Simpler cross-border payments bring significant opportunities for businesses
Multi-currency accounts, low fees and fast transactions are possible via cross-border digital payments platforms, opening up the world to businesses
For too long, international business-to-business (B2B) payments involved opaque and expensive fees, and unpredictable timing. But global digital providers are simplifying this complex environment, opening a bright new path of opportunities for business customers.
In the last decade, digital providers have challenged incumbent banks with cheaper, faster and more transparent cross-border payments – and they continue to improve their offerings.
Traditional institutions have responded by improving performance in certain areas. Through the Swift Global Payments Innovation standard, banks have quickened transactions and increased transparency. Legal Entity Identifiers were introduced to help prevent financial crimes. And the incoming global payment standard ISO 20022 should reduce delays, and improve cost efficiency and payments experience.
International card networks have responded to the challenge as well. They have made acquisitions to bolster their bank-to-bank global payment offerings and are competing with traditional banking enabled by Swift.
In addition, there have been early efforts to connect domestic real-time payment schemes, which could further accelerate payment deliveries. And in time, stablecoins and interoperable central bank digital currencies may make global payments more efficient.
Cross-border digital specialists lead the way
Meanwhile, the cross-border digital specialist providers have continued to take market share by improving what they do - supporting payments between international trading partners with intuitive user interfaces, more transparent exchange rates and pricing, and cheaper, more efficient transactions.
Specialist providers also increasingly enable companies to pay and be paid by other companies around the world in a way that helps smooth relationships with overseas partners. For example, familiarity with a transaction method often helps smooth commercial deals, and some providers have worked hard to broaden the array of international payment methods they accept, so businesses can get paid using local, familiar forms, such as credit or debit card, local bank transfer, direct banking or international wire transfer.
Erin McCune, expert partner at consultant Bain & Company, says these innovations create multiple opportunities for organisations to conduct international trade more easily and efficiently.
“For example, increased predictability of transaction timing and cost allows buyers to manage their suppliers’ expectations,” she says. This predictability helps firms manage their cash better, which is important at any time but critical in a challenging economic environment. Digital specialists typically provide clear SLAs, tracking tools and faster payments that do not go through a regular SWIFT network.
McCune says she is seeing specialist payment providers also focusing more and more on cross-border traders’ needs - for example, in offering multi-currency accounts that businesses can use to receive and store funds, then use them to make payments in the same currency.
Another innovation is that specialist providers are also increasingly embedding global payments functionality into accounting and enterprise resource planning software via application program interfaces, says McCune. For example, these could enable medium-sized businesses to use a digital platform to pay domestic and cross-border vendors from within the same interface, as well as reconcile all payments on one platform, with full visibility of their finances.
How digital specialists increase competitiveness
Despite their efforts, incumbents will find it challenging to compete with cross-border B2B digital payment specialists who continue to improve their offerings, says Stephen Whitehouse, a partner at consultant Oliver Wyman.
“B2B payments, particularly across borders and currencies, require specialised foreign exchange (FX) providers to greatly simplify the end-to-end payment experience for small and medium-sized enterprise (SME) customers,” he says. “Cross-border B2B payments involve higher value transactions and continuous, focused attention to address underlying issues and pain points. Major banks have not prioritised these challenges and specialised FX payment players have grown at their expense.”
In addition to charging significantly less than banks, specialist providers have overcome pricing challenges by avoiding hidden fees, and providing real-time rates and access to wholesale and interbank rates, says Whitehouse. He says, in his judgement, specialist providers offer competitive spreads in major currency corridors - payment flows between one country and another. And they offer reasonable FX spreads for non-major currency pairs, even during higher volatility.
“B2B customers also expect instant transfer execution and faster fund settlement,” says Whitehouse. “Specialist providers promote speed by bypassing legacy banking systems like Swift, while ensuring reliability and security. They aim to match the certification and compliance levels of banks.”
SMEs also value the knowledgeable, dedicated account management they get from some specialists, he says. This service includes tailored guidance on hedging strategies, risk management and payments reconciliation.
