“Globalization changes everything.” This could be a new adage in the world of corporate payments. Today, one in three goods crosses national borders and more than one-third of financial investments are international transactions, according to a McKinsey report. And the consultancy predicts global trade flows could triple to reach up to $85 trillion by 2025, powered by emerging economies and the spread of the Internet and digital technologies.
Opportunity for Change
Organizations participating in cross-border payments need their processes to keep up with the quickening pace and rising volume of international trade transactions. In fact, their ability to compete on a global scale and enjoy healthy profit margins may depend on adopting alternatives to traditional international payment methods, which saddle them with high fees, poor foreign exchange rates, and lengthy transaction timeframes.
The marketplace is seeing an increased demand for cross-border payments to become simpler, faster, and more cost-effective. This is the subject of Saxo Payments’ white paper Cross Border B2B Payments – Today’s landscape; Tomorrow’s opportunity, based on a comprehensive survey of issuers, acquirers, banks, payment service providers, and merchants. Their delve into the cross-border payments industry reveals that:
- 67% use traditional bank transfers when handling cross-border payments, but 63% are not satisfied with how long the transfers take to arrive.
- Only 38% believe they get a competitive FX rate for cross-border payments with their current provider.
- Nearly 30% haven’t looked around at other options, with most respondents citing a lack of time for researching alternatives or too few resources on hand to make internal changes as reasons for sitting with the status quo.
The fact is, there are other options they can consider. Companies are no longer tied to traditional cross-border bank transfers, when other solutions (e.g. cryptocurrencies and virtual credit cards) from existing banks and new entrants alike are emerging to meet the demand for next-generation international B2B payments.
Because of their ability to be issued in multiple currencies (WEX’s solution accommodates 24, in addition to extensive currency conversion solutions), virtual credit cards allow companies to avoid cross-border and FX fees, while optimizing cash flow and streamlining bookings. Payments are accepted anywhere major credit cards are accepted—they use the same networks—and can be made in the supplier’s home currency. (Learn more in How Much Is Your Travel Business Losing On International Payments?)
It seems decision-makers may not be aware of their alternatives—or they’re not appreciating their benefits: cost- and time-savings. The Saxo Payments survey shows that 79.4% of businesses would be willing to switch providers if they found a solution which cost less, while 63% would make a move if they found a service providing faster transactions.
This insight serves as yet another reminder as to why payments strategy is becoming more and more critical to business success—and why decision-makers need to stay in-the-know about marketplace trends, opportunities, and new solutions like those offered to help them manage cross-border transactions.
For more on this topic, you may enjoy How is the World Participating in Non-Cash Transactions?, Virtual Cards, 1099-Ks and Travel Companies, and Fintech: Reinventing the Financial Services Industry.