B2B Cross-border Payment Part 1 – Cross-border Payment System - How will it help businesses in cross-border payment
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Cross-border payments between businesses are always a headache for corporate financial managers as they involve a lot of complicated paperwork and an extremely long process, while the warehouse processing process needs very urgent time (otherwise the business will be fined).
In this article, let's join FinFan to learn more about B2B payment systems and see how they can help solve existing problems in cross-border payments for businesses.
First of all, let's learn about B2B payments.
B2B payment is defined to refer to cross-border transactions that take place between businesses, which include paying for certain products or services.
Overview of B2B Cross-border Payments in 2022-2023
*Analysts estimate that $39.3 trillion of cross-border business-to-business (B2B) payments will be made in 2023, and reach $56.1 trillion by 2030. Add the wholesale banking sector to that (which includes institutional investments and currency trading), and the current value of cross-border B2B payments is $186.2 trillion, accounting for 98% of all international transactions.
Growth has been a consequence of globalisation that has increased trade, and so the need to transfer currencies across borders. That commerce has been driven by large enterprises trading in physical goods, but the growth in B2B ecommerce will see it become the leading contributor by 2030, worth $22 trillion.*
*Source: bvnk.com
Why are business-to-business (B2B) cross-border payment transactions often in trouble?
The trouble comes from each country's import-export and customs laws.
When you bring goods to sell in a country, you must comply with that country's import and export regulations to prepare appropriate customs documents.
The following story about delayed payments greatly affecting a company's business will help you better understand this issue.
This story is an example from a company that specializes in providing chili abroad. Because of a lack of attention to limits on pesticide content in Korea, they exported chili to another company in this country without the appropriate documents to prove that their products didn’t exceed the prescribed pesticide threshold.
As a result, the payment process was delayed because the shipment had to be inspected at the port, leading to its being detained for a long time.
However, the time limit for that shipment to be stored at the port is only about 1 day. If that time is too much, the exporter will have to pay an additional late storage fee.
So, the above business had to have its goods recalled and had to pay very expensive port storage fees, which greatly affected the reputation as well as the finances of the business.
The second problem comes from the fact that cross-border business-to-business (B2B) payment fees are still high.
The cost of transferring money to pay for cross-border shipments from businesses to each other is also quite expensive. This fee directly eats into the profits of businesses and will be a huge burden for businesses with large volumes of import and export goods.
In the above situations, businesses must renegotiate directly with their cross-border money transfer service provider to renegotiate the appropriate price.
Another solution is that businesses can rely on alternative cross-border payment solutions such as virtual cards, to solve the above problem.
The third problem comes from traditional cross-border payment methods taking too much time to complete.
As mentioned at the beginning of the article, business financial managers have a lot of headaches with traditional transaction methods because they take a lot of time to successfully carry out transactions.
Those problems, in addition to coming from paperwork, also come from the disbursement process of the sending and receiving banks when both parties have to go through several complicated approval processes to accept the received payment. We have gone through the concept of B2B payment as well as some of the problems it brings to businesses.
So, what is a B2B payment system and how will a B2B payment system support businesses in solving the above problems? Let's find out in the following section.
What is a B2B payment system?
A B2B payment system is a system that B2B businesses use to process payments in the business. It is involved in almost every stage of payment from raising invoices to processing payments.
Why are raising invoices and automated payments important for B2B businesses that need to make cross-border payments?
Through the process of consulting for many businesses with cross-border payment needs, FinFan realized a very common problem for them, which is that many B2B cross-border payment activities are repeated continuously and almost the same.
However, businesses still must carry out extremely complicated procedures between departments to complete the transaction. Meanwhile, the goods in the warehouse are reaching maturity and if the payment process is delayed, they have to pay a large fine and this directly affects their profits.
Therefore, businesses are in dire need of a solution that can help them make invoices and payments automatically to have time to handle other legal complications for the package while avoiding wasting huge fines for not promptly invoicing and paying for the package.
Some possible payment methods that B2B payment systems can assist businesses with invoicing and automated payments.
Virtual cards - information security is maximized.
