The upsurge of digital innovations, such as global transactions in international trading, is evident as the world economy is getting better during the pandemic. As per the current statistics of cross-border payments, you can see an 11% increase in the emerging markets – where you find potential to grow like a developed market, but it’s unable to meet its standards.
A few experts attribute it to international transactions, B2B cross-border payments, borderless payments, and e-commerce businesses. The increase in those global transactions has pushed demand for payment providers to advance their services and improve cross-border payment platforms to take your business to new heights.
Cross-border payment systems aim to assist merchants in adapting and adjusting their global e-commerce strategy as per the needs of the regional or local markets. Cross-border payment systems also offer a wide range of familiar alternatives to consumers in different countries or regions.
Due to this, retailers can improve customer experience and take advantage of new sources of revenue. This implies agile, safe, and cost-effective international transactions with businesses or individuals.
This guide will take you on a deep ride to provide you the insights into some major cross-border payment challenges and their solutions. And here we go.
Cross-Border Payment Systems Challenges
Inconvenient International Remittance Processing
Cross-border payment is something that takes both your time and effort. Also, as the process is complex, you can stop or pause it whenever there’s an unexpected delay and poor customer experience between the parties.
The reason for this inconvenience involves
- Incomplete payment information
- Fraud screening processes such as AML
To be precise, foreign remittance takes more time when compared to parties doing national transactions. Also, specific checks involve a thorough search of the mentioned person, their vehicle details, luggage, and many other information and objects; these checks are done manually, resulting in unnecessary delays.
Unclear Transparency
There is always a need for a cross-border remittance system that can offer more transparency in cross-border payments between both parties. It means that no business, bank, or customer can get real-time transaction updates. Such a challenge safeguards financial institutions from monitoring data and delivering flawless services and may turn a good customer experience into a bad one.
Also, with fragmented payment solutions, you work with more than four payment processors to meet international transfer requirements, which is time-consuming and prone to multiple errors, such as payment fraud, complex management of multiple bank accounts, and payment via different platforms, resulting in disrupted financial reporting.
Legal Complications
International transfer involves parties that function in different countries. The contract between two parties and the interpretation of that contract in one country could differ in the other country. Moreover, it takes time to determine which interpretation or evaluation has meaning or authority in which country, resulting in several legal complications.
Tax Problems
Analogous to legal regulations, the tax process can be contradictory. In some countries, you can only claim the benefits where you have rules and regulations to skip double taxation. These rules will put you at a disadvantage where you have to bear high transaction fees, eventually disrupting the financial equation of both parties.
Compliance Concerns
Cross-border payments are risky and simultaneously involve a lot of complexity as there is the involvement of several manual and automated compliance checks. This process is time-consuming and results in irrelevant transactions, impacting compliance checks’ efficiency regarding banks and payment gateways.
Data Protection
Two parties involved in the international transfer should follow standard data protection regulations, which vary from one country to another.
For example, the General Data Protection Regulation applies to businesses working in the UK and EU. These data protection regulations determine what information you can share and what you cannot.
Follow these guidelines to avoid turning into a declining transaction along with paying hefty fines. However, in the US and countries like India, the regulations are easy-going compared to the UK and EU.
Security System
It’s okay if one party follows robust security protocols; other parties involved in the process will do the same. You may encounter other regulatory entities, such as poor security protocols, leading to reputational and financial damages, data breaches, and money getting stolen halfway through the transaction process.
Operational Systems
Most regulatory entities promote cross-border transactions, and they depend on legacy systems or traditional operating mechanisms or configurations inconsistent with new technological advancements. These promotional operational systems involving international transfers sometimes need more real-time tracking, settlement delays, and other transaction issues.
High Exchanges and Fee Rates
In cross-border transactions, you will get to know about different fee types. For example, there are regulatory costs, transaction fees, currency conversion or exchange fees, SWIFT messaging fees, currency conversion fees, and regulatory costs. These charges increase your transaction cost in no time.
Moreover, with the involvement of excessive intermediaries, the charge will increase for their services, which will pile up the overall fee structure.
Solutions for Businesses Facing Cross-Border Payment Problems
Next, you can get the best solutions on how to deal with the challenges you face in cross-border payments.
Blockchain Technology
With the help of blockchain technology, you can have faster settlements that don’t require intermediates like banks or payment processors. Making the best use of this technological advancement, you can make transactions within a brief unit of time, instead of long hours or days.
Cost-Effective Cross-Border Payments Solution
Often, traditional payment techniques charge higher fees, but blockchain technology reduces the fees for these payments. Blockchain transactions don’t need any intermediaries which leads to an automatic reduction in the costs of cross-border payments.
Improved Security
With the help of cryptographic methods used in blockchain technology, you can have safe and secure transactions. This helps reduce any hindrance in the transaction or results in a decrease in money theft. The enhanced security techniques increase the trust of parties and reduce fraud risk.
Compliance, Data Protection, and Security
With the help of SCA, PCI-DSS, and GDPR payment gateway integration compliant techniques, you can easily comply with top-notch data protection regulations. Also, it will enhance payment security, strengthening your business reputation.
Full Transparency
With the help of leveraging technology, you can have a tamper-proof transaction record, which means both the recipient and sender can keep track of their payments and verify their authenticity. This method helps increase reliability in the payment process and decrease fraud risks.
In a Nutshell
Lower fees, fast transactions, and multi-currency accounts offered to businesses or customers contribute to the success of cross-border digital payment platforms and open doors for businesses that are willing to go beyond their boundaries to sell their products or services.
The involvement of collaborations, partnerships, and cutting-edge technologies helps efficiently process cross-border payments, making you a leader worldwide that offers a quick and effortless payment experience for businesses and individuals. Cost-effective cross-border payments streamline your transactional operations and make your business reach new heights.