Uncovering the challenges & opportunities in cross-border payments

Cross-border payments have become increasingly important for small and medium-sized businesses (SMBs) that, in today’s digital economy, can leverage the range of talent and vendors that are now more accessible to them. However, there are several challenges that come with making international payments, and it’s essential for SMBs to understand them in order to navigate the process successfully. At the same time, there are also numerous opportunities that SMBs can take advantage of to streamline their cross-border payments and boost their business growth.

Challenges in cross-border payments for SMBs

1. Currency Conversion

One of the most significant challenges for SMBs when making international payments is the need to convert currencies. The exchange rate can fluctuate significantly over a short period of time, which can lead to unexpected costs and losses for SMBs. Indeed, according to our latest research report, 66% of them agree that high FX costs diminishes their companies’ interest in making new vendor, contractor, or freelancer relationships that would require cross-border payments.

2. Regulatory Compliance

When making cross-border payments, SMBs must comply with a range of regulations, including anti-money laundering laws and know-your-customer (KYC) requirements. This can be time-consuming and costly for businesses, especially those that are not familiar with the regulatory environment in other countries. Indeed, according to our latest research report, while 66% of payments executives say their companies plan to increase their usage of cross-border vendors, contractors, or freelancers, 81% of them say that regulatory requirements prevent them from doing so as it would require cross-border payments.

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3. Banking Infrastructure

Companies may be modernizing how they work by utilizing global talent, but they’re largely still reliant on traditional ways of doing things in payments — including bank transfers. As seen in our report, 84% of payment managers say that they use bank transfers to make international business payments. However, the banking infrastructure in different countries can vary significantly, which can create additional hurdles for SMBs making cross-border payments. For example, some countries may not have a reliable banking system, or the banking system may not be compatible with the payment systems used by SMBs.

In addition, payments can be slow when relying on banks. A full 63% of payments executives, for example, report taking 2-5 business days to pay international vendors, contractors, or freelancers; 17% report taking more than 5 days.

Speeding up the pace of business through faster and more flexible, reliable cross-border payments is essential for businesses as they look to grow with the help of cross-border talent. 89% of payments executives agree.

Opportunities abound

While navigating the regulatory environment, currency conversion, payment security, and banking infrastructure can be challenging, businesses that embrace the opportunities of cross-border payments can access new markets, drive growth, and find cost savings.

A solution like Payoneer helps lower costs and fees around FX for companies while also helping them nullify risks around currency fluctuations, manage regulatory requirements, and get recipients paid faster.

At Payoneer, we help enterprises hold funds in dozens of currencies and pay out to 200 countries and territories, in 70 currencies and in multiple methods. We also serve the SMBs and freelancers in receiving those payments from business clients and platforms and marketplaces. We enable them to receive payments and hold balances in major currencies such as USD, which can be a really powerful tool particularly for developing-market SMBs and freelancers. They can withdraw those funds to their bank accounts in any currency, but they can also access their funds in different ways, like using physical or virtual MasterCards to make outgoing payments from their balances.

Ready to simplify your international payments? Find out more about how Payoneer can make your payments easier, faster, and more reliable.