APIs Streamline Cross-Border SMB Payments

Commerce is increasingly crossing borders and currencies, digitally, affording firms of all sizes, and across all verticals, opportunities to tap into new markets.

Managing and executing payments globally can be a sticking point, though, as companies must grapple with fund flows across banks and supply chains, where fees accrue and processing times can be slow.

To that end, Benjamin Wong, CEO and co-founder of the Singapore-based cross-border payments platform TranSwap, told PYMNTS that technology – and the platform model – can help make SMB expansion efforts a bit smoother.

The challenges facing SMBs when it comes to cross-border transactions are significant – chief among them high transfer and conversion rates, Wong noted.

“Traditionally, companies have only been able to use banks to send money to other countries, and the exchange rate and bank mark-ups are very high,” he told PYMNTS. “This high cost significantly affects an SME’s margin. Additionally, the transfers take many days.”

Beyond the cost of the transactions themselves, there’s a palpable drag on operations. Wong noted that firms are impacted by slow processing times, as well as the lack of transparency and limited traceability that mark cross-border transactions.

“Despite growing globalization, these challenges have not gone away, and continue to hinder growth and expansion for small businesses,” he noted – especially as they seek to pay employee salaries and settle supplier payments across borders and currencies.

The Rise of Open Banking

The rise of the open banking framework provides a bit of salve for those frictions.

As Wong related to PYMNTS, open banking frameworks have enhanced the ability for smaller firms to make payments internationally and to take advantage of the data that accompanies the transactions themselves.

“Comparing this industry between five years ago and now, there’s a lot of technology that makes it easier to do business,” said Wong. “There are many types of financial technologies that traditional SMEs can embrace, such as AI (artificial intelligence), machine learning and ePayments. There’s even invoice financing that helps SMEs ease their cashflows, and of course FX payment providers like TranSwap, which helps make internationalization less costly.”

Open banking can be briefly defined as “open bank data,” he explained – which, at a high level, allows for access and control of consumer banking and financing accounts through third-party applications. However, the stages of the open banking framework vary across jurisdictions. Wong pointed to the U.K. and EU as regions that are leading FinTech innovation globally – and under PSD2, they offer consumers greater autonomy to access their data and allow firms to build applications for new products and services through open APIs.

This access allows companies such as TranSwap to partner and collaborate with international and regional banks through APIs, and automates data input and processing to allow for direct settlement at partner banks.

Wong said that TranSwap’s interface, which automates multiple transfers, reduces processing costs and gives smaller firms (including importers and exporters) the ability to track cross-border payments in real time. The increased visibility aids smaller companies in making better decisions surrounding cash flow management and other financial activities.

“Existing payment networks may not have the ability or technological infrastructure to facilitate high-volume transfers,” said Wong. “They may also be expensive or have fees that are hidden and are not transparent to customers. Our partnership with banks and APIs to their banking systems gives us the ability to provide settlement to 160 countries, including 60 countries via ACH for high-volume and low-value transfers.”