Other valuable services from specialists include automated pricing; personalised international bank account numbers and multi-currency capabilities; cutting-edge platforms; trade finance; working capital solutions; cards in multiple currencies, which can be used for numerous employees and are embedded with advanced authorisation and tracking tools; and FX intelligence with data to help companies compete effectively. Some also deliver fast onboarding processes, and consumer-grade user interfaces with intuitive workflows and frictionless user journeys, says Whitehouse.
With so much happening in international payments, it’s set to be an exciting space over the next few years. Competition will be robust but digital specialists will continue to embed more functions and capabilities into payments flows to make them smarter and more efficient. They will keep enhancing payments experiences for B2B customers, helping them grasp the opportunities of faster, cheaper, simpler and more connected transactions.
How digital payments help businesses to scale up
Using a digital payments platform enabled Ace Tyres to scale up globally by enabling the business to carry out transactions in local currencies
Ace Tyres International is a great example of how companies can use digital payments to solve cross-border payment problems and rocket boost growth.
Ace is a UK and Asia-based distributor of truck and agricultural tyres, selling over 15,000 monthly. Its customer base has been spreading steadily around the world, including in the USA, China, Europe, Brazil and Canada.
However, it faced significant blockages to growth caused by the payment provider it was using. Chief operating officer at Ace Chris Robertson says: “This company worked proficiently until we started collecting payments in currencies such as US dollars, Hong Kong dollars and Chinese renminbi.
“We did this to suit local preferences – for example, American companies often prefer to pay into an American bank in dollars, which would then exchange the money into pounds sterling and send it to our account in the UK.”
But Ace’s payments provider would only let customers pay in so much at a time this way, says Robertson.
Tailor to local preferences without affecting cashflow
“Then they would hold the money and only release small amounts of $30,000 to $50,000 at a time to Ace,” he says. “That was just their terms. But our payments are often many times that.”
Ace’s solution was to adopt digital payment platform Payoneer, which allowed it to use local bank accounts abroad - in the US or Australia, for example – via a wallet. Customers in those countries could pay into a familiar bank. Payoneer would then release full payments quickly, taking only one or two days at most if they had to conduct know-your-customer or anti-fraud checks.
“Ace can then collect the total payments in one go,” says Robertson. “It works well and has helped us scale in the US by tailoring to local preferences without affecting our cashflow. It even helped us expand in Europe, where many of our customers also like to deal in US dollars.”
In addition, the platform allows Ace to be paid in a foreign currency, such as euros, and pay suppliers in the same currency, removing the need for foreign exchange conversion with its associated fees and complexities, and helping Ace improve its margin.
“That is also helping us grow the business and we’ve expanded revenue from a few hundred thousand to around $8 million in Europe and the US,” says Robertson.
Potential growth barriers
Ace Tyres International is not alone – many mid-sized companies find the process of trading in multiple currencies is littered with pain points that hinder growth. Speed of payments and access to cashflow and funding are potential barriers. But this is where digital payments come into their own as they offer much flexibility – for example, with better coverage, multiple ways to transact, and ability to hold different currencies and convert at low rates. With a fully digital solution, companies can also access a payment platform from anywhere in the world; and easily transfer money between trading partners.
When trying to scale in a competitive market, companies often need to act quickly. They may need to do high-volume or high-value business and get paid for it rapidly. For example, you may have several large clients around the world. But if their payments take too long to arrive, this can impede growth rather than support it. It could mean you don’t have enough cash to pay salaries or bills, keep your business running, or move to the next level of growth.
Getting paid faster helps enormously and this is where digital payment platforms can help by avoiding traditional or legacy payment processes. It is now possible for mid-sized companies to enjoy fast, efficient and relatively low-cost international payments by working with cross-border specialists.
Access to funding
Sometimes all businesses need is an extra month or two of capital to survive and grow. Over the medium term, they also need to innovate, which requires cash reserves or investment. But banks often don’t lend to medium-sized firms, as they see them as too high risk.
It’s often one of the biggest factors limiting a business’s growth. But innovative payment providers are now not only helping companies free up cashflow. They are also making funding available to their business customers in many countries worldwide, helping fill this void left by the banks.
It’s another example of how specialist cross-border payment firms are focusing on the needs of international companies to help them survive, thrive and – like Ace Tyres International - move to the next level of growth.
