As a business owner or merchant, you may be asking yourself why you should expand to the highly complex global market. Let’s take a look at the numbers: Cross-border paymentsare expected to reach $290.2 trillion by 2030. B2B transactions have displayed a consistent growth trend, with a gradual increase of $14 trillion from $137 trillion in 2020 to $151 trillion in 2022. According to ARF, The B2C segment has increased by 14%, from 1.4 trillion in 2021 to 1.6 trillion in 2022. 

So here’s your answer: There is tremendous opportunity for growth if you enter global markets, although local markets may seem more comfortable. However, alongside the expansion opportunities come numerous challenges which vary according to geographic location, different types of payment formats, the involved parties, and other factors. 

Leading Cross-border Payment Challenges

Let’s address a few of the key cross-border challenges you may face when going global:

High transaction costs and third-party fees

Your local payment infrastructures are probably unsuitable for international payments and may increase transaction costs and third-party fees. Before entering global markets, explore new acquiring options and innovative payment opportunities such as digital wallets and digital currencies in order to reduce and even eliminate third-party fees. A thorough analysis of innovative payment options is a vital step before going global.

Time delays in settling funds  

According to a British Payments Association survey, 41% of survey respondents stated that time delays in settling funds are a major challenge in cross-border payments. Rather than rely on traditional bank transfers that are both slow and expensive, turn to new payment service providers that offer an instant, cheaper alternative. Automate your payment processes to reduce errors and speed up the payment cycle. New technologies and fintech offerings can eliminate time delays and streamline payment processes.

International regulatory variations and local compliance

Before entering various new markets, you must become acquainted with local compliance complexities as well as international regulations. As this generally varies from site to site, such an undertaking can be both time-consuming and costly. Rather than hire expensive legal advice at each location, you can consult with global payment experts who will guide you through complex compliance requirements worldwide.  

Local competition and market entry barriers 

Competitive advantages for local businesses and national restrictions may constitute another barrier for you to overcome when trying to penetrate a new market. Reduce costs by linking up with local acquirers and independent payment providers, enabling you to offer competitive prices. Provide a variety of seamless local and global payment options to enhance the customer experience and develop loyalty. 

Currency fluctuations

Foreign exchange rate fluctuations can have a major impact on the value of cross-border payments, leading to cash flow uncertainty for businesses. Sudden changes in exchange rates can result in surprise gains or losses, which complicates financial planning and budgeting. Businesses can utilize hedging instruments such as forward contracts to control currency risks and protect themselves against exchange rate fluctuations. However, not all types of hedging products are suitable for all businesses. That is why it is advisable to consult with payments experts before entering global markets.

In summary

As you can see, cross-border payments may seem intimidating, but these difficulties can be overcome by conducting the right preparations and consulting with global payments experts when necessary. Note that the payments world is highly dynamic and innovative technologies are constantly popping up to ease your international journey. Be sure to keep your finger on the payments pulse, because new solutions are just around the corner.