Why You Need Cross Border Payments In Your SEA Ecommerce Business
Image: Finextra Research
Cross-border payments sit at the heart of international trade and economic activity. Read on to find out everything you need to know when it comes to engaging in cross-border payments.
What are cross border payments?
Cross-border payments refer to payments made when payer and receiver are in different countries. Individuals, businesses, or financial institutions intending to send money across their borders engage in these sorts of transactions. Ecommerce businesses attract buyers globally as well, thus SMEs should be ever ready to receive payments in the countries they aim to serve. as well. Experts predict that global cross border payment flows are expected to reach us$156 trillion by 2022 – This shows the importance for small businesses to start looking into their cross-border payments capabilities. However, there are challenges to bear in mind when engaging in cross border payments.
Image: Earnst & Young
Challenges of cross border payments
High costs
- This is due to the number of intermediaries involved in transferring money from one country to another, all of which charge fees for their services. Additionally, regulatory costs and FX fees will also be charged when converting currencies
Low speed
- Cross-border payments through a traditional bank transfer usually takes between two to five days to process — a slow turnaround time as compared to virtually instant domestic payments.
Lack of complete transparency
- Businesses require better visibility regarding costs and deductions involved in a cross-border payment, and transparency is factored as crucial for business and customers who want to ensure that they are not absorbing hidden costs.
Read on to understand how these challenges are getting overcome and how the benefits of cross border payments outweigh it.
Cross border payment process – 7 Steps
Image: Citcon
Types of cross border payments
Bank transfers
When a customer intends to send money to a place where they do not have the currency in stock, they depend on their foreign banking partners to fulfill this transaction. At times, smaller banks also lack foreign currency reserves, therefore relying on larger banks to handle cross-border transactions on their behalf.
Credit card payments
When a customer uses this form of payment method, they simply key in their credit card details and wait for the payment to get validated.
E wallets / Mobile wallets
E wallets, the simple and most used payment method from other payment options, allows customers to pay for transactions either online or in-store. Many come in the form of smart device applications and provide great convenience as they allow users to save their preferred payment cards securely, to pay for products and services. PayPal, Google Pay, and Apple Pay are just some of the many popular mobile wallets to make use of to transact in several currencies and place orders from different countries around the world.
Benefits of cross border payments for SMEs:
Convenience
- You can pay vendors from your phone or other mobile devices via cross-border payments - Therefore, you can settle an invoice anywhere anytime. Instead of worrying about thousands of invoices, leverage your global payments platform to automatically arrange each payment for you, helping you focus on other more essential operating activities.
Networking
- As a small business you might not have the resources to hire a full team. Having a cross-border payment solution allows you to connect with more suppliers and affiliates - Many freelancers based elsewhere only charge in their country’s currency. With the help of cross border payments, freelancers can use global payment software and complete a simple onboarding procedure which includes keying in their payment details. Thus, you would be able to receive their invoices monthly, with automatic reconciliation, making it remarkably simple for your business.
More appeal for SMEs
- Breakthroughs may be on the horizon as SME’s access to international payments improves. In particular, the SME segment stands to benefit the most from cross-border payments’ convergence and simplification—given that larger corporates have long had access to most of these capabilities. SWIFT’s gpi and Mastercard’s B2B Hub are some examples of solutions which offer very flexible and SME-appropriate payments options.
Trends shaping cross border payments
Changing consumer demands - Consumers are getting more comfortable with cross-border payments.
The fast pace of change in this market is significantly connected to the rapidly changing demands from consumers. As the years pass, consumers are aware that they have a variety of growing choices, expect better shopping experience and customer experience when they checkout, therefore are unwilling to pay for highly priced services from banks.
They also demand the entire cross border payments process to be quick, safe, more transparent, and instinctive. Factors like increasing penetration of smartphones, and rising preferences of digitized options and alternative payments methods (APMs) for remittances, have created these new demands.
Rising trade due to emerging markets
As their share of international transactions increases, another major trend within cross border payments is the growing focus on emerging markets of shoppers in Africa, Latin America, and Asia.
The dynamic nature of emerging markets creates opportunities for innovation and growth. Payments are an area where this dynamism is already well-established. Over the next ten years and onwards, there would be faster changes in the payments landscape, building on the accelerating growth in electronic payments and the advent of new and disruptive market players – With the emerging markets being at the forefront of this payment's transformation
Accessibility of mobile phones and e-payments; Digitalization
Rising number of shoppers own mobile phones - More people around the world have access to banking and e-payment solutions. Southeast Asia in particular, is on the cusp of a financial revolution - 49% of consumers in the region already utilize e-wallets. This proportion will reach 84% by 2025. In fact, adoption and accessibility of mobile phones and e-payments could speed up due to the COVID-19 crisis, which has triggered a sharp increase in digital payments and home delivery.
Additionally, digital wallets are forecasted for significant growth - Mobile wallets will reach 2.6 billion users in Asia Pacific by 2025 as well. This growth is increasing cross-border shopping commerce volumes.
Choosing the right cross border payment - Factors to take note of
- Security
- Payment methods
- Regional experience and reputation
- Payment platform/interface
- Service and support
Why APAC region is the best spot for real-time payments
The APAC region has predominantly been a pioneer when it comes to fast payments technology. There are already 11 countries in this region which have active real-time payment networks, of which Singapore is one, with their FAST network. Additionally, five other countries are getting their own networks ready for launch as well. APAC has also been at the forefront of teaching the world, on harnessing mobile apps, QR codes and contactless technology, to make instant payments an easy and convenient process. Therefore, they are the preferred payment method for many customers and businesses – Thus, start actively using cross border payments if you are willing to stay on par with your competitors, and simplify the process for your customers, to be willing to purchase from you, and come back for repeat purchases.
At Trustana, we accept PayNow in Singapore as a form of payment method and have also partnered with Stripe to offer you the best seamless and secure checkout possible. With many more payment options available, source stocks with ease and enjoy a more convenient shopping experience at Trustana Wholesale.
For more information, contact Trustana here.