The cross-border payments landscape is constantly evolving. New technologies and approaches are always emerging, making it difficult to predict what the future will hold. However, some clear trends suggest where the industry is headed.
So, what are these trends? And how will they shape the future of cross-border payments? We’ve created a complete guide to answer these questions.
In this guide, you’ll learn about:
- What are cross-border payments?
- How cross-border payments work today
- The benefits of cross-border payments
- The future of cross-border payments
- What is SWIFT and how can it help?
Read on to find out everything you need to know about the future of cross-border payments.
What are cross-border payments?
Cross-border payments are electronic money transfers between two countries. The majority of these payments consist of a sender and receiver who do not share a common ledger, and the transactions between the two countries will involve a series of intermediary transactions.
They can be used for a variety of purposes, including:
- Paying suppliers in other countries
- Receiving payments from customers in other countries
- Transferring money to friends and family members in other countries
- Making investments in foreign companies or securities
Let’s say you’re a CFD broker. You have clients in the UK, Europe, and the US. To settle trades with these clients, you need to be able to send and receive payments in all three currencies.
Types of Cross-Border Payments
The society for Worldwide Interbank Financial Telecommunication (SWIFT) is a system that allows for cross-border payments to be made in any currency via a swift code. It’s used by businesses all over the world and is considered to be extremely secure.
The single Euro payments Area (SEPA) is a system that allows for cross-border payments to be made in Euros. It’s used by businesses in the European Union (EU) and European Economic Area (EEA).
Credit card payments
These are cross-border wire transfers made with a credit or debit card.
Alternative methods of payments
E-wallets, apps, and cryptocurrencies. These are all new methods of making cross-border payments that are becoming more popular.
How cross-border payments work today
Cross-border payment options are typically made through banks or other financial institutions. The sender will initiate a transfer through their bank, and the recipient’s bank will receive the payment and credit it to their account.
In most cases, cross-border payments take several days to complete. This is because the banks involved need to convert the currency, process the payment, and then send it through the international banking network.
The process can be further complicated by things like different time zones, holidays, and weekends. All of these factors can delay payment and add to the overall cost.
The benefits of cross-border payments
Despite the challenges, there are a number of reasons why you might need to make cross-border payments. In many cases, they offer a number of advantages over traditional payment services. Some of the benefits include:
Achieve a greater ROI
With cross-border payments, businesses can save on operational costs and improve their bottom line. That’s because they can take advantage of better foreign exchange rates and avoid costly bank fees.
Businesses can also save on costs associated with having a local presence in another country such as rent, salaries, and other overhead costs. Outsourcing services from emerging markets can also be a cost-effective way to get the same quality of work without having to pay high prices.
Suppose you’re an online gaming company that makes most of its revenue in US dollars. However, you have servers and other operational costs in Euros. With a cross-border payment solution, you can get the best exchange rate for your transactions and save money on every transaction. This can add up to significant savings over time and improve your bottom line.
Increase the number of buyers and affiliates
With cross-border payments, your high-risk business can expand its customer base and tap into new markets. That’s because you’ll be able to accept payments from buyers in other countries.
For example, let’s say you run an e-commerce store that sells products to customers in the United States. With a cross-border payment solution, you could start selling to customers in Europe and Asia as well. This would open up a whole new revenue stream for your business.
Comply with international tax and regulations
Cross-border payments can also help businesses stay compliant with international tax and regulatory requirements. This is because they provide a paper trail of all transactions. This can be helpful in the event of an audit or investigation.
For high-risk businesses, cross-border payments can also offer a number of other benefits. For example, they can help businesses avoid chargebacks and fraud.
The future of cross-border payments
Despite the benefits, there are still a number of challenges with cross-border payments.
But the good news is that things are changing. With the advent of new technologies like blockchain, the future of cross-border payments looks promising.
Here are some of the ways that cross-border payments are expected to change in the future:
Cross-Border Payment methods will continue to evolve
There’s no doubt that payment methods will continue to evolve and in turn enhance cross border payments. In the past, cross-border payments were typically made through banks or other financial institutions. But this is changing. SWIFT GPI, SEPA Instant, and other innovations are making it possible to make cross-border payments in real-time.
Cross-Border Payments will be instant
One of the biggest changes to cross-border payments is that they will become instant. This is possible with the use of blockchain technology. With blockchain, payments can be processed in real-time, without the need for intermediaries.
Suppose you’re a high-risk business. In the past, you may have had to wait days or even weeks for your payments to clear. But with blockchain, your payments will be processed immediately, giving you the working capital you need to keep your business running smoothly.
Cross-Border Payments will offer differentiating features
Another way that cross-border payments are expected to change is that they will offer differentiating features. This is because the market is becoming increasingly competitive. As a result, businesses are looking for ways to stand out from the crowd.
One way that businesses are doing this is by offering unique features that appeal to specific niches. For example, some cross-border payment solutions are designed for businesses that need to send large amounts of money. Others are designed for businesses that need to make frequent payments.
Each of these solutions offers differentiating features that appeal to a specific group of customers. This is expected to continue in the future as more and more businesses enter the market.
Cross-Border Payments will be more transparent
In the past, there’s been a lack of transparency with these payments. However, cross-border payments are evolving and APIs are playing a big role in this.
With APIs, businesses will be able to connect to a network of central bank and financial institutions. This will allow businesses to compare prices and find the best deals. It will also allow businesses to track their payments and receive notifications when the funds have been received. This increased transparency will help businesses to avoid hidden fees and charges.
Cross-Border Payments will meet every business’s needs
In the past, cross-border payments were often seen as a niche product. But this is changing. As the world becomes more connected, there is a growing need for this solution.
This is because businesses are increasingly doing business with partners in different countries. By tracking international payments with a single, ubiquitous standard, businesses can streamline their operations and save money. Plus, transparency on fees, remittance and FX information will help businesses to avoid hidden charges and improve the customer experience.
The future of cross-border payments looks promising. With the advent of new technologies, the process is becoming more efficient and transparent. This means that businesses will be able to save money and conduct transactions more quickly and easily.
SWIFT payments Can Help Your Medium or High-Risk Business:
One of the most popular methods for making cross-border payments is SWIFT.
SWIFT is a global network that connects banks and financial institutions. It allows businesses to send and receive money quickly and securely.
SWIFT is an ideal solution for businesses that need to make large or frequent cross-border payments.
At Capitalixe, we offer SWIFT-enabled cross-border payment solutions that can help your medium to high-risk business save time and money. It’s designed for businesses of all sizes and can be customised to meet your needs.
Interested in learning more about our solutions? Contact us today!