The Other Cross-Border Payments Risk

Increased globalization has presented a growing number of opportunities for businesses to expand their exposure to international markets. More than ever before, international commerce has been brought within reach of smaller businesses, and they are more than ready for the opportunity.

But with this move comes significant challenges.

Though cross-border trade is a desirable opportunity, it requires businesses to face currency exchange risks and complexities in dealing with different banking systems. To get to the bottom of how firms are tackling these payment challenges in pursuit of global markets, AFEX surveyed over 500 financial decision-makers at SMEs across the globe.

The culmination of their experiences and approaches towards managing international payments has resulted in AFEX’s first annual State of International Payments report, which provides insight into how businesses are overcoming the barriers and rising to the challenges of cross-border payments.

The Real Payment Opportunity

Despite the significant amount of volatility that’s been witnessed in the global markets, increased global trade has opened the doors for businesses to partake in more cross-border opportunities.

SMEs anticipate faster growth in international markets versus domestic, and roughly 46 percent of firms surveyed said they expect to increase their international payments over the next year.

But the greater weight placed on global payments does not come without its complications.

Among the biggest concerns for businesses pursuing global market opportunities are complexities with FX volatility (37 percent), cost (37 percent) and contending with different banking and payment systems (26 percent).

“As globalization continues to intensify, North American businesses seeking to increase their exposure to international markets are presented with a new set of challenges when handling higher volumes of more complex international payments,” Jan Vlietstra , CEO of AFEX, explained. “As firms scale their business overseas, they need to be cognizant of currency exchange risks and the associated costs and the complexities involved when dealing with different banking systems. Automated payments solutions, coupled with currency exchange, FX products and expert advice, can mitigate the risks inherent in each of these challenges.”

The Right Tools Of The Trade

AFEX’s data revealed that the majority of businesses (59 percent) rely on nonbank providers to send and receive many of their international payments. Among companies in North America, wire transfers are a more common method of facilitating payments, while bank transfers tend to be more popular in other parts of the world.

One significant shift that the report highlights is the movement toward automated international payments solutions.

“In order to keep up with the increase in international payments, respondents indicated that they intend  to upgrade their payments systems in order to  keep pace with this growth. A quarter (28 percent) intend to upgrade to an online automated payments system this year,” AFEX noted.

Those firms looking to take a proactive approach stated many reasons for wanting to upgrade their technology for international payments, such as reducing the time spent processing (46 percent) and delivering (39 percent) payments, in addition to cutting costs (33 percent).

While improved security was a main driver for many businesses, it seems that many are also focused on the operational benefits that will come with a more automated and optimized system.

“Increasing globalization means greater competition and payments is one obvious area where firms can cut costs, improve service and manage their exposure to international markets more effectively,” added Christian Spaltenstein, GM of the Americas at AFEX.

Please click here to view the full report “State Of International Payments Report — 2016.”