Why are SMEs still struggling with B2B cross-border payments?

by James Camilleri, CEO and founder of Fyorin

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Despite the advancement of financial technology and payments, large portions of SMEs still face difficulties when it comes to transacting across borders. As a result of this, there are more and more SMEs operating internationally (51% of SMEs surveyed in the Mastercard report do more international business compared to 2021, and 75% are implementing strategies to expand internationally further), but 40% of SMEs resort to local payments due to the hurdles associated with sending B2B cross-border payments. The most common complaints and concerns revolved around the transparency of payments, fraud risk, and delays and fees. Even with current solutions, international transfers can take up to five days and are even ten times more expensive than domestic transfers. Businesses cannot tap into the global $48 trillion B2B market economy without an efficient B2B cross-border payment solution that allows them to send money securely, cost-effectively, and fast. 

So the question arises: Is there anything payment companies and fintechs can do to facilitate the cross-border flow of funds for SMEs and tap into this massive market of B2B commerce? 

Leveraging the expertise of a global network of financial institutions

Fintechs and payment companies can streamline global b2b payments by leveraging global networks of financial institutions.

The fintechs and payment companies can then pool their talents with those of various financial institutions and remove the heavy lifting associated with establishing financial operations in a foreign country. As soon as a business is onboarded with a fintech company or payments company, they are connected to the network, and each time payments need to be made to a new country or region, they can be matched with the right institution in the given country, without having to deal with additional compliance or commercial processes. By doing this, a global business can significantly reduce its operational costs and manage several banking relationships more efficiently. 

In practice, a business can open virtual accounts with local IBANS to transact globally like a local. With access to the global network of financial institutions, they can use local payment rails such as SWIFT, SEPA, CHAPS, ACH and others to expedite payments and reduce corresponding banking and intermediary fees. Ultimately, the beneficiary account receives funds much faster, with fewer costs associated with FX and transfer fees. 

Encourage virtual card payments

James Camilleri, CEO and founder of Fyorin

Card payments are another piece of the puzzle that is often overlooked. For global SMEs, multi-currency virtual cards can significantly streamline day-to-day operations – they are another payment option and are highly efficient and cost-effective. Unlike traditional cards that require extensive contracts with banks, virtual cards offer unparalleled flexibility since they can be set up and managed remotely via a dashboard or an app and tailored to the specific needs of a business. Virtual, multi-currency cards are also highly cost-effective for online purchases, employee expenses or subscriptions – they reduce foreign exchange costs, come with 0% transaction fees, and some even offer cashback on purchases, allowing SMEs to turn costs into profits. Finally, since fraud is one of the most frequently cited concerns relating to cross-border payments, SMEs will be pleased to learn that virtual cards are significantly safer than other payment methods. While they include features like dynamic CVV and tokenization, they are also very easy to freeze or delete if there is suspicion that the company’s funds may be misappropriated.

Final word

Despite technological advancements, SMEs still face significant obstacles in B2B cross-border payments, including transparency issues, fraud risks, and high fees. However, by leveraging global networks of financial institutions, fintechs and payment companies can offer streamlined solutions that are cost-effective and faster. Furthermore, offering virtual card payments to SMEs can present an efficient and secure alternative to managing international transactions, fostering greater accessibility and competitiveness in the global market.

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