Where next for cross-border payments?

While there is significant appetite among UK businesses for international trade, tackling international payments is still an area that many can struggle with says Harry Mole, vice-president and general manager of cross-border B2B payments at American Express UK

Why are international payments such a critical issue for businesses?

International payments can be daunting and distracting for businesses. Unexpected costs, slow transaction times, painful processes and rapid currency fluctuations create a drain on resources and ultimately affect the bottom line.

The current geopolitical situation, well-publicised supply chain disruption and rising inflation have created a difficult environment for many companies. Currency volatility and sterling weakness has only increased the challenge.

Despite this, it’s reassuring to see that British businesses still have no shortage of ambition when it comes to international trade. They still see an opportunity to drive growth and revenues by working with customers and suppliers overseas.

But this ambition makes the need to manage international payments even more urgent. The good news is that there are plenty of digital tools and solutions that can help make managing international payments easier and a wealth of expertise to help navigate the inherent risk and complexities, saving time and protecting profit margins.

How can businesses tackle cross-border payments more efficiently?

Companies trading internationally on a regular basis should adopt a strategy to proactively manage the level of currency risk most appropriate for the business. Protecting margins from exchange rate changes over the long term is better business than chasing short-term wins by speculating on exchange rates.

Forward Contracts are a great way for businesses to manage exchange rate risk, by fixing the exchange rate for a future transaction. In this way, Forward Contracts create greater clarity on the value of a deal and help to avoid any unwelcome surprises if foreign exchange rates have changed when an invoice is due for payment.

What are some of the other common pitfalls?

Too many businesses are still handling foreign exchange volatility reactively, rather than adopting a proactive approach. This can mean they’re too focused on the short term, for example chasing a one-off currency ‘win’ around a particular invoice, and so failing to take a longer-term approach that offers greater financial gains.

Protecting margins from exchange rate changes over the long term is better business than chasing short-term wins by speculating on exchange rates.

By focusing only on one invoice or a set price, companies end up losing sight of other solutions that might well be of benefit. These could include Forward Contracts or batching multiple payments together to secure the rate for all invoices at one time.

Every cross-border payment is subject to exchange rate variation; it can therefore be tempting to negotiate all deals in sterling or US dollars. But in this case what’s really happening is the transfer of that risk from supplier to buyer, or vice versa. The price of that risk usually translates into higher costs of goods and services.

What does the future look like in this area?

International payments is an incredibly dynamic space with unprecedented innovation that will improve customer experience and control. We’re seeing a move towards faster payments and more transparency on when payments are delivered, giving greater confidence and improving processes for businesses.

American Express recently launched a digital cross-border payments service for US SMEs – American Express Global Pay – enabling businesses to make secure, same-day domestic and international B2B payments, including to UK suppliers. Businesses can initiate Global Pay transfers through the same mobile-friendly platform where they manage their American Express Business Card account, and suppliers receive the payments as a deposit in their bank account.

How else is American Express supporting customers?

Today, we help thousands of UK companies make use of solutions that enable customers to make fast, secure cross-border payments in more than 80 currencies and over 100 countries around the world. American Express customers can earn valuable Membership Rewards on their cross-border payments too.

We know our customers also value the direct support from our dedicated team of experts, who help businesses make smarter decisions.

For more information on American Express International Business Payment Solutions, visit americanexpress.com/en-gb/business/international-payments

Promoted by American Express UK