How To Overcome The Challenges Of Cross-Border Payments?

Cross-border payments are among the most crucial financial transactions that support families overseas and are also important for growing global businesses, as well as the economies of countries. Thus, this sector has grown a lot over the past few years, fueled by the latest technological advancements and the increasing demand for quick and more affordable international money transfers. Nevertheless, this sector is still facing some issues, and major companies like Tech Remit are working continuously to overcome these issues for businesses as well as individuals.

This article can help you whether you’re just getting started or looking to improve your international money transfer services! Continue reading to learn about the most common challenges associated with cross-border payments and how to overcome them.

Regulatory and Compliance Complexity

Financial transactions must comply with various laws and regulations, especially when they occur between two countries. These transactions are subject to multiple jurisdictions, creating a highly complex and continually evolving regulatory framework. It is essential for businesses to stay updated with the latest guidelines. Key areas of compliance typically include tax laws, anti-money laundering (AML) regulations, know-your-customer (KYC) requirements, foreign exchange controls, sanctions screening, and data privacy laws, such as the General Data Protection Regulation (GDPR). Noncompliance with even a single regulation can lead to penalties and hefty fines for businesses.

Solution

Modern cross-border payment software includes built-in tools for KYC (Know Your Customer) and identity verification, tax form collection, local compliance reporting, AML (Anti-Money Laundering) screening, and transaction monitoring. These tools can even be customised to meet specific regulations, ensuring compliance for money transfer services between two different countries. Furthermore, the service provider must conduct regulatory research to ensure that the organization remains in compliance with local and international legal requirements.

High Transaction fees

Unlike domestic money transfers, international money transfers typically involve multiple intermediaries, primarily correspondent banks, for money to reach the intended recipient across borders. Thus, each involved party charges a fee for their service in processing the transaction, and these charges gradually add up to reduce the actual transferred value.

Additionally, these financial institutions impose fees not only for their services but also for compliance costs. As a result, money transfer companies that rely on this bank network to provide international cross-border payment services struggle to manage transfer fees. It becomes difficult for them to profit from their platform while also providing affordable services to their customers, which is hampered by intermediary service costs.

Solution

To address this issue, consider the following:

• Choose fintech software providers who remove multiple intermediaries and enable direct money transfers.
• Bundling payments also helps to manage fewer transfers and, eventually, reduce associated expenses.
• If the money transfer business is doing well, it may even request a reduction in transfer fees for its large volume of transactions from the intermediary banks.
• The best option could be to opt for crypto payments or even use wallets. They enable P2P transactions without requiring any intermediaries and removing extra charges.

Slow delivery times

When multiple banks are involved in a cross-border financial transaction, not only does the transfer fee increase, but the processing times also lengthen. Customers demand quick transactions, yet international money transfers typically take around 2 to 3 business days to complete. This delay is primarily due to the various handoffs, complex verification processes, required approvals, and differences in time zones.

Solution

The latest money transfer software solutions reduce delivery times by partnering with local banks and streamlining the network required for transactions. Tech Remit’s remittance software facilitates payments in no time due to the streamlined payment infrastructure. It is specifically designed to process instant transfers without any delays or compliance issues.

Poor transparency in Transaction Fee And Tracking

Even the money transfer business is offering fair services from their end, but the lack of transparency on their platform creates doubt among their customers. Moreover, it is even true that money transfer fee structures are quite complex due to the involvement of different factors such as exchange rate, platform fee, etc. Thus, the customer can’t wrap their mind around what they are actually paying for. However, some businesses even add hidden charges that damage the customer’s business relationship.

International transaction service provider even fails to update customers on the transaction status. Due to this uncertainty and anxiety, clients constantly contact them to inquire about the recipient’s expected payment date, particularly in the event of unforeseen delays.

Solution

To address this issue, businesses should invest in reliable money transfer software equipped with a tracking feature. This software can provide both senders and receivers with real-time updates on payment status and even notify them. Additionally, it offers clarity on transactions that are in process as well as those that have been completed, helping businesses manage their operations more efficiently. Furthermore, presenting upfront pricing with a detailed breakdown of costs can enhance transparency for customers, allowing them to understand exactly what they are paying for.

Security and fraud risks

Every money transfer is sensitive to fraud and security risks. International money transfers, however, typically involve a sizable sum of money as well as several parties and jurisdictions. As a result, they are frequently targeted by fraudsters and cybercriminals. Common attacks include identity theft, phishing, and diverting payments, which are common at these payment platforms.

Solution

• Multi-factor authentication
• Encryption
• Fraud detection systems

Wrapping Up

As a result, the cross-border payment industry is one of the most important sectors that continues to face significant obstacles. However, your business doesn’t have to worry about these challenges. If you apply the solutions mentioned above in this article, you can avoid these issues and thrive in the market. Tech Remit is a cross-border payment solution provider that enables you to run a profitable remittance business without having to juggle multiple tools or incur high operational costs. Simplify your remittance process with our secure and custom money transfer software. Request a demo today.

Also Read : How Multi-Currency Support Helps in Global Remittance Software?