Overcoming X-border roadblocks to payments

Cross-border payments are highly in demand owing to a growing global E-commerce culture. Learn how the roadblocks to X-border efficiency are being overcome by business payment automation.

Cross-border business has grown enormously as the world has gotten more interconnected. Today’s businesses are more likely than ever to sell internationally and collect payments from anyone, anywhere in the world. Unfortunately, this means that many of them have to deal with cross-border roadblocks when it comes to receivables. B2B systems need to be able to recognize remittances coming back into their corporate treasury systems and adjust them against outstanding invoices accordingly. The need for real-time payment settlement is being mutually realized by the vendors and the payors as it helps streamline the purchase cycle. Both parties are therefore investing in technologies such as digital wallets to enhance the transactional experience.

That said, payments are generally received in a variety of formats, such as checks, Automated Clearing House (ACH) transfers, and Electronic Funds Transfers (EFT). Even when they do arrive electronically, they are often unreadable by the latest automatic payment processing technologies. The electronic information from various payment methodologies isn’t always enough for B2B companies to automatically process the payment against an invoice accurately. Manual intervention becomes imminent in such a situation. This means that the transacting parties need to ensure that their payments are processed correctly and instantly through mutual confirmation. With the B2B payments industry reaching the US $942.6 billion mark in 2021 and being expected to reach US$1563.5 billion by 2027, the time has come for businesses to adapt to innovative technologies in the field.

Removing the Human Touch from the Payments Funnel

Payment automation is a solution to X-border roadblocks, which include the problem of sending payments across borders. X-border roadblocks occur when a business’s customers or suppliers are located in different countries, it gets tedious to verify every payment manually. Businesses that implement automated invoicing and payments are able to get a better understanding of how much money they are owed by customers. Robotic process automation (RPA) helps them automate reconciliations, saving time and reducing costs associated with manual processes. More efforts can be focused on high-risk payments that are flagged in the automated systems through deep learning.

Automation helps manage redundancy without a bulky workforce and slashes the error rates that could be as high as 6%, which can translate to a substantial amount. There is greater scope for achieving scale in any operation with increased efficiency. Accounts and financial management are high-stakes tasks that require precision and timely reconciliation. These can be improved by following a standard process ideal for automation. Checking the real-time exchange rates through intuitive APIs can also be helpful for certain businesses that do not rely on fixed rates due to their dynamic business models.

Automating the Reconciliation Process

Payment automation tools can help businesses receive more accurate information on their payments and easily reduce the days’ sales outstanding (DSO) by a substantial proportion. DSO is a standard metric used to check the financial performance of a business with respect to Orders to Cash (O2C). The lower the DSO, the higher the operational efficiency of a business. The need for working capital also reduces as a result of lean management.

For example, if you’re expecting a payment from a customer and then you see remittance advice from them in something other than your standard format, your system won’t be able to apply it against the invoice automatically. You will have to manually apply it against the invoice before processing that transaction through your system again. Businesses tend to avoid these issues by automating much of their back-office processes, like invoice management and payments processing. 64% of small businesses are keen to adapt to the new payment ecosystem to reduce cross-border fraud risk.

Moving to a Centralized E-Banking Platform

A cloud-based SaaS solution is a perfect fit for companies that want to move their payment systems to the cloud. These solutions bypass X-border roadblocks using specialized software, hardware, and other services from select specialized vendors. The E-banking platform handles the file formats and connections so that all feeds from banks are normalized in real-time, using a rules engine such as SWIFT. A rules engine is a software program that automates decision-making processes. It analyzes data, makes decisions, and enforces business processes. It can also monitor and automate business processes, ensuring that they run smoothly while reducing errors and costs.

The rules engine works with data from multiple sources to determine whether a transaction is considered fraudulent or not. For example, there can be multiple files coming into one hub. Each one contains different information about each account (such as bank name, routing number, and account number). The rules engine determines whether these transactions match up adequately based on their unique parameters. In case of any discrepancies, the AI engine triggers a notification for further review by the organization, to investigate the flagged concerns.

Faster Payments with Lower Costs

The business payment networks of financial operators have become so advanced that they surpass the efficiency of legacy payment systems exponentially. The mode of embedded finance allows businesses to leverage the neo banking services to offer varied payment options to their customers directly through their apps. The user experience increases manifold due to a seamless checkout, while the compatibility of different modes of payment attracts customers across different categories and nationalities. While the customers can be profiled for the risk probabilities, the AI engines set the tone and frequency of reminders accordingly.

Embedding reminders into the invoices makes B2B payments even smoother. This helps with better reconciliation by reducing DSO and maintaining relations with customers. As the payment cycles improve with the use of cloud servers while the costs of secured infrastructure reduce, the need to charge a fee on transactions has also diminished. Payments can be further optimized by channeling customer behavior to define customized payment terms. Adding an element of cash discount from traditional payment settlement prudence can further improve O2C. It is easier to compute complex values related to uploaded documents through NLP automation. The process also becomes more auditable with standardization.

Leveraging Innovations

Payment reconciliation pipelines use a set of processes that start with the order requisition and end with the receipt of final payments. Modern enterprise resource planning (ERP) software is built to handle these pipelines efficiently with the help of 3-way matching principles. The transaction data is also stored structurally in blockchains for corroborative future reference. The inconsistencies of manual reconciliation are overcome by automated workflows that are plug-and-play for modern businesses. A meager investment of 1% of the revenues has the potential to save 80% time in the reconciliation process, rendering a highly error-prone process completely error-free.

The best part about enabling the automated pipelines? It can be implemented by integrating a comprehensive service suite into the existing payment ecosystem without hampering the ordinary course of business. With the help of collaborations by authorized payment operators such as Billtrust and Visa, independent software developers can also easily integrate cross-border payment services without hassle. Unauthorized payment providers’ fraud can be curbed by leveraging regulated networks and registered partners.

Frictionless Experience of Cross Border Payments

Payment automation is the key to moving past the roadblocks and building a robust X-border receivables process that mitigates risk, reduces friction, and fast tracks cash flow as a result. The aspects of compliance can also be better managed with automated funnels. Needless to say, going paperless adds to the sustainability of the business through a reduced carbon footprint.

Contact Opus Consulting Solutions to learn more about making seamless cross-border payments.

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