Cross-Border Payments Innovation Key to SMB Growth

small business eCommerce

Industries are defined by what customers do, not what companies produce.

And if something doesn’t scale up across a global audience, then it isn’t worth much. 

That’s why, as more small- to medium-sized businesses (SMBs) look to do business internationally, solving for low-cost cross-border payments has become vital for the financial services industry. 

Cross-border transactions have traditionally had the highest frictions and costs of any form of payment. Solving for these historical bottlenecks has drawn the attention of non-bank platforms and firms offering alternative payment methods, as well as an increasing interest from incumbent financial institutions. 

This, as a slate of new announcements this week highlight the accelerating go-to-market pace both incumbent and emergent payment players are taking with innovative solutions and technologies that are simplifying cross-border transactions. 

After all, SMBs are responsible for over $17 trillion of cross-border payments annually, and getting a slice of that pie represents an attractive value proposition for stomachs of any size. 

But, while attractive, simplifying cross-border payments won’t be simple by any means. Even the world’s largest multinationals are well aware that transacting internationally is inherently complex, no matter the scale. 

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On Monday (Sept. 18), Citi Treasury and Trade Solutions announced its new Citi Token Services meant to provide institutional customers with “always-on” and programmable financial services, including cross-border payments, liquidity and automated trade finance solutions.

Also on Monday, Bank of America unveiled its own global trade platform designed to help business clients digitize trade finance. Additionally, Revolut Business launched a solution aiming to address the difficulties surrounding cross-border payments for businesses: a free and instant global payments network available to businesses within the Revolut network called RevTags. 

On Tuesday (Sept. 19), the drumbeat of cross-border focused announcements continued. Banking giant HSBC debuted a trade finance tool, dubbed TradePay, to help the bank’s clients pay suppliers, part of a series of new trade finance and working capital solutions reshaping the world trade landscape and allowing firms to seize new opportunities and drive economic growth on a global scale. 

Additionally, Visa and Swift announced their own collaboration aimed at streamlining international payments.

“Expectations for international payments are rising as the complexity of moving money across borders is intensifying,” said Thierry Chilosi, chief strategy officer at Swift.

Visa wasn’t the only financial services company Swift partnered with this week, as the global messaging platform also announced on Monday a new payment partnership with money transfer firm Wise designed to provide financial institutions and their customers with more cross-border options.

The companies say their collaboration is the beginning of a broader relationship, and is aligned with development goals set by the G20 and U.N. on the speed, transparency, cost and access of cross-border transactions.

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Global Interoperability Across a Fragmented World 

Many of the historical frictions bottlenecking cross-border payments are obvious on the surface: We live in a world without a global banking system, where fragmentation leads to inefficiencies that range from settlement times, to pricing, to transparency, to compliance and beyond. 

Because traditional global payment methods rely on a complex system of correspondent banks, sending funds across national borders can be opaque, expensive, slow and often unreliable. 

“[SMBs] really feel the pain of correspondent banking much more acutely versus larger companies,” Pegah Soltani, head of payments products at enterprise crypto solutions provider Ripple, told PYMNTS. “They have a lot fewer resources. And because they’re smaller, they have worse service and worse pricing relative to the bigger competitors.”

Still, as customers increasingly demand the same experience that they get from the domestic payment experience within the cross-border space, the incentives are there to innovate cross-border payment processes.

One area of concern is the investment required for banks to undergo a major tech build that can support next generation cross-border expectations, as well as comply with various regulatory checklists. And while the technology exists today to make the cross-border occasion easy and seamless, often, the modern technology that’s needed to support cross-border goals is incompatible with legacy infrastructure. 

Layer on top of that the diversity of regulatory models between countries, and expanding low-cost cross-border capabilities becomes a slower process to realize. 

But it’s not an impossible one, and with access to many of the innovative working capital solutions available today, firms can more easily make the investment they need to start growing their business across borders.