Why technology and service are a winning mix in B2B payments
Business people are increasingly choosing digital payments over bank services. Tosin Oke, country manager UK and EU at Payoneer, explains why digital demand is booming
How are digital payments taking over from banks in the B2B space?
Demand for digital payments among business customers is exploding because customers increasingly expect more self-service options, faster or real-time payments, and better end-to-end service – digital payments provide this no matter where you are based.
Say you have pounds sterling in your UK business bank account, but you need to pay a supplier in US dollars or euros. Payoneer is a multicurrency platform and card provider that allows you to easily make and receive instant payments in a choice of denominations. Then you can either keep the money in that currency and use it for other transactions, or convert it back to your local currency. Most traditional banks won’t allow you to do these things, or it takes a long time, and they charge a high fee.
That empowers businesses to get things done much faster and more smoothly and keep their costs down. The value adds up quickly and becomes powerful for many businesses.
How do digital payments help businesses reduce risk and scale up?
Digital payments companies offer faster payments, lower fees and less trade friction, helping you grow.
Many SMEs fail in their first three years, often because their margins are too tight or they can’t manage cashflow. Saving on business banking fees helps companies increase their margins; and receiving payments quickly from international customers helps cashflow.
It takes two to three days to make an international payment through a traditional bank. If you made three such payments a month through traditional banking, each taking three business days, you’d lose nine business days of credit and cashflow. With Payoneer, you receive those payments instantly, so you get those nine days back. That is a game changer for many companies’ cashflows.
We also operate in many emerging countries, which helps support the many businesses that are unbanked or cannot rely on their banking infrastructure. Their funds risk being frozen, say if their local bank is sanctioned, goes out of business, or is affected by political instability. They can use our service to reduce that risk and easily send and receive payments with their international trading partners. It’s a much more safe and stable way to transact.
What other benefits do digital payments offer?
With Payoneer, you can transfer earnings from anywhere in the world to your local bank accounts at low rates, or you can load funds onto your multi-currency card and use it at an ATM or via Apple Pay. So in countries that have more of a cash economy, a Payoneer card is a stable and safe way to get cash.
Plus, you can pay your contractors from your Payoneer account for free.
These services are powerful for many types of business. For example, many freelancers and digital nomads love getting paid from their freelance platform onto their Payoneer account, then loading the funds onto their card and using them to pay for things like advertising or to withdraw cash. Plus, you can pay your value-added tax in the EU or UK with euros or pounds.
Another service we offer is business funding for one, three or six months, and we are developing that towards a more flexible overdraft-type facility. Banks often don’t want to lend to SMEs because they see them as too risky. And in many developing countries, capital is not as accessible as it is in the West. Sometimes a business needs another month or two of additional capital to survive and grow - and we want to support them.
Why do you describe Payoneer as a “tech and people business”?
Many traditional banks don’t make account managers available for business customers unless they have a very large monthly balance or number of transactions. And most digital providers don’t provide a human contact either.
Payoneer combines technology and service from people. If your needs are simple you can navigate our platform by yourself, or medium-sized companies and upwards, you can engage quickly with someone from our team who will show you how to use the service. Currently if you use a self-serve-only platform and your payment doesn’t go through - you have no one to contact, except a Chatbot, with Payoneer, you can speak to someone who will resolve any issues you have end-to-end and really help keep your business running smoothly.
We can also advise on how to grow your business. And wherever you operate - from China to Poland – we can connect you with our ever-growing network of suppliers and service providers. For example, we can connect you with the world's largest marketplaces if you sell goods online, or Government institutes of trade if you are looking at expanding into new territories / countries.
This combination of technology and service is a winning mix and makes a big difference to our B2B customers.
Cross-border payments: beware these five pitfalls
If you are expanding into new territories, you will need to consider local payment preferences, regulation, accessibility, timing, exchange rate and fees. Here’s a guide to five of the biggest potential challenges and how to solve them
Cross-border payments are faster and more predictable than they used to be. But there are exceptions, and transactions are still sometimes delayed. Compliance concerns and inaccurate payee information are the leading cause of such delays.
Erin McCune, expert partner at consultant Bain & Company, says to avoid this, businesses should work with their suppliers to double-check payment details. Many providers will validate account information as it is entered, which helps identify transaction issues before the payment is sent.
