Exporting payment solutions, especially in the countries with extreme foreign exchange controls in place such as Argentina, poses considerable problems to the businesses. Apart from compliance requirements and implementation difficulties, managing these headaches requires due diligence strategy alongside appropriate technological support. Being aware of these issues in addition to coming up with sound solutions certainly goes a long way in being competitive in the global setups.
Challenges of Exporting Payment Solutions to Argentina
There are severe limitations with regards to payment systems imposed by the banking institutions in Argentina which includes some of the permits which are required in payment transactions or the foreign exchange directives identified by the Banco Central de la República Argentina (BCRA) alongside other tax regulations. Non-compliance can attract criminal sanctions of monetary fines, suspension of payment accounts, or limitations on payment transactions—ultimately costing firms millions in a year.
The depreciation and high inflation characteristics of the currency are well-known, as evidenced by the value of one Argentine peso, which is expected to experience 118% inflation rate within the duration of 2023. A direct result of this is the cost component associated while making an international payment. Moreover, it increases the level of uncertainty which firms face in relation to the pricing of their goods and consequently their expenditure forecasting capabilities.
The cross border payment involves delays and extra costs which are a serious challenge to firms whose cycles are short on cash flow. With a cross-border payment, transaction costs can range from 1-10% and take several days to settle. Many payment channels require the participation of intermediaries who charge their fees for every transaction which further aggravates the problem.
Numerous Argentine companies find it difficult to engage with international banking systems due to restrictions on local policies. As a result, the infrastructure that local institutions have, which civilians rely on, is not sufficient to facilitate effective foreign transactions. As a result, every single local business is prone to a stringent regulatory process, possible times.
Exporters in Argentina are slapped with heavy taxable services including a VAT of 21% and cross-border payment with hold tax, that accounts for an additional 5%. In national settings, combining intermediary expenses with these taxes would drastically impact profit margins and make competing against larger companies in international markets very difficult for smaller companies.
Resolving the Payment Predicament
Alternative digital payment apps proved beneficial for international engagements by reducing the reliance on traditional banking channels. Automated compliance and multi-currency accounts enable payments to be executed while decreasing manual mistakes. Collect&Pay, for example, eliminates extra bank charges for companies wishing to conduct business in various currencies, thus improving efficiency and transparency.
Some corporations choose to hedge the volatility of the rate of exchange because it is unpredictable; in that case forward contracts are a excellent option. These tools stabilize the exchange rates, mitigating the risk of the companies engaged in sudden fluctuations rates. Companies using hedging instruments for all or part of their trade, have lost around thirty percent of losses from exchange rates, according to a report prepared and published by the International Chamber of Commerce in 2024.
To build a secure payment platform, compliance tools must be incorporated. Technologies are able to produce necessary compliance reports and identify early warning signs of issues. According to Guldana Ablanos, Chief Compliance Officer at Collect&Pay, “Building compliance within the payment infrastructure minimizes human faults and quickens the granting of approvals.”
Expanding international business requires diversifying from local banks. Engaging with international electronic payment providers who accept various currencies and payment methods will assist in accomplishing this. Such companies charge lower transactions costs and process applications dramatically quicker than ordinary banks.
Working with tax firms which have experience with Argentine export regulations is helpful in tax planning. A lot of companies owe less tax than they’re supposed to due to refunds, tax exemptions and even changing the timing of their payments. To illustrate, by strategically placing payment orders for periods with lower tax rates, the overall tax burden can be lowered to 15% or even less.
A company based in Buenos Aires and into medium manufacturing experienced heavy delays in the payments made to Europe and at times incurred unnecessary charges while associating to the payment. The company used the digital payment service Collect&Pay and was able to save 40% in fees as well as cut their settlement time span from 5 days to 1 day. Additionally, the use of automated compliance tools made it easy to submit reports to the set semiannual maximum of 5-6 documents to the BCRA giving no room for errors and consequently being jailed.
Expert Perspectives
As stated by George Arakelov, Collect&Pay’s CEO, ”When doing business in intricate economies, companies should put a lot of emphasis on making payment processes to be customer friendly and transparent.” He further adds, “The application of contemporary facilities not only makes compliance easier, it also improves management of expenses and timelines better.”
Another perspective from Anthony Bridges who serves as the Chief Finance Officer at Collect&Pay, “It’s necessary to appreciate the details of local banking regulations and currency exotic. Companies implementing such efficient financial systems are said to achieve up to 25 percent annual savings in operational costs.”
For overseas payment service providers in restrictive markets, adjusting to the local environment and utilizing the current technology is the answer. With the use of digital platforms, automation of compliance as well as having an efficient cash flow strategy creates the motivation for businesses to succeed in the international markets.
Rather than simply reinforcing their transfer price setting, companies have the potential of complementing it as a tool for economic improvement, Cadogan Etal. (2003). Such companies can create supply chain all around the world, which will significantly lower the costs. Especially if those companies are using global cooperation and competitiveness as business strategies.