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Reducing Costs in Cross-Border Payments

Global Payments
James Camilleri
November 1, 2021

In 2020, despite global lockdowns and the pandemic, payment revenues worldwide reached $1.9 trillion. The total flow of global cross-border payments has been expanding at a 5% compound annual growth rate (CAGR) with B2B transactions standing at approximately $150 trillion. However, the global cross-border payment network is plagued by long-standing challenges such as lack of transparency, delays, and high costs, which can significantly impact your business’s bottom line and ability to grow. Transaction fees associated with a singular payment often go unnoticed but can add up over time, especially at high volumes. If you’re grappling with these challenges, there’s a solution. Multi-currency business accounts and corporate virtual cards offer cheaper, faster, and safer alternatives to traditional banking methods

The Cost of Cross-Border Transactions

What makes banks the natural owners of this market? The answer is simple, an ubiquitous network of trusted parties worldwide, a mandate for huge liquidity, and adherence to substantial technical infrastructure and regulatory frameworks. This has resulted in many hurdles for individuals and businesses, such as limited accessibility, long settlement periods, and high costs. Cost is a significant issue today, especially after the pandemic, as small and medium-sized businesses struggle to regain their foothold. If you’ve been struggling to get your SME established, you are not alone.

A 2021 survey revealed that 68% of small businesses intend to do more business internationally than they did before the pandemic. At the same time, 54% state that fees for online cross-border transactions are too high, and 56% say that poor exchange rates are a hindrance to using these channels frequently. Let’s look at some of the common issues you might be facing.

Currency Exchange Rates for Exotic Currencies

The charges for cross-border payments depend on the method, destination and amount of payment, and the exchange rate. This could be anywhere between 0.3%-20% of the transaction amount. Issues like high transaction fees and long settlement periods could be a lesser concern for liquid currencies like the US dollar or euro. But they become significant when it comes to transactions in exotic currencies. For instance, costs to make transfers between a bank account in Germany to an account in Senegal could cost more than €100, based on the amount involved.

Plus, it would take several days to be complete. The same holds true for a transaction from the US to, say, Cuba. If your US-based business has suppliers from Cuba, then you could end up paying 9.8% of the transaction amount on average for a $200 transaction. This is a significant issue, considering that cross-border payments are increasing in emerging markets like Latin America, Asia and Africa, as they increasingly trade overseas. Initiatives like the African Continental Free Trade Area and China’s Belt and Road Initiative are only expected to drive the payment volumes up.

AML/KYC Guidelines Escalate Costs

Banks also charge you for all the effort they put into ensuring the security of their networks. A survey by The Financial Action Task Force (FATF) on global banks, PSPs, fintech firms, and electronic money issuers, revealed that the complexity of divergent AML/CFT rules is a contributing factor to high costs. Standardised regulation and innovative technologies are much needed to reduce these costs for businesses.

For instance, at Fyorin, we remove the hurdle for companies to open accounts with multiple financial institutions. With our one-time compliance process, you can access any financial product swiftly, as and when your business needs it, saving you time and money.

A Complex Affair for Businesses - Cash Flow Challenges

International payment management involves a huge effort for businesses, in terms of compliance with tax and regulatory requirements. To do it right, accounts payable (AP) teams have to add in several controls and extra steps. For instance, the task of validating payment data accuracy is huge. Thousands of global rules are predominant in different countries and payment methods, which means that AP departments must enter multiple bank portals and payment rails to send funds across nations, in multiple currencies.

This escalates costs, not to mention that cross-border reconciliation is also a complex affair. For instance, if your company is based in the EU, and your vendors and/or clients are in the UK, Brexit may be becoming a strain. For starters, payments between the EU and EEA companies are no longer intra-EEA payments under PSD2. Moreover, some European banks now treat your transactions with UK-based entities as cross-border and levy additional bank charges. So, what can help with all these challenges? Let’s take a look.

How Fyorin Helps Businesses Reduce Cross-Border Payment Costs

At Fyorin, we empower businesses to tackle this evolving and challenging business and economic environment through seamless and cost-effective methods of cross-border payment.

Multi-Currency Wallets

Your business can create multi-currency accounts, for free, and also assign sub-accounts for each cost center or client. This makes it easier and cheaper to send funds in local currencies, with transparent FX fees. You and your vendors/clients can take advantage of local payment networks for faster processing. Also, by allowing customers to process payments locally, you can enhance their experience of dealing with your business, which is great for customer retention.

So, if you are a Maltese-based business sourcing material from China, you can pay in the Chinese Renminbi, and if you are a business in Germany that wants to pay them in euros, you can choose to do that too. This not only ensures streamlined payments and cash flow management, it also helps circumvent the high cost of transfers. Banks typically levy heavy charges for international payments, and even for maintaining accounts. With a multi-currency wallet, these costs can be avoided, and your business doesn’t have to be at the mercy of exchange rate fluctuations. This also helps you streamline the bookkeeping and account reconciliation process.

The accounts team will no longer need to log in to multiple bank accounts in different currencies and spend long hours in reconciliation. Fyorin also provides an automated payment approval process for multi-business management. Your Accounts Payable (AP) team can set up multiple roles and permissions to speed up the payments approval process and reduce operational overheads.

Corporate Virtual Cards

Rather than issuing corporate plastic cards to employees, corporate virtual cards make it easier for your accounts team to keep track of employee expense limits and prevent misuse and fraud. Misuse of corporate credit cards overseas can be a significant cost to your business. With virtual cards, you can issue separate cards for employees, vendors, suppliers, and other partners, as and when needed, with strategic payment limits.

There will be a lower risk of employees overspending on subscription services. If they forget to cancel a subscription on time, your team can do it at your end. At Fyorin, we create solutions that address the increased demand for a streamlined and cheaper cross-border payment solution, which is critical for the revival and growth of the global economy. Contact us to learn more about how we can support your business through cutting-edge fintech solutions.

Fyorin, your financial partner

Fyorin, a financial operations platform for digital businesses, automates and monetizes the movement of money, making financial operations smoother, faster and more efficient. The platform eliminates 90% of manual work, allowing businesses to connect with their preferred accounting platform to automate receivables and payables.


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