As you move money across international borders, avoid these five common payment mistakes businesses make:
1. Always assuming that you have to wire money
Today, there are far cheaper and faster ways to carry out cross-border transactions than using an international wire transfer. Third-party payment solutions have changed the game by giving users direct access to the payment ecosystem and more control over international cash flow at less personal cost, risk and hassle. In addition to being inefficient, traditional wire transfers lack transparency, as transaction fees and exchange rates are often not revealed to the sender upfront. This can cause payments to arrive short of the intended sum (if not enough money was sent to cover the payment total and the additional FX costs) and can quickly become a burden for B2B companies and their international customers and suppliers. Third-party payment options like Currencycloud allow businesses to tap into ACH (Automated Clearing House) networks around the globe to send and receive money abroad from local accounts.
2. Not understanding the value of local payment options
To expand on the first point, not many businesses understand the control and flexibility that local payment options can provide to your international payment efforts. In addition to saving you from paying inflated landing fees on cross-border transactions, leveraging a domestic payment system will insulate you and your customers from shouldering the costs, hassle and risk of FX payments. If you can offer customers and suppliers local payment options, you’ll be able to keep your prices competitive globally and maintain a superlative payment experience, regardless of region. In addition, leveraging domestic payment options for international exchanges will help your company control internal cash flow to a greater degree, so you can make bulk exchanges when FX rates are optimal and free up capital when you need it.
3. Not planning for when things go wrong
When you’re building out a payment solution internally, it’s easy to focus on how the solution will function if everything goes according to plan. But any reliable payment platform should be prepared to accommodate the unexpected and be able to respond to challenges without missing a beat. In fact, your entire business depends on this adaptability.
On the surface, designing an international payment platform from scratch may seem manageable. If you know what basic functionality you need, it’s easy to assume that your seasoned development team can build a solution to fit your criteria. But while payment platforms often feel simple from a UX standpoint, that ease is the product of an incredibly intricate and nuanced API infrastructure.
Fintech, by nature, is unique from other development sectors. It carries it’s own set of challenges, concerns and regulations that are unique to the financial industry and can have catastrophic consequences when not executed properly. In addition to simple functionality and UX concerns, building a payment platform means navigating a web of payment compliance laws and creating an API infrastructure capable of providing real-time payment transparency, validation and status updates (among other functions). Sophisticated third-party payment solutions offer developers the ability to test key functional elements before system changes go-live, so problems can be troubleshooted and corrected before they effect real customers.
By integrating with a third-party provider’s payment ecosystem and pre-built API platform, you can reap the benefits of cutting-edge payment technology while saving time and costs in development. Rather than juggling all the nuances of payment platform development and execution, your team can focus their time and energy on improving your core product offering.
4. Not thinking about reconciliation early on
As you evaluate your current payment process, it’s easy to focus on aspects of the front-end user experience. But your finance and billing department will have their own ideas about what an ideal payment solution should look like. If you’re moving money internationally without thinking about the reconciliation process, then it’s likely that you’re making things infinitely more complicated for your team from an operational standpoint.
When you’re dealing with foreign currency, reconciliation becomes significantly more complicated. In addition to tracking each transaction, your company needs to account for how much of a given currency was converted, the FX rate charged on each transaction and the resulting balance. If your payment process and platform aren’t built to provide you with this data for each payment, then you won’t have a reliable means of reconciling your cross-border payments or evaluating them for accuracy. Before diving head-first into the international marketplace, make sure your payment reconciliation process and underlying tech framework is equipped to bridge the FX divide so you don’t run into larger issues down the line.
5. Not bulking cross-border payments
Bulking payments won’t save you in exchange rate fees (since the FX rates aren’t effected by the size of a transaction) but it will save you on transaction fees. By grouping payments together, you can move a large number of payments in a single transaction (and will be charged once, rather than on a per-payment basis).
To touch on reconciliation once again, if you’re planning on grouping FX payments, make sure that your payment provider can do so while still providing you with referencing data for each of the payments involved. Currencycloud gives customers the ability to join up referencing data throughout a transaction and capture details like the exchange rate and execution status for specific payments within a larger transaction. Key information is captured through our API and organized in a format that can be easily consumed, filtered and funneled into your preferred reconciliation platform for seamless reporting.
Help is here
Leveraging a third-party payment provider will protect you from making all of the above blunders that can increase your cross-border B2B payment costs and inhibit your growth potential. To learn more about how Currencycloud can help you regain control over your international cash flow, contact us to start a conversation.