The world is now more connected than ever before. In business, leisure, family relations and friendships, life is now closer and more integrated. Even the disruptions caused by the global pandemic haven’t stopped the flows of information, goods and people around the world. In fact, the opposite has happened. Recent surveys show that more and more companies are now doing business across national borders and in new way. As their daily operations change, so do their needs and the challenges they face, in particular when it comes to their payment and banking needs.
Large corporations have engaged in transnational business for decades or even centuries. But nowadays, small and medium businesses (SMBs) are as prolific in cross-border operations. A majority of companies have, at the very least, foreign suppliers of raw materials, products and services. But in the wake of the pandemic and the rise of remote work, it has become common for even small companies to employ workers in multiple physical locations, often spanning many time zones and jurisdictions. And that’s before we get into international customers.
Even before the pandemic, almost two-thirds of small businesses in the US had international customers. Now that widespread lockdowns over the last two years have accelerated the shift to doing business online, that number has grown significantly.
The advantages of such international business are significant: a larger pool of employees to choose from, better access to physical resources and services, and of course increased revenues through access to a much larger customer base. But as with every good thing, there are challenges as well.
Companies’ operations across national borders are often faced with the reality that what is easy on a local or national level can pose challenges when operating across borders.
To start, cross-border transactions are usually scrutinised more strictly than payments made domestically and the checks for adhering to stricter standards and regulations can cause delays for companies that are unprepared for the increased scrutiny.
International payments also incur additional fees and other associated costs when compared to domestic payments.
Moreover, banks and financial institutions operate through payment networks, correspondent banks and intermediaries to wire funds internationally and they may not support all transactional flows and jurisdictions.
The international banking and payments environment can be unpredictable at times, and without expert guidance small companies can come up against costly delays. That’s why it is recommended setting up a diversified banking and payments infrastructure early. It can save delays and money in the long term.