No company department or division wants to develop a reputation for always throwing a spanner in the works whenever strategic decision makers consult on a new direction or business opportunity. But as any VP or department head knows, the operational details are often inevitably complex. And although the CEO may feel that the company Needs to expand into South America or open a new branch, putting in place the necessary processes to enable the organization’s strategy can sometimes take longer than expected. Or cost more. Or present an acute risk or potentially put the company in breach of regulations X or there. Etc…
Finance professionals are, understandably, much more aware of the kinds of details, caveats, and stipulations than most. After all, the money (or euro, yen, pound) literally stops at the CFO. So while it may seem strategically interesting to open up a new market, for example in Southeast Asia, the complexities of cross-border payments add up on a large scale. Plus, there are tax implications, costs for forex transactions, fraud and KYC issues, data compliance, and a dozen other diabolical details to iron out.
Payment processes are a subject in themselves, especially when the company is carrying out perhaps hundreds of different transactions in dozens of currencies. Payment providers will often say that their platform offers payments (and deposits) in every possible currency, but international SWIFT processes are, ironically, anything but fast. And very few of these vendors have localized knowledge of all market fiscal configuration
The danger for CFOs is that the conservatism (small ‘c’) that is a valuable asset around the boardroom table can all too easily dampen a company’s strategic momentum. In some cases, that can be a good thing, but there are ways to bypass some of the financial time and detail.
The most obvious is to leverage local knowledge (for new geography) or specialist consultation (for new products or niche offerings, for example). External contractors don’t come cheap, of course, and hiring new staff with specialist skills is rarely quick or risk-free.
But the benefits of digital commerce have opened up possibilities for companies looking to have a much more agile approach to international trade, especially when it comes to cross-border payments.
We have seen the rise of neo-banks over the last five years or so; institutions that offer highly scalable and low-cost services compared to “traditional” international banks. Consumers, especially younger generations, are flocking to these digital-centric and app-centric companies for convenience, new and different services, ease of use, and low cost at the point of service.
Businesses are a little less fortunate in many cases. Successful businesses sometimes feel like their bank’s cash cow when looking at their monthly fees, especially for foreign currency payments. And while the savvy CFO will have established a local on-the-ground presence overseas (especially for geographies where trade is buoyant), these arrangements are slow to take hold. Accepting international “SWIFT” payments and high exchange fees seems like the only option when looking at new markets.
Specialized payment providers, often born in the days of the first e-commerce sites, are stepping up to fill the role of neo-bank of the corporate sector. With mature technology and an established local presence in dozens of countries around the world, some vendors enable that commerce agility that companies acting alone struggle to establish.
Interestingly, with a focus on the international needs of business organizations, the payment provider can also perform KYC checks on vendors, for example. This is invaluable in reducing risk at the start of a new business and helping to reduce the burden of having to prosecute, in the future, foreign companies that begin to act in ways detrimental to a brand. Additionally, while some payment platforms insist that KYC documentation be translated, this is not a universal requirement.
Streamlining payment processes means more than making it easier to establish new markets, of course. One dashboard or one person on the phone who can handle multiple geographies and tax jurisdictions means less time sifting through vastly different business processes every day just to move money around the world. The added values of some platforms may include fully domestic money transfers from a local banking presence, so SWIFT transfers can be avoided – for some sellers, speed of money movement is a feature highly desired.
Like neo-banks for consumers, payment platforms can fill the service gaps left by traditional banking institutions. Is there a major bank that, for example, will dynamically perform a KYC check on a seller for a marketplace, negotiating with local authorities on behalf of a marketplace? Unlikely. But payment platforms with a local presence can, and some do.
There is no silver bullet for each of the pain points in the finance division and establishing links with payment providers takes time. You cannot, for example, ask a marketplace seller to go through a discovery process for KYC, only to have to ask again due to a switch to a different payment method or platform. provision of payment. But a payment platform can and should offer customers (and their customers) the ability to expand payment options, particularly to include those favored by localized markets.
There are companies whose offerings have been developed not as an add-on to existing services, but as advanced technologies and methods only for globally operating companies. Digital disruptors like Upwork have chosen digital partners because their business is data-driven. Companies like Airbnb and Shutterstock, which pay many thousands of suppliers around the world, won’t sort out local tax laws themselves – the cost burden would be too high. Their secret was to choose the right payment provider from the start.