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The absurdity of the technological advances we’ve made can sometimes only hit you when you start complaining about them. Getting annoyed about the quality of Wi-Fi on a plane, for example, when you’re flying 30,000 feet above the Pacific Ocean is a reminder that 20 years ago most of the world’s population who could even access the internet were struggling with dial-up connections.

International payments are another area where we’ve advanced so far that customers have come to expect instant solutions and flawless execution. Thankfully, businesses today can – to a large degree – offer exactly this, providing they take certain steps.

By first identifying the friction points you face when making international B2B payments, and then leveraging modern methods and technology, businesses can make international payments as easy as transferring money between a customers’ own bank accounts.

Common types of friction points in global B2B payments

Friction points in international payments can be put into three buckets in terms of how they affect the business; time, cost and risk.

Time is the first problem to solve, particular when it comes to the customer experience. Domestic payments today are as near instant as we can expect. Sometimes when it’s a payment that involves two banks, it can take a day to come through, but often it is instantaneous. Customers have come to expect similar when making cross-border payments.

With international payments, the money can travel through several banks or third-party providers, often using different back-end systems, operating in different times zones and within fluctuating currency markets. This adds several friction points to the chain.  

Cost is what businesses pay to address those friction points. At each point in the chain, the bank or third-party provider will take a cut, and that cut will generally be charged to the business making the payment. That cut may come in the form of a straight fee for receiving an international payment, or a transaction fee because of foreign currency exchange.

You may also be charged a fee if the payment fails for whatever reason, such as having incorrect details or if it’s flagged for potential fraud or money laundering.

It’s estimated that between 2% – 5% of all cross-border payments will be checked for compliance reasons.

Risk comes from those red flags that systems throw up because the cross-border payment has the potential to be fraudulent or being used as part of a money-laundering scheme. It’s estimated that between 2% – 5% of all cross-border payments will be checked for these reasons. As a result, friction points will emerge as payments are delayed, additional information has to be provided, and generally people need to get involved.

How to reduce friction points when making cross-border payments

The tactics and technologies to reduce friction when making international payments is available to all organizations, from SMEs to large enterprises, but it sometimes requires a mindset shift away from the traditional, comfortable methods of making payments.

1. A centralized and consolidate payments platform

The sourcing and paying of suppliers can become very ad hoc if adequate controls aren’t in place. Someone in the marketing department contacts finance to pay a supplier they need for a one-off conference, and finance cuts a check or pays on the company credit card. It’s easy in the moment, but detrimental in the long-term.

A process like this leads to a sprawling mass of payments coming from multiple points and going through multiple paths. Hard to track, hard to reconcile, and open to fraud.

The alternative to this is to use an integrated payment platform, which will both do the heavy lifting and keep track of all relevant information. An accounts payable and receivable digital platform means the finance team are only required to validate who the payment is for, how much it is, and when it should go. In the background, the platform will resolve the ‘how’ and ‘where’ to pay.

This leads to a centralized platform where all B2B payments can be made, reviewed, approved and reconciled easily. It eliminates multiple friction points for both the organization, and the customer or supplier. 

Where this saves you: Time, Costs and Risk.

2. Proactive and Automated Compliance Procedures

A major pillar within these centralized platforms’ functionality will be automated compliance procedures. Payments that raise alerts – such as coming from new bank accounts, being sourced from a risky jurisdiction or breaching certain limits – should be automatically flagged to the organization to ensure they are legitimate.

Speed is a major part of any anti-fraud and money-laundering strategy, and automated systems are the first line of defense in this regard. After 72 hours of fraud occurring, the chances of recovering the money drops to 9%.

Before contracting with a partner, it’s also vital to know what their procedures are for updating their screening process. Criminals generally will push the envelope for what can be done, so your platform must do the same or else they may be able to circumvent the barriers that are in place.

Where this saves you: Risk

3. Automate the error solution process

Errors when making payments are inevitable. People will enter incorrect details, systems will fail to communicate appropriately, and sometimes a red flag for fraud will come up in error.

Through a centralized B2B payments platform with automated compliance procedures, combined with API integration, you’ll be able to automate at least some of the process when these errors do occur. The API integration is so crucial because these paths you require towards a solution needs flawless communication of the data between differing systems.

The value of cross-border payments is estimated to increase from almost $150 trillion in 2017 to over $250 trillion by 2027

Bank of England

Often, when an error occurs, it requires a human intervention to make a decision. By automating the likely decisions, a human has to make, you reduce the admin time and speed up the process considerably.

 Where this saves you: Time.

4. A transparent payment system

Payment systems need to be able to communicate with each other in order to provide a frictionless experience

One of the big headaches of the past was sending a payment off into the ether and waiting until it emerged on the other side. Depending on the chain it went through (and the cuts, commissions and exchange rates it was subject to along the way) the payment coming out the other side may not be the same as it was when it was sent.

