Five fixes for frictionless cross-border payments | Visa

ADDRESSING THE B2B OPPORTUNITY Five fixes for frictionless cross-border payments

Calling B2B cross-border payments big business is an understatement – the market is projected to rise to $111 trillion by 2027 from $88 trillion in 2022.¹

Clive Cornelius and Edward Galvin

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But despite such high value, issuers using traditional payments processes often struggle to deal with complex cross-border transactions.² Why? Because they rely on corresponding banking relationships where costs, payments and delivery timings are unclear – with fraud risks and regulations further compounding the uncertainty.

However, by combining the latest technology with expert guidance, issuers can simplify the process, address compliance concerns, and consumerize cross-border payments with intuitive platforms B2B customers find easy to use.

With that in mind, here are five fixes for frictionless cross-border payments.

Fix 1: Prioritize real-time payments

Embracing modern cross-border payment solutions is crucial for any ambitious business aiming to remain competitive and grow in a global economy. Economies like Brazil, China, and India are embracing the frictionless international transactions, improved cashflow and reduction on debt financing associated with real-time payments.³

There are global disparities in real-time payment adoption however, with leading GDP nations like Germany, the UK, and the U.S. lagging behind.³ If you’re an issuer yet to offer real-time payment to commercial customers, now’s the time to remedy the situation – and working with experts on secure and compliant global payment systems like Swift is a great place to start.⁴

Fix 2: Tackle technical differences

While various real-time payment systems are becoming more popular worldwide, implementing a truly global offering can prove difficult due to different technical standards and protocols.

To overcome this hurdle in cross-border payments, public-private partnerships can harmonize legal and regulatory frameworks, enabling further automation, faster processing speeds, and lower costs.⁵ Stakeholders from regulators to issuers and payment system operators need to collaborate to reconcile messaging standards, facilitate data exchange and support the use of ISO 20022.⁶

And the good news is, this type of coordinated cooperation is already available to financial institutions with the requisite technical capacity. Take the Single Euro Payments Area (SEPA), for example – a system used by banks in the EU to standardize cashless payments to anywhere in the EU (and several non-EU countries) in a similar way to domestic payments.⁷

Fix 3: Keep an eagle eye on compliance

With thousands of ever-changing tax jurisdictions worldwide, it’s easy to see why regulators are keen to ensure new technologies like real-time cross-border payments don’t boost financial crime. Key considerations for compliance include everything from collecting and verifying customer IDs to screening against global watchlists and implementing enhanced due diligence for high-risk customers and transactions to filing Suspicious Activity Reports (SARs).⁸

The consequences of noncompliance are high - the average cost of a data breach in the financial industry worldwide in 2022 was $5.97 million.⁹ However, issuers can work together with payment technology partners to bolster compliance – for instance, Visa Direct issuers can subscribe to Visa’s sanctioning screening score accompanying cross-border money transfer OCTs, as well as a consolidated data report of AML (anti-money laundering) data fields.¹⁰

Fix 4: Navigate fees and exchange rates

It’s important issuers factor currency conversion and fees like ISA (International Service Assessment) into cross-border transactions. Although these factors may influence cardholder behavior, there are several ways issuers and other stakeholders can join forces to navigate the challenge.

For example, some banks issue cards in multiple currencies to avoid FX fees for popular trading routes like the Pound, Euro and US Dollar. And technology partners can help in this area too – for example, Visa Cross-Border Solutions B2B4X model alters the end-user’s experience for different organizations, using APIs to create modular building blocks delivering a range of capabilities – from multi-currency wallets holding up to 30 currencies to FX with persistent and real-time rates.¹¹

Fix 5: Collaborate on card payment and acceptance

On the path to smooth cross-border payments, payment technology providers and issuers are collaborating to bolster worldwide card acceptance. And Visa’s global network is a powerful platform for advancing the cause, comprising many partnerships which enhance the security, transparency and uptake of cross-border transactions in B2B and beyond – recent alliances include Standard Chartered, CB International Bank and JP Morgan Chase.12,13

Greater strategic collaboration can prove a vital weapon in issuing banks’ arsenals as they compete with specialist cross-border payments providers on key metrics like speed, acceptance, and accessibility. But please bear in mind that in some territories, collaboration might require a flexible approach. For instance, this might mean accommodating supplier preferences for more traditional methods such as wire.

Conclusion

The cross-border payments landscape has long been convoluted and confusing for intermediaries, but real-time payments and virtual cards are calming the chaos by enabling swift, secure, and compliant global transactions. And as B2B payments become increasingly intuitive, simplicity is fast becoming the ultimate sophistication.

About the authors

Clive Cornelius

Head of Large & Middle Market, Visa Commercial Solutions, Europe

Edward Galvin

Head of Large & Middle Market Commercial Payments Sales, Visa Commercial Solutions, North America

  1. Visa, Introducing Visa Cross-Border Solutions,2023
  2. Visa, Delivering simpler, more transparent B2B cross-border payments, 2019
  3. Javelin Research, Commercial instant payments and the need for speed, 2023
  4. Visa, Visa and Swift Team up to Enhance Transparency, Speed and Security in Global B2B Money Movement, 2023
  5. Visa, Public-private partnership remains critical to improving cross-border payments, 2023
  6. Visa Economic Empowerment Institute, Demystifying ISO 20022, 2022
  7. ecb.europa.eu, Single Euro Payments Area (SEPA), 2023
  8. Visa, Key Considerations for Launching Cross-Border Payments, 2024
  9. NIUM.com, Compliance Challenges with Real-time Cross-Border Payments, 2023
  10. Visa Direct, Risk & Compliance FAQs, 2022
  11. Visa, Visa Cross-Border Solutions launches to help businesses grow globally, 2023
  12. Visa, Visa Inc. and JP Morgan Chase Forge Strategic Alliance, 2024
  13. Visa, CB International Bank and Visa work together to Revolutionize Cross-Border B2B Payments, 2023