As the world becomes more connected through technology, so does business. In the past, only large companies had the resources, as well as the need, to do business overseas.
Nowadays, however, even the smallest businesses can be classified as international companies.
But this presents a problem. The cross border payments industry, historically, has been behind other technologies when it comes to reaching across borders.
Many businesses find it difficult to transact with clients and suppliers in other countries.
This is especially the case for SMEs (small-to-medium-sized enterprises).
Even though SMEs employ a massive amount of people and account for huge portions of global GDP, they are often unable to effectively navigate the regulations, difficulty, and cost of performing global payments.
Luckily, the global payment infrastructure is always improving, making it easier to send and receive money around the globe.
Follow these hand-selected tips to ensure your next global payments experience is as smooth as possible!
5 Tips for Improving Your cross border Payments Process
1. Specialize in Your Customers’ Local Payments Platforms
Different countries like to use different platforms to send and receive global payments. For example, Canada and the United States use Paypal more than any other platform.
China, by contrast, almost exclusively uses WeChat Pay and AliPay.
As a global business, part of your strategy should be to take these differences into consideration when accepting international transactions.
If you only do business with one other country, it’s best to integrate their most popular systems into your checkout process.
This creates a familiar experience for your customers and saves them the inconvenience of registering for a new platform.
If your customers come from all over the world, it might be best to find an easy, seamless way to accept international payments from something most consumers have – a credit or debit card.
For this, we recommend setting up an account with a payment gateway like Paypal and have this account linked to your company business account.
2. Define Your Currency Strategy
International businesses have to deal with foreign currencies. And because currencies are always changing in value, it can be tricky.
When your consumer pays through the web, they vastly prefer to see the price in their local currency.
In fact, if you only list prices in one currency (for example, U.S. dollars), over 30% of your international customers will abandon the payment on the spot. For B2C transactions, we heavily recommend listing your prices in customers’ local currencies.
For B2B transactions, such as paying a supplier, there are two options for currency strategy.
First, you can pay them in your local currency. This spares you the inconvenience of having to change the currency on your end. It also saves you from foreign currency risk, since you’ll be paying a known value for every transaction.
Of course, your supplier is running a business, too. They would gladly take payments in their own local currency and get the same benefits described above.
Some suppliers will even offer a discount for payments in their home currency. In case you decide to take payments in foreign currencies, a good way to mitigate your risk is through a Forex forward contract.
Let’s say you own a business in Hong Kong. You charge your European customers €1,200 per unit sold. At different times, that €1,200 might be worth a different amount of your local currency (HKD). That constitutes a foreign exchange risk since you might make fewer HKD per sale as time goes on.
A forex forward contract would allow you to pay a set number of euros for a set amount of HKD at a given time in the future. This reduces risk since you will know exactly how many HKD each euro will get you.
3. Get familiar with SWIFT and CHIPS
SWIFT and CHIPS are two codes utilized in the global payments process. They’re especially important with large volume B2B transactions, where there’s a lot of money involved.
In very basic terms, both SWIFT and CHIPS accomplish roughly the same goal – identifying the receiver and sender of a cross-border transaction.
SWIFT codes are generated and stored by the Society for Worldwide Interbank Financial Telecommunication (SWIFT). They identify the country and bank of the person or business receiving an international payment.
Associated with the bank account number of that person or business, they ensure those cross border payments are routed correctly (click here to know about what is SWIFT Payment and how it works).
A CHIPS code is essentially the same thing, only it’s used to identify the sender of the money.
When conducting business with other countries and across languages, information about the receiver and the sender can get lost in translation. Using SWIFT and CHIPS codes help to mitigate this risk.
4. Minimize Cross Border Transaction Fees
One of the biggest barriers to international trade for small and medium-sized businesses is global payment fees. Because most international transactions are carried out by banks, global payments have a reputation for being expensive and time-consuming.
Thankfully, with the increasing power of technology, banks are becoming less important in international payments.
More and more companies are choosing to perform their transactions through non-bank platforms like Statrys.
Non-bank platforms are licensed to send and receive money just like a bank, without the heavy transaction fees. Additionally, they are integrated with state-of-the-art encryption software. Your funds are just as safe as they are with a traditional bank.
5. Maintain Global Payments Compliance
Following the law is always important. It’s even more important, and more difficult when it comes to global payments.
International business needs to follow the laws of both their own country and the country they’re doing business with. This means twice the work is required in order to learn which laws apply to their cross border payments process.
Data is extremely important for international business.
For example, Europe’s new GDPR (General Data Protection Regulation) places strict regulations on what can and cannot be done with consumer data. It also defines permissions that must be granted directly by the customer when it comes to their data.
Money laundering is an ongoing problem, so most countries have strict financial information laws that must be followed under penalty of fines or criminal sentencing.
Being an international business means putting in the extra time and effort to ensure you’re following all laws and regulations. Not only is it the right thing to do, but it can save you a lot of time and money later on.
With the help of companies like Statrys, cross border payments are becoming equally accessible for businesses of all sizes. Statrys is an international payments platform offering some of the most competitive features in the industry.
Signing up for Statrys takes less than ten minutes, and we have real people available throughout the whole process to answer questions and find the right services for you!