This can lead to time being used on administration on both sides (leading to frustration) and additional payments being made to make up the shortfall (which are subject to all the same fees). This doesn’t include the support requests from suppliers wondering where the payment is while it is traveling through the chain. 

Again, it is the centralized platform that can remove this uncertainty. Through modern solutions, payments can be tracked by all parties as it moves cross-borders, and the payment will arrive as it was sent due to locked-in exchange rates and transparent fees.

“Reality has truly caught up with expectation. Clients require full transparency of their payments from initiation to delivery with minimum friction. This can only be made possible by a solution that understands these points of friction and can automatically take steps to address them.” Said Andrew O’Garro, SVP Strategic Innovation at Axletree Solutions.

Where this saves you: Time and costs.

5. Self-service onboarding

An effective technique to remove friction when making international payments is to have a self-service onboarding portal, either within your centralized payments and receivables platform or linked to it. This allows customers and suppliers to enter their own data in the format required and provide the system with the ability to raise red flags when data has been entered incorrectly.

This will lead to pre-validated payments, which means that once the details have been entered and payments made, the next payment becomes much easier – very much like our personal banking when we’ve already set-up a payment to a person, it becomes a one-click process the next time.

While this all sounds simple enough, it often requires API integration in the back end, allowing different systems to talk to one another.

Where this saves you: Time.

Frictionless international B2B payments are here (with the right solution)

Technology usually has to catch up to customer expectations. A customer demands, a business invents, a market is made.

When it comes to cross-border B2B payments, fintech solutions are removing the friction when moving money around the world to meet these heightened customer expectations. They have done this by building the digital infrastructure required to both create new payment rails and keep them safe and partnering with the traditional banking system to build integrated solutions.  

The exception to this frictionless experience is simply when people aren’t aware of the new market. They put up with the old, full-of-friction-experience, because they are unaware an alternative exists. For international payments, the alternative is here.

There will always be some points of friction in certain circumstances, however. Sending a payment into a country ravaged by war and corruption will throw up red flags in these systems – and rightly so – but even in these cases exceptions can be made with the right technology. At TransferMate, we‘ve worked with NGOs in exactly these sorts of situations, and where the money is needed quickly to save lives. 

So, the next time you’re cursing the Wi-Fi on the plane, feel okay about it, because the future is decidedly here, and it’s the least we should expect.

If you want to learn how TransferMate can reduce or eliminate friction points in your international payments process, contact us today.

Invention is a funny thing. Sometimes, something new will hit the world and fundamentally change how we live in an instant. More often, though, invention creeps up on us, until suddenly one day we look up and realize the world has changed around us.

When we look at a high-speed train, for example, its easy to see the similarities to those first steam engines. They kind of look the same, they travel using tracks, and their purpose is to carry people or goods from one destination to another. Dive below the superficial level, however, and we soon realize that a whole new system was invented to make these trains possible.

Invention upon invention adding up to make a revolutionary change.

With international banking, the fintech sector has been building a new system to make global B2B payments, utilizing and transforming the old payment rails used for centuries, transforming them into equivalents of the high-speed train systems. If you haven’t taken the time to look, you may have missed how much it really has changed.

How fintech has changed B2B global payments

1. Instant global payments

‘The check is in the post’ should be assigned to the dustbin of history as an excuse for late payment. While businesses still use checks – around 50% in both the US and UK – the reality is that checks are an inefficient payment system open to fraud.

Modern payment rails allow companies to make global payments as if they were lodging directly into the payees’ bank account. While instant payments generally require an initial set-up time (although, even here, the initial set-up time is equivalent in administrative burden as what a traditional payment would require every time) this leap forward allows businesses to better manage their cash flow, improve supplier relationships and enhance traceability.

By 2020, India boasted the largest Real-Time Payment (RTP) market by volume, with 41 million payments per day.


2. Real-time fraud and money laundering detection

Fraud has always been a significant threat when it comes to B2B payments. Whether it’s an outside entity infiltrating the payment process, or insider criminal activity, fraud costs businesses billions each year.

A core part of the new wave of fintech solutions is automated fraud detection, using in-built rules to detect potential fraud and immediately alerting the account owner. Anti-money laundering protection is a key pillar in these detection systems, looking out for suspicious transfers and movements of money.

Of course, criminals know this and have technologies themselves that can keep attacking our systems. It’s an arms race of sorts, but without the solutions fintech companies are putting into the market, this would’ve been a one-sided war.

3. Transparent movement of money

Good communication between suppliers and buyers is always crucial to a smooth-running business and efficient supply chain. In the past, money moving across borders would essentially disappear into the ether as it moved along traditional banking rails, before appearing on the other side.

