Economy is rapidly becoming a global phenomenon, and in the light of that, cross-border payments are getting their limelight. Cross-border payments are an essential aspect of business operations, but they are far from perfect. 

Nearly one third of consumers say that these kinds of payments should be a top priority for banks. They mostly complain about efficiency, however cross-border payments have more challenges to face and overcome. 



Regulatory compliance and differences

One of the first and most important challenges when dealing with foreign companies is knowing regulations and laws of their countries. Each country has its own set of financial regulations. They can vary in terms of anti-money laundering (AML) laws, counter-terrorism financing (CTF) regulations, tax compliance, and data protection rules. 

The main fear of companies having business with foreign companies is that they will inadvertently transfer money to someone who is not following laws or is subject to international sanctions. However, SEON’s list of sanctions screening software can help companies to avoid mistakes like that. These softwares are screening against crime lists, sanction lists, and watchlists. They are an immense help in protecting companies’ reputations.

Foreign exchange risk

Many countries have different currency values. It can be risky for cross-border payments if you’re not familiar with foreign exchange (FX). 

When businesses go into transactions involving various currencies, they are under a risk of adverse currency movements. That can affect profit margins and financial stability.

Currency values can be highly volatile, considering they can be under influence of different factors. Some of them are:

  • Economic conditions
  • Market sentiment
  • Political stability

A sudden depreciation in the currency in which a business receives payment can lead to losses. 

So, what can you do to avoid losses concerning currency?

You can use hedging strategies like:

  • Forward contracts
  • Swaps
  • Multi-currency accounts

Multi-currency accounts hold funds in different currencies which gives flexibility and reduces the need for immediate conversions at unfavorable rates.

High transaction costs

Have you ever been in a position when after transferring or receiving funds cross-border you find yourself with less money than you should have? And after some research, you are amazed at how highly unreasonable transaction fees can be. Not to mention bank fees, currency conversion fees, and intermediary charges. Can you imagine what it looks like when they all add up, especially for small or medium-sized enterprises (SMEs)? 

Even though banking troubles seem quite challenging to overcome, there is a solution for everything. In this case, it’s leveraging fintech solutions and alternative payment providers.

Payment delays

Another payment trouble that companies may be subjected to are payment delays. Naturally, everyone wants their payments to be processed as fast as possible, but sometimes banks take days to do their job. It’s mostly because of currency traveling through multiple banks and intermediaries, different time zones, and possibly varying banking hours. 

When your payment takes days, if not weeks, to find a way to its new home, it's tricky to explain all that to your new business partner. So, what can you do?

Skip the traditional banking system if you can, and try real-time payment systems.

Lack of transparency

Businesses have some challenges in tracking down their payments. Combine that with the lack of understanding about fees involved or getting clear information on their transactions’ status, and you have a large field for improvement. Also, this lack of transparency can lead to unexpected costs and delays, which is something no company wants.

Nowadays, this transparency issue is usually connected to traditional banking. Fintech solutions can help solve some of the problems,

Security and fraud risks

Every business is vulnerable to security and fraud risks, but the ones that deal with cross-border transactions especially. Cybercriminals often target international payments because of the higher transaction value and the complexities involved in multiple jurisdictions. 

Cyber attacks get sophisticated every day, so now businesses need to be careful about

  • Phishing
  • Identity theft
  • Payment diversion fraud

That’s why you need strong security measures like:

  • Multi-factor authentication
  • Encryption
  • Fraud detection systems

Also, partnering with reputable payment providers is a number one.

Cultural and language barriers

It’s only natural, when having business with a company from another country, that you will encounter cultural and language barriers. At least language barriers can be overcome due to numerous translating apps, or thanks to the fact that the English language has been widely known as a business language all around the world. 

But what about cultural differences? Is there an app for that? Unfortunately, there are some situations where technology can’t help. You can hire a local expert to help you, and the most beautiful part of the experience is that you will learn about different cultures in the process. 

We talked a lot about challenges in cross-border payment, and we only mentioned some of the solutions. Now let’s focus more on the solutions and how companies can benefit from them.




Adoption of fintech solutions

Financial technology (fintech) has grown over the last years, and now is capable of offering innovative solutions for many of the traditional challenges.

For instance, companies can use digital wallets and mobile payments. Fintech companies provide these features that can help businesses to make and receive payments with envious speed and efficiency. The plus side is, these platforms have:

  • Lower fees
  • Real-time tracking
  • Elevated security features

Another example goes into the field of blockchain and cryptocurrencies. Blockchain technology is 

  • Secure 
  • Transparent
  • Fast

With it, there is no need for intermediaries. Bitcoin and Ethereum, for example, give an alternative to traditional currencies. With them, transaction cost and FX risk are significantly lower.

Peer-to-peer (P2P) platforms are payment platforms that connect businesses directly. They are bypassing traditional banking channels while shortening processing time.

Implementation of hedging strategies

Hedging strategies are meant to lock in exchange rates or protect against unfavorable currency movements. 

Companies can use 

  • Forward contracts–with them, companies can fix an exchange rate for a future date, with that providing certainty about the amount they might pay or receive.
  • Currency options–companies have the right, but not the obligation, to exchange currency at a predetermined date. That way, companies have protection against adverse movements of currency.
  • Multi-currency accounts–another way that helps companies to not suffer loss due to untimely currency conversion. Companies can choose the optimal time for conversion, or not to converse at all.

Utilizing payment aggregators

This is where various payment methods  and providers go into a single platform. Isn’t that simple?

  • Streamlined payment processes–companies can integrate multiple payment options, such as digital wallets, credit cards, and bank transfers.
  • Enhanced transparency and control–aggregators give detailed insights into transactions, including fees, time, and statuses.

Partnering with international banks and payment providers

When you have a business that practices cross-border payments, of course you’re gonna partner with a bank that deals with the exact kind of payment you need. You have extensive options with international banks and payment providers, thanks to their experience and customized solutions. Not to mention that you’ll have access to global networks of banks, which can only speed up the transaction time.

Investing in compliance management systems


Compliance management system is extremely important, and companies should invest in it in order to have seamless business. There are great options between many automated compliance tools. They can monitor transactions in real-time, flag suspicious activities, and make sure that everything goes according to AML and CTF regulations. 

Also, it’s a good idea to provide regular training to your employees so that they can be updated on regulatory changes. That way the company can avoid penalties.

Enhancing security measures 

Strong security measures are the primary feature every company should have. These days it’s not just important to have robust security, it's an essential part of the company. Nobody wants their data and money to be stolen. What companies can do? They can employ various measures, such as: 

  • Multi-factor authentication (MFA)--MFA adds an extra layer of security and companies can have multiple different forms of verification before processing transactions.
  • Encryption and secure communication–they can prevent unauthorized access and make sure the integrity of transactions
  • Fraud detection systems–these system can use machine learning and artificial intelligence to identify and deal with threats



Removing border from cross-border payment

Have you ever read financial thrillers from the ‘80 or ‘90? Every transaction, and therefore fraud, was painfully complicated and hard to understand. Nowadays, all you have to do is click some buttons a couple of times on your screen (computer or mobile), and there you go. Like there was never any border to begin with. 

But the simplicity of the process only made people more careful. Like, who is on the other side? Where is my money now? Can I do anything to speed up the process? 

Cross-border transactions are entering a new era and, even though they pose some challenges, solutions are at the grasp of the hand. After looking through some of the most important ones, they seem fairly simple. All you need to do is click some buttons a couple of times to have more secure and faster transactions. Easy, right?