With its speed and convenience, credit cards have been a method to support businesses in handling cross-border payment issues (because most credit cards are issued by multinational companies such as Visa and MasterCard) and are accepted worldwide, making exchange rate conversions and payments easier.
Today, with the advancement of digital transformation technology in payment, virtual cards have been born, and they provide very good support for businesses in making payments as they do not need to keep a physical card with them, and the risks of stolen cards and information have decreased significantly.
Read more:
. What is a virtual card? Why should companies integrate virtual cards?
Wire transfers - fee concerns are resolved.
Global businesses like MoneyGram (FinFan’s partner) facilitate wire transfers that electronically route money between business accounts.
The process is speedy and with the connection with FinFan, the fees for payments are significantly supported when FinFan has links with more than 65 domestic private and state banks through the NAPAS payment system.
Online payment gateway - small businesses benefit
Many small and medium-sized businesses will benefit from incentive programs offered by payment gateways.
Direct debit solutions – sasier and less costly
FinFan offers a direct debit solution, which is ideal for taking recurring payments and handling supplier invoices.
With this method, FinFan will directly pay customers the prefund amount to the receiving partner's bank through the strength of cooperation and API connection with domestic banks through the NAPAS payment system.
Businesses can take authorized payments directly from the client’s bank account, avoiding card fees and invoice processing delays.
Direct e-wallet solutions - suitable for transactions that are not too large (under 50,000 USD)
Payment with e-wallet accounts has been increasingly popular not only for individuals but also for businesses.
It is really necessary when businesses need to pay money to collaborators and KOLs/KOCs who have cooperated with them on projects with costs that are not too large (under 50,000 USD).
With more than 10 years of experience in the field of cross-border payments, FinFan has been updating the latest trends in payments (including e-wallets) as we are one of the first technology companies to build an e-wallet aggregator system.
How business can choose a suitable B2B payment system?
To choose a business that provides a suitable B2B payment system solution, first of all, the business providing the above service needs to have the following factors:
- Compatible integration
Businesses providing B2B payment system solutions need to better understand the operating mechanism of the accounting software, old payment methods, as well as old payment management systems of each client to whom they provide services.
From there, they can have a compatible plan with each business to integrate appropriate API with accounting software to be able to send reports of monthly transactions and give advice to clients on adding more payment methods that are suitable for the demands of payments of each client.
- Providing multi-currencies account
Another issue that worries customers who need B2B cross-border payments is the exchange rate between national currencies.
Therefore, when choosing a business providing a B2B payment system, businesses should pay attention to whether the business providing this solution can integrate the payment system with multi-currency payment accounts.
Read more:
. 4 Benefits of a Multi-Currency Account for Your Business and How to Choose the Right Provider
- Providing suitable payment methods
Businesses providing B2B payment systems must provide payment methods that suit the needs of their clients.
For example, companies that regularly pay for media services such as advertising and KOL bookings (usually no more than 50,000 USD), will prefer to pay via e-wallet.
On the contrary, companies that deal with huge output (usually food processing companies, garment manufacturers, electronics manufacturers, etc.) need a solution that can help them complete the process with the fastest, most suitable fee to be able to transfer money to partners without affecting profits, at this time direct debit solution is the most suitable solution.
- Providing automatic invoicing feature
By invoicing customers immediately after the transaction, you’ll encourage timely payments. You can also find a system that sends automated follow-up messages as payments become due.
Some information about FinFan
FinFan is a cross-border embedded financial services company that focuses on mass disbursement, fund collection, card processing, IBAN, and digital APMs solutions, which can provide valuable input and integration on and for the same. FinFan already integrated with almost the world's well-known MTOs, PSPs, switch and core fintech platforms as Money Gram, Thunes, Qiwi, Remitly, World Remit, Bancore, PaySend, Terrapay, Ria Financial (Euronet), Dlocal, Ripple, TripleA, FoMo Pay, Wings, ... or MoMo, Zalo, VNPay, VNPT, ...etc.
For more information, visit:
🌐https://finfan.io
📞(+84) 2866 85 3317
LinkedIn: FinFan
Read more about B2B Payment System:
Dr. Tuyen Nguyen
Money Beyond Borders
