Cross-border payments are an essential tool for keeping your business running smoothly in a global economy, irrespective of the size of your business. Know the various reasons your payment infrastructure needs to adapt to the times.
The global economy is becoming increasingly digital. The opportunities to expand their reach and compete in new markets have been opened up for companies by this trend. However, this rapid growth has also led to increased competition and the need for cross-border payment processing solutions. Companies need to modernize their payment infrastructure to remain competitive.
With the presence of SWIFT MT, the exchange of information amongst financial institutions has been quite efficient for a long time. Clearing payments within minutes is the miracle achieved by the widespread acceptance of the SWIFT ecosystem. But as the transactions are increasing with growing digital traffic and more incredible internet speed, the throughput rate of processing also needs to match the neo economy. This is where the latest ISO 20022 standard comes into the picture. This article focuses on this new payment standard’s possibilities and what else is in store for simplifying international payment processing services.
Complications of Cross-border Payments
From the 18th century onwards, globalization has led to many innovations in trade, commerce, and technology. But the pace of change is much faster now than ever. The most significant cause of concern in our evolving society is tackling cybercrime. The world’s interconnectedness brings its own set of difficulties and talking strictly about finance, cross-border payments are more complicated than domestic ones.
- Due to varying exchange rates, these payments tend to be more expensive than domestic ones
- The different regulations and compliance requirements for cross-border payments make them unreliable
- The payment methods for cross-border payments are often different than the domestic ones, and so is the process
- The infrastructure to process international payments is opaque, attracting transaction fees of sorts
Need for Modernizing Payment Infrastructure
The traditional approach to payment processing involves the use of paper checks. Payments via check can be slow and expensive, especially when you factor in the costs associated with clearing and settlement. They also require a lot of manual labor, which is not scalable or transparent. This makes tracking your expenses challenging and ensures you get good value for your money.
The traditional approach has plenty of other flaws as well:
- It’s inconvenient for everyone involved, especially since you must wait days or weeks after sending out your payment before receiving confirmation that it went through
- It’s not secure as anyone could easily steal thousands of dollars by simply walking out with a stack of checks in their pocket
- Since it relies on outdated methods like paper checks or wire transfers (which take even longer than paper), there are no guarantees that these funds will arrive at their destination on time
Companies must have an international payment gateway to process payments quickly and efficiently. The traditional model of processing payments through a bank has become outdated due to the rise of digital commerce. As more people shop online and use mobile banking applications, there is a greater demand for faster payments with less friction when making purchases. The holistic adoption of ISO 20022 is expected before 2025 by major currencies, which will help provide the payment processors with rich data regarding the transactions. This will help minimize discrepancies in and costs of the low-value transactions, with a 99.999% network availability.
The digital ecosystem has dramatically evolved over the past few years, so companies must adapt to regulatory environments and changing customer expectations. To keep up with the times and stay competitive, businesses often adopt new technologies and processes. Knowing your customer base and understanding their preferences goes a long way in helping you decide to embed a payment gateway for your business. There is always a need for a cost-benefit analysis that allows you to vet the viability of an option.
With the growth of your business, there may be a point where it makes sense for you to look at cross-border payments as an opportunity instead of something that you have no control over. You must build a robust financial foundation for your company by managing global payment processing costs while maximizing potential revenue opportunities through global payment processing solutions. Around 63% of the abandoned carts during online shopping are recoverable, given the right approach has been adopted to revive them. Real-time payments are being demanded in the C2B and B2B spheres and are expected to register significant growth for the same reason.
International Payment Gateways vs. Regional Payment Options
Local payment gateways are the way to go if you’re a small business with a limited customer base.
- Local payment gateways are cheaper than global payment options
- They’re easier to set up, with fewer hoops to jump through and less documentation required upfront
- They offer greater flexibility for your customers and their preferred methods of payment
- They’re more secure than some of their global competitors because they don’t require a long list of documents or verifications before setting up an account
Cross-border gateways are for businesses that want to accept payments from customers in different countries. While a regional gateway provides only one currency and payment processing ability for each currency—cross-border gateways allow you to process multiple currencies simultaneously. McKinsey’s 2021 report suggests the overall cross-border payments revenues will grow by 6% until 2026. Large companies with global reach typically use cross-border gateways, for example—big retailers like Amazon or Netflix that sell their products internationally. But they’re also great if you’re looking to expand into another market and need an easy way to process payments on different continents.
When you are processing transactions worldwide and want to save money, a single global gateway is a good option. A single international gateway means all your customers will be routed through one central hub for processing. The benefit is that there is less overhead, and the cost of doing business goes down. This option works well if you have a large customer base that doesn’t need individualized services or price points based on location or currency but wants consistency across their entire purchase experience.
Going forward with digital transformation
Payment processing is pivotal to any business. Whether a multinational corporation or a proprietary firm, cross-border payments are vital for keeping your business running smoothly. However, traditional methods of processing payments have become outdated and inefficient in today’s world. The future of global commerce depends on companies finding ways to modernize their payment systems without further complications. This will give them a competitive edge over other businesses from around the world.
Let us know about your business expansion plans and how we can help you keep your customers happy with best-in-class payment options.