Payments are the lifeblood of any business. The ability to remit and receive monies impacts everything a business does from cash flow and hiring to credit, investment and expansion. And as businesses grow, many look to expand their reach to include international markets.
A recent study by Juniper Research estimates that the total value of B2B cross-border payments will reach $35 trillion in 2022, up 30 percent from last year. These international receipts represent a growing portion of transactions for both banks and their clients. This should not be surprising given the increasingly global nature of regional economies and the growing number of digital B2B marketplaces that make it easier for more businesses to sell outside their domestic markets.
That does not make global trade any less complex. It’s one thing to start “selling” internationally. It’s entirely another thing to find profitable customers in new markets, overcome language barriers, deal with regional tax and legal requirements, manage currency conversions, and various other considerations. And even if they can navigate all those complexities, they might still have trouble getting paid.
Cross-border payments are highly problematic. Traditional international wire and bank transfers can be slow, costly and difficult to reconcile for both businesses and their customers. Short payments, manual errors and a lack of transparency hurt cash flow, increase operational costs and erode customer satisfaction. Any company processing either large sums or a large numbers of international payments is likely paying more than they should for those transactions due to all of the hidden fees and unpredictability around foreign exchange.
And there are regional-specific challenges related to requirements for preferred banking relationships or local infrastructure. Certain countries restrict the amounts and nature of payments that can be made to overseas recipients. Important compliance and anti-money-laundering considerations may also need to be taken into account. All these things distract from the core business and make it more difficult for businesses to receive payments from their international customers.
Banking’s role and opportunity
Businesses look to their banks as trusted advisors to help them navigate these payment challenges, but as banking services have been unbundled, many business customers are using an array of services from multiple providers. As a result, banks have an increasingly narrow view of their customers’ business and, not surprisingly, customers have a narrow view of their banks’ capabilities and services.
This can present a critical point of churn for banks. Businesses, increasingly digital and global in nature, feel they are outgrowing their banks’ abilities. So, they look for solutions that better serve their needs and reduce risk around their business. At the same time, competitors from big-tech companies and fintechs are beginning to offer payment services at low or no cost to break into new markets or simply to access more valuable data sets.
Banks have an opportunity to fend off potential competition and customer churn by addressing their commercial customers’ needs around international receivables. It presents a high-value differentiated service with a compelling user experience that improves global reach while improving stickiness.
By addressing both the needs of the receiver (automated reconciliation) and the payer (easy local digital methods, global payment support), banks can eliminate many of the operational challenges related to international payments for their commercial clients, while also optimizing the payment experience for their clients’ customers.
Offering a comprehensive receivables service with local currency transactions for payer and receiver – replete with 24/7/365 multi-language customer support – rather than simply “a way to accept payments,” improves efficiencies, creates added-value and reduces churn.
Payment services that integrate seamlessly into the client’s existing systems and workflows allow their customers to pay locally, without increasing fees and operational costs in the process. Banks also don’t have the operational headaches or the lower margins synonymous with correspondent banking.
Offerings like digital invoicing accrue a wealth of data on payment flows against goods and services specific to buying groups or market segments that can help businesses plan their operations and reveal ways to better serve their customers—more added value and stickiness for banks.
International payments present a key obstacle to growth for many businesses. Banks are perfectly positioned to address this need with international receivables services that allow the bank to grow with their customers by constantly improving the reach and quality of their services and operations.
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