Cross-border payments, the process of transferring funds internationally, have become very essential in today’s global economy. The popularity of these transactions has increased due to the interconnectedness of businesses worldwide.
Small businesses, in particular, are increasingly adopting cross-border payments due to the benefits they offer, such as expanded market reach and the potential for growth. The World Bank reports that small and medium-sized businesses (SMBs) make up around 90% of all businesses and provide more than 50% of employment worldwide.
According to the Mastercard Borderless Payments May 2022 Report, 58% of small and midsize businesses (SMBs) reported a rise in their cross-border payments since the COVID-19 pandemic started. This surge has accelerated payment trends thereby emphasizing the importance of smooth cross-border transactions.
As these businesses look to grow internationally, the need for effective remittance platform provider becomes crucial.
In a cross-border payment, a bank in the sender's country works with a bank in the receiver's country. This type of transaction is all about transferring money or assets from one country to another.
These cross-border payments include both everyday retail transactions and larger-scale business deals. In short, cross-border payments connect markets across the globe and enable international trade.
Furthermore, cross-border transactions involve converting currencies based on the current exchange rate.
Traditionally, banks have offered a range of financial services to support small businesses, such as domestic payments and loans. However, small businesses struggle with the more complex needs of cross-border payments and foreign exchange (FX). These complex services account for 8%-14% of the total revenue banks make from payments
To tackle these challenges, fintech companies have come up with smart FX payment solutions that make cross-border transactions easier for small businesses. By leveraging existing banking infrastructure, these fintechs offer more user-friendly and cost-effective services.
Hence, banks and fintech companies can team up to create solutions that make foreign exchange payments and data integration smoother. Working together can improve the customer experience, offer better exchange rates, and refine transaction pricing strategies.
Cross-border payments are not just about transferring money, they can significantly drive your business growth.
Here’s how they can benefit you:
With cross-border payments, small businesses can sell to customers worldwide. This allows you to enter high-demand markets, and overcome local market limitations. By expanding your reach, you can grow your customer base and increase your sales potential. This boosts long-term growth and stability.
Global payments provide features like:
Competitive exchange rates
Secure fund transfers
Efficient international transactions.
These features can set your small businesses apart from local competitors, helping you import materials at better prices as well as enabling you to offer unique products or services to your audience.
Engaging in international markets helps small businesses to reduce dependence on local economies. By taking advantage of seasonal demands in different regions, they can also protect themselves from local economic downturns.
Cross-border payments enable access to global supply chains which allows small businesses to source products and services from international vendors at better prices. This can result in cost savings and higher-quality products.
Offering seamless cross-border payment options can improve the customer experience. This not only boosts customer loyalty but also encourages repeat business.
Cross-border payments simplify international payment methods for small businesses. It reduces the need for complex currency conversions and provides better financial visibility across markets. This leads to increased efficiency and cost savings for your small businesses.
Despite the benefits, cross-border payments present unique challenges:
International money transfers can be expensive for small businesses. They often face significant expenses. These can include bank transfer fees, currency conversion charges, and fees from intermediaries, all of which can reduce their profits.
Read More :- Proven strategies to reduce remittance costs for providers and customers
Exchange rates can change rapidly, which might lead to unexpected financial losses. This unpredictability can make it difficult to set accurate prices for products or services and can complicate financial planning.
When dealing with international transactions, there's a higher risk of cybercrime and fraud. Small businesses are especially vulnerable to data breaches and may find it challenging to verify the legitimacy of their international partners.
Cross-border payments offer significant opportunities for small businesses to expand and thrive in the global marketplace. As more small businesses seek to engage in international transactions, you have a valuable chance to partner up.
By offering integrated and innovative payment solutions, you can simplify the complexities of global transactions for small businesses and eventually help them expand and succeed on a global scale.
DigipayGuru, a leading mobile eWallet solution provider, offers the best white-label digital wallet software solutions for banks, telcos, and financial institutions. Our cutting-edge technology empowers you to deliver secure, user-friendly, and efficient digital wallets. Enhance customer satisfaction with real-time transaction alerts, advanced security features, and a seamless interface. Customize our scalable solutions to reflect your brand identity and drive higher engagement and retention. Transform your financial services and elevate customer experience with DigipayGuru. Contact us today to revolutionize your digital offerings.