Money movement makes the world go ‘round.
But moving money around the world has historically challenged organizations looking to expand internationally and do more business in overseas markets.
As companies navigate different regulatory regimes, compliance and fraud are ever-present issues, and fragmented payment structures increasingly keep critical funds locked up in messy and far-flung correspondent banking nodes.
There is also the intractable issue of cross-border payments’ high fees, and slow-as-molasses transaction times.
But technological innovations — and the network effect of their adoptions — are starting to help thaw the pain points long plaguing cross-border B2B payments, offering organizations looking to grow globally a chance to do so.
After all, in today’s unprecedented era of global connectivity, the need for efficient and secure cross-border payment solutions has never been greater.
And the future of cross-border payments for B2B transactions holds immense promise, driven by a convergence of innovation around artificial intelligence (AI), machine learning (ML), real-time payment solutions, embedded finance and even blockchain and distributed ledger technologies (DLT).
PYMNTS spent the past year talking to payments industry experts, and taking the friction out of the cross-border occasion was on nearly everyone’s bingo card for 2024.
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One of the defining themes of 2023 is that business customers are now starting to expect the same, seamless and technology-driven experience in B2B transactions as they receive in their day-to-day lives as consumers.
“There are two highly important areas for B2B payments where innovation is occurring,” Eric Foust, vice president of banking partnerships North America at Trustly, told PYMNTS. “And the first one is cross-border payments.”
Form3 U.S. CEO Dave Scola told PYMNTS that “we’ll start to see a movement away from traditional correspondent banking,” as real-time payments schemes, distributed ledger technologies and tokens increasingly play a role in reducing the complexities of cross-border payments.
For cross-border innovations to stick their landing, the need for interoperability across regions and localities is crucial.
Imagine, for example, a passenger taking an international flight that requires multiple connections and layovers, each with their own set of passport controls and security checkpoints with long lines and longer waits. This journey would not be a pleasant one, but if you replace “passenger” with “business payment” — it is the same cumbersome and cost-intensive journey that cross-border B2B payments make nearly every day.
“The cross-border B2B market is growing massively,” Neil Drennan, CTO at Visa Cross-Border Solutions told PYMNTS. And that means there are more businesses than ever looking to “[move money around the world] quickly and transparently, with complete clarity around costs.”
See more: Corporates Chase Payments Ubiquity in Bid for Cross-Border Expansion
PYMNTS Intelligence found that only 23% of smaller businesses say that current cross-border payment solutions are “very or extremely satisfactory.”
“What we hear from banks and the needs of their corporate and small business customers are frictions around complexity of setting up bank accounts in every international market they operate in. We are seeing the demand for virtual accounts, to set up faster and be able to accept in the local currencies. In addition, businesses are looking for integrations to tie those accounts and payments to their ERP [enterprise resource planning] and accounting systems,” Paul Chang, head of payment networks at Amazon Web Services (AWS) told PYMNTS.
And that complexity leads to further downstream hiccups and delays, hamstringing the ability of businesses to effectively manage their cross-border flows and liquidity.
“This core problem is how long it takes to move money across borders … you’re being charged serious rates to move money across borders, and you also have an inability to track those payments and know they’ve arrived with certainty,” Brooks Entwistle, senior VP of global customer success and managing director at enterprise crypto solutions company Ripple, told PYMNTS. “As these businesses grow, it comes with the need to really move value faster, and in more places.”
But change is on the way. Additional PYMNTS Intelligence shows that nearly two-thirds of financial institutions (FIs) are either “very” or “extremely” willing to invest in new technology to solve cross-border pain points. The percentage increases for FIs serving cross-border payments needs of larger companies, as 88% of them say they are “very” or “extremely” willing to embrace new tech to carry out B2B payments.
The promise of embedding payments in cross-border commerce is a multitrillion-dollar opportunity, Citi Global Co-Head of Payments and Receivables, Treasury and Trade Solutions (TTS) Amit Agarwal told PYMNTS.
Other innovations like AI are helping to digitize invoices and streamline existing complexities between cross-border B2B transactions that have stacked and tiered contractual terms between buyers and sellers, while at the same time helping monitor transactions in real-time, identifying suspicious activities and ensuring compliance with regulatory standards.
The conversion to ISO 20022 standards “has the potential to bring additional data flows into the payment systems,” which can and will do much to eliminate the frictions that can lead to delays and mistakes when sending payments across borders, Nilesh Dusane, global head of institutional payments at Amazon Web Services, told PYMNTS.
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