Enabled by ever-better digital services and the siren song of new customers in foreign markets, businesses are still dealing with cross-border payments pains, for which remedies now exist.
PYMNTS’ report “The New Instant Enterprise: How Borderless Financial Services Power eCommerce Innovation,” a USEND collaboration, explores how enterprises and SMBs alike are benefiting from agile API solutions that are taking friction out of international commerce.
“Businesses in developing countries with cross-border trade, especially those with volatile currencies, often must cope with the high opportunity cost in holding all their funds and operations in local currency,” per the report. “Business owners from developing economies face numerous challenges at each stage of their companies’ growth when it comes to their most critical operation — managing payments.”
Increasingly, the answer lies in taking “a risk-based approach when choosing a user or merchant authentication method. Access to a payments services platform or solution that uses extensive contextual data to approve each user or merchant payment or use case is essential for eCommerce companies that want to avoid false declines or unnecessarily flagged vendors.”
Risk Assessments and Relevant Data
Among the most prevalent and effective methods for clearing cross-border payments bottlenecks is the use of application programming interfaces (APIs), which connect disparate systems with digital accuracy and speed that’s critical to growing eCommerce operations.
According to the report, “an API-based solution allows businesses to ‘outsource’ the most complex elements of payments to a payments service with expertise in authentication and payments processing. Using an API payments option, eCommerce companies can allow customers to pay or receive refunds in local currencies directly in apps or via their websites.”
In regions “where currency values may fluctuate frequently and where consumers might struggle to assess eCommerce pricing and optimize their purchasing power using traditional bank or credit cards,” the API approach is proving particularly useful to online operations.
This extends to transaction security and AML/KYC compliance as well. As the report states, “risk assessments should be made with context and relevant data in mind. A secure, regulatorily compliant API-based solution can help newer and established enterprises build and sustain a rapid go-to-market strategy by eliminating user authentication and payment bottlenecks. Automating user authentication and payments through an API means that apps, platforms and websites can support exceptional user experiences at scale.”
Partnering for Cross-Border Success
Both established and emergent eCommerce businesses face similar hurdles in not only clearing payments from abroad in currencies and methods of choice, but in staying compliant with the tangle of cross-border payments regulations that have regional and other nuances.
Teaming up with a payment services provider (PSP) possessing technological wherewithal and experience can significantly smooth cross-border money movement, as many are discovering.
Per the new report, “an API-based solution powers rapid eCommerce growth through quick onboarding and secure transaction management. The right PSP will allow eCommerce companies and marketplaces to send and receive payments to and from customers and merchants in developing countries easily. PSPs that are KYC- and KYB-compliant manage the intricacies of global regulatory compliance for their clients, allowing U.S.-based entities to trade with customers and merchants in developing countries easily.”
That goes for companies expanding outside the U.S. as much as it does those reaching into the United States for new customers and major market potential. But problems arise when businesses lack a U.S. bank account, for example. Brazil is a prime case in clearing such hurdles.
As The New Instant Enterprise states, “potential delays involved in opening a U.S. bank account might last months, if opening such an account is possible at all. A European entrepreneur might attempt to sell goods from Brazil in Europe and the U.S. online, but the complexity of local currency fluctuations, regional delays in setting up accounts and differing KYB and KYC regulation compliance may halt the effort altogether.”
Here again, the report concludes that “choosing the right payments management solution is essential for compliance management, data security and a high-quality customer experience.”