The fundamental aspect of any business that trades internationally is cross-border payments. However, it also has its drawbacks including export delays, high costs, compliance issues, and the lack of accountability. Solving these issues, on the contrary, guarantees the efficiency of the transaction as well as the protection of interest in terms of competition, particularly in the global market where pace and timing is everything.
The Problems Exporters Face While Making Cross-Border Payments
- Transaction Costs that span broad margins
Exporters most often tend to spend more on costs incurred as a result of exchange margin, charge by the intermediary banks, and other transaction costs. World Bank estimates state that average cross-border payment cost could reach as high as 6.5% of the transaction cost by 2023, hence making it reasonable for SMEs as those cost margins would otherwise deeply cripple profit margins.
- Unforeseen Payment Delays
Long waiting times are usually an inevitable consequence of border payments, a survey conducted by the International Chamber of Commerce in 2024 reports that almost 44% of businesses making international payments had to wait over 5 days for the payment to go through which delays the entire transaction and supply causing customers and partners in the global trade to lose faith in the organization.
- Inadequate Payment Transparency
Another relevant issue is the payment opacity. Payments often include opaque transactional fees and timelines, making it difficult for exporters to follow. In the eyes of businesses engaged in cross-border trade highlighted by McKinsey’s report of 2023, 36% currently believe that transparency concerns do exist.
- Regulatory & Compliance Issues
Meeting the host country regulatory standards is sometimes a nightmare due to differing regulations in different countries. This includes exports that are subject to AML and KYC compliance which worldwide differ as per the country’s requirements. If those measures are not taken, transaction_PROCESSING might incur fines, delays, or be blocked altogether. In 2023, the FATF stated that compliance with international payment regulations resulted in 20% of international payments being delayed.
- Low Hedging Mechanism Usage
An unhedged transaction on the other hand means constantly worrying about the other currency even if there is a slight fluctuation, particularly a high value currency. High value currencies, which tend to be highly sensitive to foreign transactions, can mean huge losses for exporters. Even slightly changing a 1 percent increase can mean millions of dollars lost.
Coping Strategies for the Hammering Payment Problems
International exporters can make great savings by using payment gateways advertising for beneficial exchange rates and a lower number of intermediaries. This is due to the costs of transaction fees being cut down up to 35% for exporters using Collect&Pay who combine all payment processes into one robust efficient platform and other services. Numerous suppliers stand to gain in thousands every year as they cut down on the number of intermediaries using platforms with low fees ranging from $5-15.
Innovative technologies such as SWIFT GPI (Global Payments Innovation) and blockchain are redefining payment speed. Blockchain has the capacity to enable payment contractors to directly connect with contract workers removing the need for intermediaries which would in turn allow for elimination of wait times for payment.
As these payment structures are put into place cash flow management is seen to greatly improve. In the year 2023 it was reported through surveys that 60% of businesses adopting these tools highlighted the improvement in their cash visions and factoring other businesses comes out with great resource management. To enhance the final consumer experience better accountability these expense notification tools which are real time, monitor the status of payments alongside other financial factors.
When working with partners and clients that abide by compliance using Collect&Pay simplifies the regulatory processes. Guldana Ablanos advises “Exporters should prioritize solutions that assist in automating compliance such as compliance focused tools. These solve challenges related to Money laundering and fraud while again being less work intensive.”
Exporters can address currency fluctuation risk by employing derivate instruments such as options and forward contracts. Furthermore, multi-currency accounts allow enterprises to maintain balances in currencies of their choosing, thereby minimizing the risk of currency translation. The Bank for International Settlements states that firms implementing a hedging strategy in 2023 reported 22% less losses due to currency volatility.
A Tale of the Triumph of a Textile Exporter
A European textile exporter used to experience unpaid invoices and high transaction fees while working with clients from Asia now felt confident in collaborating with them. As a linge company, they were able to decrease expenses by 40% and reimbursements from 6 days to less than a day. These advancements greatly benefited the company in terms of cash flow, as well as nurturing the company’s relationships with both suppliers and buyers.
George Arakelov, the CEO of Collect&Pay comments “The future of businesses is bright, anytime I envision firms expanding globally, I can hear the future emphasis on, among many others, the ability to process cross-border payments efficiently. It is always the most brilliant idea to create a solution that marries technology, regulation, and cost in the best way possible.”
And complementing him, Anthony Bridges, the accounting rep at Collect&Pay further added, “Just as regulations have become increasingly nuanced due diligence will only become even more nuanced and complicated. In order to keep pace with compliance, companies need to partner up with providers who specialize in cross border movement of fast.”
The issue however is that exporters have a number of issues they have to tackle while moving money internationally in this case cross border payments. Adequately modern and effective measures to tackle these problems are important for business growth in the long run. Companies that are prepared to spend a lot of money to put in place a transparent, affordable, and compliant payment system across international borders will be able to fend off the huge competition in the international market.
There is variation in what a business needs but companies such as Collect&Pay have a reputation of solving the fundamental problems with cross border pay solutions. If the right tools coupled with strong strategies are used by the exporters, transactions can be made easier, costs can be reduced, and global relationships can be built.