The last few years have brought increasing change to the world of cross border payments. The tried and tested banking system encountered stiff competition from emerging alternative solutions as new players shook some of the industry’s fundamentals.
For small businesses in today’s globalised economy, the ability to accept payments from clients around the world is crucial. If your company has international customers or suppliers, managing payments across borders can be a challenge.
New research has shown that more than half (52%) of UK small businesses have experienced a growth in online sales since the start of the pandemic. Supported by this growth, payment trends for businesses have accelerated, bringing the need for smooth cross border payments with them.
For businesses to catch up, they need to adapt their payment strategies to include:
#1 PSP and P2P Payments
If you’re a small business owner looking for a way to save money on cross-border payments, you’ve probably heard about using a Payment Service Provider (PSP). This service offers a secure, global payment gateway that allows businesses to accept all types of payments securely and efficiently. PSPs are the middlemen between banks and businesses and manage the entire transaction from start to finish.
Additionally, at the point of sale, businesses with international reach can use a dynamic currency converter to allow their customers to pay in their local currency wherever they are buying in the world. With this service, the customer achieves certainty as to how much they will be charged in their own currency and the business knows how much they will receive.
An alternative payment option for secure international payments is peer-to-peer (P2P) payments or money transfer apps, like Venmo, PayPal and Cash App. These allow users to easily send money to relatives or friends using their mobile phone, which is linked to their debit card.
P2P payments can improve your company’s cash flow and reduce the fees you pay to send and receive money. Businesses like Uber or Papa John’s are already adopting them as part of their cross border payment strategy. Google and Apple Pay are following suit, having seamlessly integrated P2P options into their mobile wallet capabilities.
#2 Local Payment Options
Country specificity is an important consideration when thinking about optimising your cross-border strategy. The United States and Canada predominantly use PayPal. By contrast, China uses Alipay and WeChat Pay, while parts of Europe, like Malta, prefer payments via challenger banks like Revolut.
As a global business, part of your strategy is to consider these differences when accepting international transactions. If you only do business with a few other countries, consider integrating their most popular payment systems into your checkout process to create a familiar experience for your customers.
Maria Roberti, who manages Strategic Partnerships for Trust Payments, believes that businesses need to find the right cross-border payment solution for their needs, so their “clients are no longer limited by domestic borders or devices for a smooth and trouble-free checkout experience.”
Roberti mentioned Belgium as a good example – in this country, 25% of purchases are cross-border, so Trust Payments facilitates integration with their most popular debit card – Bancontact, allowing customers to make real-time card transactions on all channels.
#3 Emerging Technologies
An emerging cross border payments trend is the use of cryptocurrencies on networks like Ethereum, Bitcoin and Ripple. Until 2020, cryptocurrency payments were used mainly by digital challengers, but recently large companies like Microsoft, Tesla and Expedia started accepting payments in this currency. Some key players in the payments space, such as Visa, Mastercard and PayPal, have also joined in.
Notably, there is increased adoption of payments for cryptocurrency in the B2B space as businesses receive interest from consumers to access this technology.
According to research from Deloitte, cryptocurrency is improving cross-border payments by reducing banking costs from 40% to 80%. It’s also more efficient as the transaction is done in real-time, compared to the five days needed for traditional payments.
However, cryptocurrency is still considered volatile, and it needs a lot of knowledge for it to be securely managed. Businesses who want to adopt it in their cross-border payments strategy need to find a suitable payments platform that would help them with minimum risk while implementing in this emerging vertical.
Overall, for businesses looking to expand overseas, the focus should be on enabling a smooth customer experience versus pure payments. International success will require systems integration with an experienced PSP partner to offer the best payments experience to their customers.