each of your major markets, so you get round-the-clock support.

Cover your back with compliance checks

Though typically a payment partner will take on the burden of regulatory compliance, your business could still be liable. So do your homework first: look at how the provider is licensed (is it an e-money institution for example?), as well as who’s in their compliance team; whether they have a detailed governance and oversight framework that clearly articulates policies and procedures; and investigate how compliance is embedded throughout the solutions they offer. It’s also important to assess their approach to safeguarding client funds and protecting any digital assets you may hold with them.

Businesses willing to embrace the opportunities of better cross-border payments have lots to gain, including lower operating costs, improved cash flow, and deeper market penetration. But cross-border payments are also becoming more complex. Businesses must navigate a growing number of payment methods and providers, dislocated regulatory landscapes, and markets that have customers with different habits and expectations - not to mention the fact that none of these factors stay still for long.

In that context, partnering with experts to understand and manage local needs as well as the technical aspects of moving currencies across borders, or between traditional banking and blockchain rails, is a major factor in staying competitive. But bad partners can do more harm than good: so have a clear set of criteria and priorities when selecting them, and get them involved early on, so they can help shape your overall payment strategy, when all options are still in play.

This was posted in Bdaily's Members' News section by BVNK .