Modern systems allow both the payer and payee track the money from the moment it’s sent to the moment it arrives. Crucially, the amount paid is also the amount received – not always the case with traditional payment methods…

4. Dramatically reduce banking fees

The other thing that happened to money moving along the traditional rails was that it could become subject to banking fees. When the money moved through several banks – a common occurrence when paying internationally – each bank could potentially take a cut or fee for moving that money along.

If open finance continues to accelerate, it could reshape the global financial services ecosystem, change the very idea of banking, and increase pressure on incumbents.

McKinsey, 2021

With modern fintech payment rails, the amount paid is the amount received because it skips over these steps and simply uses the rails set-up by the fintech company.

5. Reduce FX risk, and cost 

The new global payments infrastructure allows businesses to operate globally while using local payment rails
The new global payments infrastructure allows businesses to operate globally while using local payment rails

While that money was travelling through multiple banks, it may also have been moving through multiple countries. This means that the money is subject to FX fees and detrimental currency fluctuations.

Again, the ultimate outcome was that often the money paid wasn’t the money received and led to big headaches for finance departments working out how much they needed to send through the chain in the first place.

With new fintech solutions, all this is done away with. Due to the infrastructure in place, near instant payments means a finance professional sending a payment through the network knows that that money is not subject to any of this movement, and therefore not subject to any FX risk.

6. Procure-to-get paid

A real indicator of how the traditional global B2B payment model has been flipped on its head is that businesses can now earn money on FX transactions by partnering with fintech payment providers. Because of the global infrastructure the fintech company has set-up, they can offer partners a commission on international payments and the FX margins that they receive.

This means that global payments become an additional revenue stream for the business rather than just a straightforward cost.

As David Hughes, Chief Commercial Officer in TransferMate puts it, ‘We offer our long-standing clients a share in the FX margin we’ve created through building our infrastructure. The combination of the network we built, and the scale and regulatory of payments made by our clients means we can create a sustainable payment network that not only allows our clients to save money on banking fees and FX rates, but make money too.’

7. Genuine digital infrastructure

We’ve talked a lot about ‘infrastructure’, but what does that mean? For fintech payment companies, it means a global network of regulatory licenses and bank accounts. While it’s an arduous process to apply and receive these licenses to operate in different countries, and opening local bank accounts, it means that fintech companies can safely and securely circumvent traditional banking payment rails.

In 2019, FIS calculated that 54 countries had activated real-time payment systems—a fourfold increase since 2014.

A lot of the B2B payments we thought of as digital actually required lots of manual work in the background, but fintech solutions have changed that paradigm, creating a genuinely digital, global banking infrastructure.

8. Making mass, automated payments, easily reconciled

Another headache fintech has solved for finance departments is the sending of mass payments. In the past, this could be a cumbersome, time-consuming process prone to error.

Today, businesses can send mass payments in a batch form, with the automated solution significantly reducing the admin time spent reconciling payments and recording invoices on multiple platforms.  

9. Connecting systems through API integration

One of the fundamental challenges with the global payments system is that it requires different systems to communicate and interact with each other. Indeed, the proliferation of technologies added layers of complexity to this, with different providers and facilitators using different systems. 

However, today, API integration allows fintech companies to connect disparate payment systems, creating efficiencies throughout the chain and for the people operating them. While they can require a big lift to get off the ground, the savings (both in money and time) businesses make once they kick into gear can be genuinely game-changing.

“One of the major hurdles in removing friction from the payment lifecycle is ensuring straight through processing from the back office all the way to the banking institution. We have been providing a seamless integration experience between our client’s back-office systems and global payment rails for almost two decades using traditional and advanced methods of communicating” said Andrew O’Garro, SVP Strategic Innovation at Axletree, on how they connect different systems. “This has significantly reduced the burden imposed by legacy and disparate systems. Together with TransferMate, we have embraced the revolutionary change and are committed to delivering a frictionless cross border payment experience across all the markets we serve.”

Standing on the shoulders of giants – how banking and fintech move together

While the fintech sector has made huge progress in making global B2B payments easier, more cost-effective, quicker, more transparent, more accurate, safer, and less prone to error, much of this progress has been made in collaboration with the banking sector.

Those old train tracks had begun to creak and piling digital infrastructure on top of them had the potential to crack them completely, so a new, ‘third-rail’, needed to be constructed and created.

When we look at how global B2B payments have transformed over the last decade, it’s hard to point to any single genius that made it possible; it’s been through the work of thousands of people, standing tall on the shoulders of giants, that our world has fundamentally changed.

Have you noticed it yet?

If you’re looking to transform how your business makes domestic and international payments, get in touch with the TransferMate team today.


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