Transactions through specialist digital cross-border payment providers are often much faster than those made through banks as they bypass legacy systems.
Using a digital provider can also help reduce errors by increasing automation, integrating with other business software, and enabling transactions in familiar local payment methods, such as local bank transfer, credit and debit cards. They can also reduce compliance issues by automatically helping you keep abreast of regulations.
Cross-border payments can be lucrative for banks, as they often charge higher fees and earn money from foreign exchange spreads. But cross-border payments are an increasingly competitive field, with non-bank challengers looking to provide cheaper, easier transactions that are also more transparent around fees and currency conversion rates.
Specialist cross-border payment providers often offer competitive conversion rates. Many also simplify the process of dealing with multiple currencies and can help companies avoid the additional fees and complexities associated with traditional bank currency conversion services. For example, some now enable you to take payments in foreign currencies and pay others in the same currency without converting back to your own.
Peter Elliott, payments architect at PA Consulting, says cross-border payments through banks are complex as they often rely on correspondent banking relationships to reach all destinations in different currencies and time zones.
“These relationships can involve multiple conversions and fees, which add to the transaction costs and time it takes,” he says. “Businesses must understand how their bank handles this process and the efficiency of their bank’s correspondent banking network.
“Innovations such as immediate payments and mobile payments all help make cross border payments faster, cheaper and more efficient.”
Stephen Whitehouse, a partner at consultant Oliver Wyman, says that, in Europe, consumers and merchants often strongly prefer local payment methods. “This is due to familiarity, significantly lower cost compared to card-based payments, real-time settlement convenience, and lower fraud risks compared to direct card payments,” he says.
Using a specialist digital payment provider can enable you to easily make multicurrency transactions using familiar local payment methods. Specialist platforms have also been widening the range of payment methods they offer, and many now include various options such as credit cards, debit cards, digital wallets, and alternative payment methods.
By using a payment platform, companies can also provide their B2B customers with more choice, enhancing convenience and customer satisfaction.
For businesses trading internationally, keeping up with local regulations can be a challenge. Over the last decade, many new and updated rules in the EU and UK have been changing the way international buyers and sellers do business - and fresh rules and updates keep coming.
Major rule changes include the General Data Protection Regulations (GDPR); the fifth and sixth anti-money-laundering directives (5 and 6AMLD); the EU and UK Funds Transfer Regulations; and widening sanctions since the start of the Ukraine war. That’s not to mention the broad-ranging impacts many traders have felt from post-Brexit changes to rules and procedures.
To protect your business in this fast-changing regulatory environment, it is important to understand the implications of non-compliance and the nuances of each rule change.
For example, Robert Drummond, payments architect at PA Consulting, says businesses need to be aware of their obligations under Secure Customer Authentication - a set of payment security rules - as not optimising their exemptions from the rules can lead to increased drop-off rates on online card-based transactions.
One of the best ways to keep on top of the regulatory environment is to use a cross-border payments platform that operates a robust, risk-based compliance programme and adapts to the evolving regulatory requirements in each jurisdiction.
If your firm trades in multiple countries, using a payment platform is often easier than a bank because platforms tend to be more accessible. They are designed to be user-friendly with intuitive interfaces that ease navigation and transactions. Specialist payment platforms are often accessible via mobile applications, allowing businesses to manage their payments conveniently from anywhere.
Payment platforms also typically support a wider range of countries and currencies than traditional banks. This benefits firms trading internationally, as they can reach customers in different countries without needing multiple banking relationships. Payment platforms may also accept localised payment methods and integrations, enabling you to tailor to the preferences of local customers.
To improve accessibility further, specialist payment platforms typically offer integration capabilities with accounting or enterprise resource planning software, e-commerce platforms, and other business tools. This integration allows firms to automate payment processes, synchronise financial data, and streamline their operations.
You should choose your platform carefully though. Some are self-serve, but others provide dedicated customer support to help businesses with any queries or problems. They may also offer resources, documentation, and forums to help you understand features and optimise payment processes.
The desire to transact with those in far flung places is growing apace
Businesses are looking far and wide when it comes to expansion, with consumers leading the way, showing that borders are no barrier for those who wish to transact outside their country