Given the increasing connectivity of the digital landscape, it should come as no surprise that there has been a marked uptick in cross-border trade via digitized transfer. Billions of dollars criss-cross the globe on a daily basis without fail.
Electronic payments are king. However, sluggish, outdated payment processes are ill-equipped to handle the volume and frequency of international transactions.
Although the recent surge in eCommerce activity added new urgency to address this issue, the problem is not a new one. For decades, antiquated payment systems have underperformed in the digital environment. They complicate crucial cross-border transactions and intensify delays.
Some progress has been made to address these concerns. For instance, the issue of international payments was prioritized at the G20 Summit last year. At the same time, companies are struggling right now to keep pace with demand. Clearly, much more is needed to relieve anxieties around payment infrastructure.
Paypal and Venmo are just two platforms attempting to bridge the cross-border divide by making small improvements to their platforms. However, these isolated efforts still fall short. Transfers remain a lengthy process for small- and medium-sized enterprises or businesses (SMEs and SMBs, respectively), costing them time and money which they can’t afford to spare.
Small Businesses Suffer the Brunt of Interminable Transfers
There is a growing number of requiring international payments services to operate.
According to Statista, the SME sector is made up of more than 200 million open businesses, and now accounts for half of our available workforce. Aside from this, Visa estimates that the portion of SMEs reliant on cross-border payments has increased from roughly 34% to 43% in recent years.
Although banks have attempted to address the delays and other headaches caused by offering new international processes, SMEs and SMBs are often excluded due to smaller returns. Though they may accrue lower payment volumes, the need for streamlined cross-border payments is no less important for them than it is for larger-scale businesses. Transfer delays, fees, chargebacks, and other challenges can drastically affect an SMBs bottom line.
Banks have a habit of compounding these issues by layering temporary fixes atop core procedures. This does little to relieve the overall problem with international payments, as the system itself does not meet the new standards incurred by digital enterprises.
Innovation Can Be a Solution to Cross-Border Payment Woes
Small businesses need access to a swifter and more stable system if they are to grow. They must not be forced to exclude cross-border transactions from their payment schemes if they’re going to accomplish this. The good news: innovations in financial technology could provide solutions.
Now more than ever, international payments are a priority for the fintech space. App developers and startups tirelessly work to develop the most effective, seamless solutions for consumers and merchants, from transaction processing to portfolio automation.
Even still, there is a definitive gap between what an app can achieve for a merchant and what a supporting bank can match. If cross-border payments are to be managed wisely, logical improvements must be made at the banking level. This demands cooperation, as well as a commitment to innovation.
Partnerships Make Sense
Every small business should seek to operate internationally. But, to make this both possible and beneficial for SMBs and processors alike, integrated solutions between apps developers and banks are key.
Long delays, fees, and intermediaries are the lay of the land for most SMB cross-border transactions in the current space. Integration with third-party solution providers may improve the overall process by streamlining payment portals and other features.
For example, PayPal’s ease of use could be paired with lower banking fees, which would improve ROI for both parties. Additionally, banks might pair their platform more effectively with apps like Zelle or Venmo. This would let them eliminate barriers to entry and ease cross-border payment burdens and authorization delays.
Using biometric details provided by app data, for instance, can drastically limit the need for third- and fourth-party approvals. This would cut out extended waiting times, making the cross-border payments process much faster.
The Cross-Border Mentality at the Banking Level
Savvy merchants understand that the rate of growth on a global scale is much higher than in domestic markets alone. As such, more are seeking processors that will help with this goal.
Sky-high fees and increasingly hostile waiting times have historically discouraged many SMB’s from embracing globalization. This inhibits merchants’ growth, but also impacts institutions. Banks who are not invested in providing cross-border payment solutions share in the loss of revenue. Thus, offering comprehensive networks and integrated management portals are just two ways banks can innovate in the cross-border payment landscape.
Partnering with fintech companies to provide these solutions makes sense for everyone involved. Advancing security and automation, while improving speed and transparency for merchants and consumers, can vastly expand the payments ecosystem. Ultimately, this translates to a brighter future for all.