Cross-border commerce is a multi-trillion-dollar opportunity that is ready for disruption. While the possibility of selling and buying across borders has clearly gained prominence, organisations of all sizes (SMEs, MSMEs & large-scale) and industries face a slew of obstacles when attempting to enter international markets.
Instant cross-border payments are the answer to these problems, made possible and facilitated by fintech providers such as Fable Fintech.
Revolutionary players such as Fintech, digital banks, and big tech are propelling the surge in cross-border transactions, projected to soar to a staggering $156 trillion in total payment flows, through their innovative solutions and collaborations with payment service providers and card networks.
With instant payments, everything from invoicing and payroll to customer payouts is made easier, faster, and more transparent by bypassing traditional intermediaries. In this article, we will explore the differences between traditional cross-border payments and instant payments, as well as the key challenges and how to overcome them.
Continue reading to discover how Fable Fintech utilises advanced technologies and automation to offer superior payment solutions and SEPA instant payments.
Cross-border remittance landscape
The cross-border payments landscape is a complex network of B2B, B2P, P2B, and P2P merchants, all connected by a web of legacy channels such as SWIFT/correspondent banking, post, Rupee Drawing Arrangement (RDA), and Money Transfer Service Scheme (MTSS).
These channels are the backbone of cross-border remittances, allowing for the smooth and efficient processing of transactions across borders.
With an impressive USD 83 billion, India dominates the global market for inward remittance flow, surpassing even China and Mexico. Fueled by the booming international mobility of goods and services, as well as increased travel and workforce, India's inward remittances primarily come from the Middle East and the USA, with a large portion also sent to Nepal and Bangladesh.
Since 2016, India's cross-border remittances have seen a steady growth rate of 8% CAGR, solidifying its position as a leader in the industry.
Challenges of cross-border payments
The challenges of cross-border payments are daunting - time zones and currencies vary, compliance checks add layers of friction, and delays, charges, and uncertainty are all too common. But through innovation and partnership, we can break down these barriers and create a system that is fast, cost-effective, and transparent.
Cost: Cross-border payment fees vary based on transaction amount, payment method, destination, and exchange rates. Typically, fees range from 0.3-20% of the transaction amount. Complexity or managing multiple currencies can also affect the cost for providers. High costs may also be due to compliance with KYC/AMC guidelines and partnerships. Standardised regulation and advanced technology can decrease these costs and overall transaction costs for customers.
Speed: Domestic real-time payments have been implemented in many nations, yet cross-border payments are often delayed due to extensive checks and regulations. Delays are commonly caused by missing remittance information and anti-money laundering/fraud checks. Financial institutions have various methods to reduce risks. The use of digital tools and standardised information sharing between countries can improve payment processing speed.
Lack of standard regulation: Cross-border payments are subject to regulations from the origin and destination countries, as well as any other jurisdictions they pass through. Each country has its own systems and regulatory authorities to protect consumers and prevent fraud and illegal activities. In India, the Reserve Bank of India regulates and issues guidelines for cross-border payments.
In Singapore, the Monetary Authority of Singapore oversees cross-border payments. In Europe, the Single Euro Payments Area system and other legislation like the Payment Services Directive 2 are used.
Banks also have specific regulatory and compliance requirements for Anti-Money Laundering and Know Your Customer regulations, which can increase the cost of setting up the process. Standardising AML and KYC processes can create a level playing field.
Message format: Standardisation and interoperability are crucial for enhancing the effectiveness and growth of cross-border retail payments. The majority of cross-border payments are processed using the SWIFT MT103 messaging format, which is highly dependable but has limitations in terms of the amount of information it can convey.
Additional information that cannot be conveyed through MT103 and MT199 is typically sent in an accompanying email. Some payment systems use their own proprietary format, while others adhere to the ISO 8583 messaging standard for card payments.
Cross-border payments face a major challenge in interoperability. Faster payments require compatibility between systems to reduce transaction time and risk. ISO 20022 is being adopted by many countries to improve compatibility, but it is a long-term solution that requires time and effort. Despite this delay, standardising global messaging formats is necessary for an evolved cross-border payments system.
Customer experience differs by geography: Cross-border payments also pose a challenge in terms of cultural differences. To ensure effective solutions, operators must take into account the varying priorities and expectations of customers in different countries. FinTechs have adapted by offering services in multiple languages and tailoring their offerings to multilingual markets.
To know more about how businesses can use a streamlined global payments solution for high growth read Businesses Need A Cross-Border Payment Solution For Massive Growth
How Fable's solutions effectively tackle the issue of cross-border payments
At Fable, we harness cutting-edge financial technologies to uphold strict compliance standards, including AML and KYC regulations worldwide. Our expertise allows us to deliver seamless, cost-effective, and transparent payment solutions.
Fable is a cross-border payments platform that aims to make transactions more efficient, interoperable, and scalable. The platform offers a modular approach, allowing users to pick and choose the features that best suit their needs. The core feature of Fable is its ability to automate remittance transactions and easily manage partners for both inward and outward remittances. Additionally, the platform can seamlessly integrate with existing IT infrastructure for easy scaling.
The Fable Growth Suite is an additional feature that allows users to effortlessly implement a customizable, white-label platform for seamless digital customer engagement across all touchpoints. The Fable Processing Suite is designed to help users manage a successful remittance business that handles multiple currencies, countries, and partners with efficiency.
Fable's API Hub is another feature that provides self-service financial information access for corporate clients through integration with their ERP systems. Lastly, the Fable Management Suite offers efficient and reliable treasury management through secure, real-time solutions. It also allows users to effortlessly connect with various partners, including internal treasury teams and external FX platforms.
Learn how to catapult your business into the future with fable. Get in touch with a cross-border payment solutions team now!