With the surge in cross-border B2B payments and the spread of e-Commerce across the globe, a simple and secure payment method is indispensable. Businesses looking to expand globally ought to understand the several payment methods and how they work.
What are cross-border payments?
Cross-border payments take place when the merchant and the customer are operating from two different countries. While making international payments, it is important to look out for:
● The exchange rates
● Foreign transaction fee
● Varying taxes while transferring money to and from banks
To expand a business globally, the merchant needs to accept payments from different countries, and cross-border payment companies like Tazapay, backed by fintech, provide a risk-free approach for the same.
Pain-Points in cross-border payments
The total value of cross-border e-commerce is projected to grow up to the US $4 trillion by 2027, and the recent pandemic has only boosted the businesses and provided a much bigger marketplace.
But yet some issues need to be addressed:
● Customer satisfaction:
→ Merchants need to ensure that payment methods provided by them are easy and manageable for their customers.
→ While local bank transfers are certainly fast, cross-border payments may take several days, and the involved transaction charges might be frustrating for the payee.
● Data privacy issues:
→ Banks need time to process what information can and cannot be shared across banks in different countries. Several countries do not allow personal or business-related information to be shared across the border.
● Exalted transaction amounts:
→ Due diligence is required whenever huge amounts of payment are to be made, especially across the border.
→ Fraud is widespread, and banks often struggle with cross-checking the credentials to make sure the payee and the recipient are both authorized. This takes time, and the payee or the recipient might not be willing to present too much information.
● Foreign transaction fee
→ Financial institutions often charge exalted FX fees whenever a consumer purchases a foreign currency via a digital payment card.
The Solution
Many fintech start-ups keep the process of cross-border B2B payments simple and make them easily accessible. Some solutions provided are:
● Additional Payment Methods
→ Providing customers with multiple and user-friendly payment methods like wire transfers, e-wallets, prepaid debit cards, and more.
● Using KYC and KYT
→ The KYC (Know Your Customer/Client) concept allows banks to cross-check the credentials of both the client and the customer to limit fraud.
→ KYT (Know Your Transaction) provides a way to share data about the progress of transactions in an authorized manner.
● Planning logistics
→ Choosing the right logistics partners, tactical planning, knowledge about customs, and achieving shorter order to delivery cycle can greatly improve customer satisfaction.
● Blockchain
→ Blockchain refers to a digital ledger of transactions that is securely spread over a network of computers and allows data encryption, essentially making such crucial information impossible to hack.
● SWIFT Messaging
→ SWIFT (Society for Worldwide Interbank Financial Telecommunication) provides a messaging format for over 11,000 worldwide financial establishments to collect and confer information concerning financial transactions.
→ MT103 with Field 23E is a special messaging type format in use specifically for cross-border payments.
Cross-border payment company flows are expected to reach US $156t by 2022. This only further substantiates the need to redefine international payment options.
