Credit cards and e-wallets provide customers with international payment methods, but for businesses to reach the majority of global consumers, they need to offer locally preferred payment methods in every country where they do business.
A merchant in Europe or the US that is used to accepting credit cards may not realize the diversity of payment methods preferred globally. From e-wallets like AliPay and GrabPay in Southeast Asia to cash payment methods like Boleto in Brazil to locally issued cards and instant payments in South Korea, traditional bank wire transfers can cost up to 10 times more than a domestic payment. This difference could mean the difference between doing business in a particular country or not.
What are the most pressing challenges of cross-border payments?
The cost of cross-border payments can be as much as ten times what it costs to send a domestic payment, making some businesses and consumers less likely to transact abroad. However, payment service providers (PSPs) are finding ways to reduce these costs and make cross-border payments affordable.
Suboptimal speed and frequent delays
Due to the complexity of financial transactions and the fragmented data formats used by each intermediary, automated processes are difficult to set up. PSPs and back-end networks are developing solutions for reducing that burden by taking on the processing of compliance checks and ensuring that merchants and their customers don’t face these challenges.
There are many obstacles to transparency in cross-border payments, including old technologies, varying compliance standards, long transaction chains, and so on. These challenges make it difficult to know what’s happening at every stage of a process, which might lead to something important getting overlooked.
Risk of payment fraud
For merchants, it’s essential to have confidence in international payment systems. However, banks cannot guarantee that stolen funds will be recovered if cybercriminals can steal money from a cross-border payment pathway. That’s why cross-border payments are frequently targeted by hackers.
Every country abides by its own regulations, so the cross-border payment system may be compromised whenever funds enter a country with relatively soft security and access policies. Naturally, cybercriminals are far more likely to target systems that aren’t reliably regulated and don’t have adequate security measures in place.