Cross-border payment transactions are those in which the recipient and recipient of the transaction are situated in different countries. Due to the impact of the COVID-19 epidemic, the cross-border B2B payment space experienced a small drop in growth during the first half of 2020. But despite this drop, its expansion is expected to continue.
A recent report estimated the value of B2B cross-border transactions to reach $ 35 trillion in 2022. And this can be great news for the businesses that are turning to international markets for suppliers, business partners, and employees.
Many companies still process cross-border transactions via wire transfer which can be time-consuming. However, Interest in instant payment rails and digital money transfer software is also growing as companies and workers expect to receive their funds more quickly.
Businesses that want to grow international sales should strive to provide a frictionless experience to customers. Therefore technologies such as automation and blockchain are receiving more attention from businesses, especially when the amount of data expands with cross-border remittance solutions.
What Are Cross-border Payments?
Cross-border payments occur when payments are initiated in one country and are received to an account in another country. The transaction can be made and received between individuals, companies, or banking institutions who are looking to transfer funds to the territories. For example, A merchant who is operating his business at the international level, it is crucial for him to be able to accept payments across all countries that are targeted by the merchant.
For international eCommerce businesses, cross-border business payments are an important part of their day-to-day operations. Therefore they need to transfer funds through the most secure and efficient way.
Cross-border payments are often more costly and may take longer to process than domestic payments because of the increased number of stakeholders. International payments usually take two to five business days to compensate, depending on the number of intermediary banks the funds need to transit.
Business Benefits of Cross-Border Payments:
With a cross-border remittance solution, merchants can pay their suppliers via their smartphones or other devices, even when they are away from their offices. Merchants can use their international remittance application to efficiently schedule each payment. Through this, they can focus on their core operational tasks rather than focusing on hundreds or thousands of invoices.
Cross-border payments also increase the number of suppliers and affiliates with which businesses can connect with. For instance, If you hire a freelancer who is located in a different country and able to create content for your website at a remunerative price, but accepts payment in his local currency then without cross-border payments, you will not be able to secure this relationship.
But with global remittance and money transfer software, freelancers may go through a simple integration process through which they can add their payment details. Thus, they can send you bills every month and the reconciliation will happen automatically.
Thus, B2B companies can’t ignore cross-border business payments as they offer convenience while using a global payments platform.
Types Of Cross-border Business Payments:
- International ACH (Automated Clearing House):
International Automated Clearing House makes it easy to pay foreign suppliers and affiliates. International ACH payments can be made by various entities such as SEPA, BACS, and local banks. It can not be done through the card network. It is inexpensive and very convenient. As the transaction cost is low, international ACH will be a great option for making a large amount of payments. And also they are very simple to implement on a recurring basis.
The disadvantage of international ACH payments is that they may take several days to complete. To make a global ACH payment, you must have the Payer’s International Bank Account Number (IBAN) and other account information.
- Prepaid Debit Cards:
Prepaid debit cards also known as cash cards. They are processed over a card network. With Cash Cards you can make quick payments to global suppliers which is a plus point for cross-border businesses. Transactions are often accompanied by fees for both the payor and the recipient.
- PayPal:
Global PayPal payments come with high transaction fees. Also, there is no clear policy of PayPal as to how the funds are kept. In PayPal cross-border business payments, you may have one payment clear immediately, while at the same time another payment within the same entity takes several days to clear. Using an international remittance app that supports mass payments with PayPal is an effective way to enhance the payment experience.
- Paper Checks:
When an international affiliate is incapable or reluctant to provide banking routing information, then you can go with a paper check to make an international money transfer. All you need is the recipient’s name and address in order to send the cheque. However, it will take weeks to receive the check by postal mail, which can negatively affect your cash flow management.
Above mentioned methods of cross-border money transfer are widely used across the globe. You may also opt for the one for your B2B company.
Future Of Cross-border Business Payments:
Real-time international payments, one of the most exciting new developments in the world of cross-border payments, are likely to become a reality. Swift GPI, Visa Direct and MasterCard Send are focused on the provision of fast and secure worldwide payments. Accelerated cross-border payments will fundamentally change the way international businesses transact with each other. EU cross-border payments are also expected to evolve in the far future.
Funds will be able to flow from account to account anywhere in the world, and in real-time, with fees, FX, compliance, and KYC all known information in advance. And in the near future these payments will flow in a common language.
Wrapping Up:
For merchants who want to expand their business overseas, it is crucial for them that they should be knowledgeable about cross-border payments. Staying abreast of the latest innovations will give your customer the best possible payment experience and encourage tailored feedback. International payment mechanisms can be complex, so it is worth partnering with an experienced PSP that will help you overcome any challenge.
Author Bio:
Nikunj Gundaniya, Product manager Digipay.guru, one of the leading FinTech application development companies USA, which provides mobile finance application development services. He is a visionary leader whose flamboyant management style has given profitable results for the company. He believes in the mantra of giving 100% to his work.
