Deep Dive: How Businesses Can Sidestep Cross-Border Payment Pain Points

Most companies now operate at global or multimarket scales, offering their products to clients and customers around the globe via digital channels. Employment is following this trend, with gathering workers at a single office location becoming more old-fashioned by the minute. Communication channels have expanded to facilitate discussions between businesses’ in-house teams and their growing numbers of remote or freelance workers, but payments has not kept up the same pace.

Work may be global, but payments are personal, and the divide between the two can cause frictions for freelancers who live and pay bills in one market but work for companies that operate and process payrolls in another. Shifting tax rules only exacerbate these problems, with 13 percent of freelancers in the U.K. planning to find work outside the country this year due to tax code changes, for example. These workers will likely still expect fast payments regardless of the markets in which their employers are based.

Facilitating cross-border payments can be problematic for businesses and their partner banks, especially as real-time payment platforms become more popular. Many freelancers still receive their payments via traditional wire transfers — despite the fact that they can receive payments from friends in an instant — and a large number of firms do not accept or send payments in alternative currencies. They may conduct significant portions of their business overseas, but these companies often still rely on “international” currencies like the euro, the U.S. dollar or the British pound.

This can further frustrate freelancers, many of whom are already fed up with late payments: 71 percent of ad hoc workers have dealt with clients that did not pay them on time or at all. Many that do pay international workers often use wire transfers, which can sometimes take weeks to arrive, depending on the currencies in question, and any complications can cost recipients.

It is thus critical for the businesses that hire freelancers to have solutions that can easily facilitate these payments — a difficult task knowing that they must satisfy not just their employees but also international banking regulations. Exploring why freelancers are so affected and how companies can ease these fears is crucial to maintaining relationships with workers.

The cross-border payment problem

Businesses are somewhat limited in how they solve international payment issues. Companies’ payment platforms support certain currencies, but they cannot force freelancers to accept payments in denominations that they will not use. Transferring sums into local currencies may take up valuable time and money, adding stress to business relationships and likely causing freelancers to look for work elsewhere.

Wire transfers are becoming less viable for these services, too, particularly as existing costs and frustrations mount. Most gig workers are younger and are thus not familiar with wire transfers or lengthier payment solutions, with one report finding that 40 percent of millennials are freelancers. Another report found that 70 percent of global freelancers are under 35 years of age and are thus less inclined to resign themselves to slower payments. This trend is even more pronounced in Asia, where that number is 82 percent.

Many workers in these groups are accustomed to handling their finances using mobile applications, and though merchants may not be able to add mobile wallets that support local currencies, they still need solutions that enable them to work closely with international freelancers. Solving such issues may require firms to partner with providers that offer the necessary solutions.

Freelancers hunt for faster payments

Many companies have tackled cross-border payments over the years, but key friction points remain for both businesses and their freelance employees. Partnering with third-party providers equipped to handle cross-border payments is one viable solution as these organizations can mitigate potential payment process hiccups, including foreign exchange concerns and payment speeds.

Third parties are also better able to educate businesses and gig workers about the costs involved in sending payments via wire transfers, physical checks or other methods because many utilize automated software that tracks shifting foreign exchange rates and other facets that impact currency exchanges. Businesses can partner with payment service providers (PSPs) or invoicing companies that consolidate payments onto one platform, for example, making it easier for them to manage billing and for freelancers to collect their funds.

Third-party providers cannot eliminate all the frictions associated with cross-border payments, however. Automated technologies like artificial intelligence (AI) can monitor fluctuating foreign exchange rates and currency valuations, but companies have no control over these shifts and thus cannot prevent loss of funds. This problem is currently minor, but it will likely become concerning as more of the workforce becomes freelancers. Many of these employees work online, meaning this group’s expansion without corresponding payments developments could leave freelancers stranded without funds. Eighty-five percent of gig workers would be more likely to take on additional work if they got paid faster, according to PYMNTS research, yet only 17 percent of companies working with them have systems in place to ensure they are paid as soon as projects are completed.

Satisfying workers who want to be paid immediately is difficult, even when those individuals are in the same domestic market, and no company has yet cracked cross-border payments’ issues. Firms and PSPs will need to continue experimenting, though, as these workers — especially those who are on the younger side — are no longer accepting traditional excuses like international payments taking more time or that currency conversions are costly and difficult. Companies will thus need to find partners that can help them add speed and security to their international payments, particularly as freelancers keep searching for projects with businesses that can accommodate the new standards of global work.