There are over 19,000 tax jurisdictions worldwide — any of which can change in an instant.
With new and emerging payment rails, such as instant payments, helping to transform the cross-border space, regulators are increasingly cracking down on businesses in the payment chain to ensure that new technologies don’t drive an increase in financial crime.
That puts the onus on businesses to stay compliant. As a result, the pendulum of enterprise spend is starting to swing toward investing in the back office for firms that are eyeing cross-border expansion beyond their domestic markets.
The benefits of entering new markets and winning share internationally are in many ways wholly contingent upon navigating the intricate compliance requirements set forth by various regulatory bodies when it comes to payments within their borders.
Against this backdrop, compliance, often viewed as a cumbersome necessity, is being reimagined as a strategic asset. By adhering to stringent regulatory standards and embracing digital solutions that facilitate seamless interaction with tax authorities and ensure adherence to evolving regulatory standards, companies can differentiate themselves in a crowded market.
Read also: Can Payments Innovations Solve US Merchants’ Top 5 Cross-Border Challenges?
Implementing a robust compliance framework is no small feat. It requires an understanding of both the technical aspects of payment processing and the legal landscape of each market.
However, with the right approach, compliance can drive efficiency and scalability. By using technology to automate compliance checks and streamline reporting, businesses can reduce manual errors and operational costs.
“Everything’s going more cross-border and getting regulated, so tax compliance regulation is huge for new business models in new markets,” Sovos CEO Kevin Akeroyd told PYMNTS in an April interview.
“Compliance has traditionally been a cost center designed to avoid risk and ensure compliance,” he added. “It has not been a force for growth — but now, it’s turning that corner and it really can be a force for growth.”
He said the more global markets a business enters, the more valuable a single, centralized compliance and indirect tax reporting solution and system of record can be.
The emergence of new payment corridors and digital currencies introduces additional layers of complexity. Businesses must stay ahead of regulatory developments and adapt their compliance strategies accordingly. Embracing a proactive approach not only ensures regulatory adherence but also opens new markets and opportunities for growth.
By turning regulatory hurdles into competitive advantages, companies can unlock new potentials and contribute to the global economy’s interconnectedness.
See also: Currency Matching Key to Effectively Competing in International B2B Markets
Globalization of the B2B landscape has also put a spotlight on the need to streamline cross-border payments, which remain riddled with challenges beyond compliance.
“There are two big things businesses want,” Boost Payment Solutions founder and CEO Dean M. Leavitt told PYMNTS in an April interview. “The first is cross-border payments mechanisms that are cost-effective and efficient in paying their suppliers abroad. That’s a clear desire on the enterprise B2B level. And the other thing is just broadly digitizing the ways in which businesses pay and get paid.”
Faulty cross-border payments cost merchants in the United States at least $3.8 billion in sales last year alone, according to the PYMNTS Intelligence report “Cross-Border Sales and the Challenge of Failed Payments.” Additionally, 70% of U.S. firms experienced higher rates of failed payments in cross-border sales compared to domestic sales.
Separate PYMNTS Intelligence found that traditional cross-border payment methods entail friction for businesses, with the three most commonly cited pain points being slow speeds, lack of transparency and high costs.
The marketplace is responding to the need for better solutions. TransNetwork acquired Inswitch Wednesday (May 15) to accelerate the development of its digital product suite for cross-border payments in Latin America. Also on Wednesday, Block-owned TBD and African FinTech Chipper Cash partnered to facilitate B2C and B2B cross-border payments across 40 African countries.
Elsewhere, Tassat Group and Glasstower Digital partnered Thursday (May 16) to facilitate cross-border digital B2B payments. The collaboration aims to provide multinational corporate institutions with secure, immediate and cost-effective solutions for cross-border transactions.
The PYMNTS Intelligence report “The Treasury Management Playbook: Spotlight on Cross-Border Payments” examined why cross-border payments are more important than ever and how companies can minimize the traditional frictions associated with international transactions.