How to overcome struggles with B2B cross border payments?

The global expansion of Small and Medium-sized Enterprises (SMEs) is on the upswing as evidenced by the recent Mastercard report. The survey found that 51% of SMEs are currently doing more international business than they were in 2021, 61% are using more international suppliers, and 75% are implementing strategies to expand internationally even further. Unfortunately, the path to global expansion is paved with challenges, especially when it comes to cross-border payments. Traditional banking, manual transfers, and wire transfers are hurting reputations and client relationships, impacting revenue and cash flow, and making it harder to plan for the future and scale. As businesses seek to expand into new markets, they are faced with multiple challenges relating to establishing and conducting financial operations and making payments and then, as they grow, so do the costs.

In this article, we will delve into the difficulties faced by SMEs in cross-border transactions and present strategic solutions for CFOs to navigate these challenges successfully.

According to Mastercard, SMEs face four main challenges in expanding internationally- fraud risk, transparency, speed, and fees.

Payment security & transparency

According to the Mastercard report, SMEs are most concerned about data security and fraud. The security of funds is understandably important to businesses, particularly when transferring large amounts of funds across borders; however, since international transfers involve many intermediaries, this transparency cannot be guaranteed in all cases. Businesses are unable to track the progress of the transfer or find precise information about the involved entities and the associated fees.

Payment fees & delays

Adding to the lack of transparency and fraud risk is the high cost of cross-border transfers - they can sometimes be 10 times more expensive than domestic transfers. Each global money movement involves multiple intermediaries that charge their own fees and set exchange rates. The more intermediaries, the more costly the transfer. A weaker domestic currency means that, if you don't pay in the beneficiary currency, you may lose money due to foreign exchange fluctuations.
Besides reducing costs, 4 out of 10 respondents wanted funds delivered faster, ideally within 24 hours. Currently, international money transfers can take up to 5 days and are also associated with lengthy manual reconciliations. Moreover, late or failed payments disrupt business operations and damage business reputation and relationships with clients and suppliers.

The hurdles explain why more than 40% of businesses feel hesitant to send cross-border payments - and use domestic payments instead.

Providing a faster, more cost-effective, transparent, and secure way for businesses to move money globally is clearly needed - it would not only ease a lot of concerns and allow businesses to grow globally more easily, but it would also reach out to businesses who aren’t even thinking about expanding globally at the moment. Additionally, a cross-border payment solution could boost the economy by capitalising on the $48 trillion B2B market.

Technology platforms and fintechs are continuously developing products and solutions to facilitate fast, low-cost and efficient cross-border payments, which allow businesses to expand, reduce costs and increase efficiency. There are a number of solutions to consider, including local accounts, virtual cards, and partnering with the right international payment provider.

Virtual accounts

With virtual accounts, businesses can access to a local IBAN and payment rails like SEPA, SWIFT, ACH, FASTER and others. Using this method, businesses can transact globally as if they were local - reducing delays and fees associated with banks and intermediaries. Additionally, opening virtual accounts in local currencies streamlines the process of establishing operations in a new country by reducing the need for navigating the traditional process of opening an account with a local bank.

Virtual cards

The virtual cards are available in multiple currencies and allow businesses to make purchases online, manage subscriptions and expenses in their preferred currency. In addition to reducing expensive FX fees and offering 0% transaction fees, virtual cards often offer cash back on purchases, allowing SMEs to turn costs into profits. Additionally, virtual cards offer unparalleled flexibility and agility as they can be issued and managed instantly and remotely, eliminating the need for extensive bank negotiations. This instant setup allows businesses to tailor virtual cards to their specific needs, including setting limits and controls for better budget management.

Picking the right technology partners

To overcome the hurdles of cross-border payments, this is probably the most important strategic move SMEs can make. The right partner will understand the complexities of global money movement and have the right skills, technology, and expertise to provide the platform for global growth. Here are some key aspects to consider when choosing an international payment provider:

Partner with a technology provider rather than a bank or an EMI. Technology providers build payment infrastructure on top of a network of financial institutions. In practice, this means you’d get access to multiple banking institutions, currencies and financial products from one platform to streamline your operations. In the end, the right technology partner can onboard you once and connect you with the right banking providers across different countries, reducing the heavy lifting involved in traditional banking.

Choose a partner who has a wide global reach. Having access to multiple currencies and countries is crucial - the bigger the global footprint, the better. For instant money transfers, you should have access to local payment rails such as ACH, SEPA, SWIFT, and others. Fyorin uses local payment rails, and nearly all of our payments arrive instantly or within 24 hours.

Additionally, if your partner has ERP integration and accounting tools, you'll be able to streamline manual reconciliation of foreign transactions and reduce administrative burden, giving you more time to focus on more important things.

Fyorin is your partner for global financial operations - automate cross-border money movement and unify your treasury, all from one place. Our platform lets you tap into our network of global financial institutions with access to over 100+ currencies to instantly expedite payments, manage cash and multi-bank globally as easily as you would locally. Our clients save on average 40,000 eur per year on manual processing of cross-border transactions and 16 hours per month.

Our product suite includes:

Virtual accounts with local IBANs

Automated cross-border payments as a local

Integrations with Xero, Netsuite, Microsoft Dynamics 365, Quickbooks and other accounting tools

Multi-currency Virtual Cards with cashback on every purchase.

All of that in one place, with one onboarding process. Increase efficiency, reduce costs, and expand into new markets, without hassle - drop us a message at [email protected]