When you're transferring money overseas, the process might seem like it takes a lifetime. But why is this so? Money is nothing more than information. The question is, why does it take longer to send money internationally than it does to email? There are three leading causes behind this. 

First and foremost, one currency must be exchanged for another. Second, compliance checks are required in order to avoid the payment of unlawful funds. And, finally, various payment systems communicate in a variety of languages. Costs, friction, and delays can all be associated with these procedures. Payment innovators and organisations like SWIFT are working hard to create better solutions and standards for data and messaging transmission and storage.

With the growth of cross-border e-commerce, businesses must be able to take payments from clients all over the world, regardless of location. As of 2022, it is anticipated that cross-border shopping would account for 5.4 trillion US dollars in sales and account for 20% of total e-commerce sales. Amazon and eBay are two of the most prominent online marketplaces for cross-border buying, primarily in North America and Europe, and they are both owned by eBay.

If you are a merchant conducting business worldwide, you need to be able to take payments from customers in all of the countries you are considering.

So, what are cross-border payments, and how do they work?

Cross-border payments are transactions in which the payer and the transaction receiver are based in different countries from where the transaction is being processed. Transactions can take place between people, businesses, or financial organisations that are attempting to move funds across borders. In order to accept cross-border payments, merchants will need to partner with a payment service provider capable of processing a diverse variety of payment methods.

• For example, you can make online payments easy by offering local and global payment methods. It is possible to make cross-border payments using various techniques, including credit and debit cards, bank transfers, and local payment options.
• The use of credit and debit cards is a popular choice among customers who want to make a cross-border payment since they are simple to use: users simply enter their card information and wait for the transaction to be processed.
• Payments made via international bank transfers are another option for sending money across borders. To conduct this sort of transaction, consumers will require the merchant's IBAN and BIC.
• E-wallets and other local payment methods can expedite overseas transactions, as can credit cards and other forms of cash.

How does a cross-border payment transfer operate?

In order to move funds across borders, banks and a diverse set of domestic companies collaborate to complete the transaction. When a transaction is made, a "correspondent bank," which represents the entity seeking the money, communicates with a "respondent bank," which represents the entity purchasing the item being purchased.

There are counterparts for every bank in each of the world's major cities in a different city. Consequently, money will first leave the buyer's bank and go to that bank's counterpart in the merchant nation, where they will be prepared for remittance to the buyer. The merchant's bank will then receive the money and it will be deposited into the merchant's account as soon as possible. These banks frequently collaborate with others to move money, which frequently entails more than four banking locations interacting with one another, traversing many currencies, and dealing with a variety of taxes.

What are the benefits of investing in cross-border payment solutions?

Customers want to make payments in an easy and familiar method, such as by credit card. As a result, it is advisable to research the preferred payment methods in the territories you intend to target. Depending on the country, international payments usually take between two and five business days to clear. The greater the number of financial institutions that the money must pass through, the longer it will take to complete the transaction.

You must identify all elements of a cross-border transaction if you want to run a successful worldwide business. These processes must be recognised and, if necessary, modified to ensure that the consumer has a positive experience while making an international purchase online.

As the number of individuals who own smartphones continues to rise worldwide, they have practically unlimited access to financial services and online payment solutions, with mobile wallets experiencing considerable and consistent development. Because of this expansion, the volume of cross-border business is expanding.

Cross-border payments: What the future holds

The market for cross-border payments has traditionally been dominated by financial institutions. Because there was minimal competition among the dominant global correspondent banks, cross-border transactions were fraught with difficulties for ordinary customers and companies alike.

As real-time cross-border payments become more widely accepted, techniques such as Visa Direct and SWIFT GPI will rise in popularity, and this will become more common. Strong Customer Authentication, mandated by PSD2 regulation, is another characteristic that makes cross-border payments more efficient. Payments made inside the European Economic Area will be required to go through a two-factor authentication procedure in order to authenticate the identity of the cardholder as a result of this new legal requirement. 

Looking at the public opinion, it is recommended that merchants deal with a payment service provider that provides quick payment processing, transparent charge structures, a secure worldwide payment gateway, a variety of local payment options, and a variety of settlement currencies.

With over twelve years of experience in the industry, he is currently the CEO of Maxpay and Founder of Genome.

How big is the online payments market in Malta and how is it developing?

 The online payments market in Malta is almost exclusively export-oriented. With a population of less than half a million people (that’s about 0.1% of the EU) and a landmass that’s about 0.1% of the area of the United Kingdom, the three islands are mostly a platform for international business servicing the European Economic Area. Because Malta is an EU member state with a compliant regulatory framework, as well as a country that is part of the Schengen visa-free economic area, it has over the years become a hub for financial services companies, with payment gateways, card issuers, e-wallets and online foreign exchange traders located here, but serving Europe and the world. With a banking sector consistently ranking amongst the top 10 of the world’s most reliable banking sectors (according to World Economic Forum rankings), the regulatory framework in Malta is very favourable for establishing and growing financial services firms and opening multinational branches.

What are the challenges associated with operating cross-border in this sector? How do you overcome these alongside your clients?

 When it comes to cross-border payments, the two key difficulties that are a persistent barrier for businesses of all sizes in every industry are speed and cost, according to a report by the Bank for International Settlements. Payments sent from practically any country to another are often more expensive, slower, and less transparent when compared to domestic payments. The reasons for this are that cross-border payments are more complex, considered to involve more risk and fall under more rules and regulations as opposed to payments made within one country.

Small and large companies experience different problems with cross-border payments, with large corporations that make high-value international wire transfers experiencing problems with the lack of transparency, including transparency of FX rates, and smaller businesses working with smaller payments that face high transaction costs.

This is why at Maxpay we have made a strategic decision to be transparent about transaction rules, payment clearing timelines and fees upfront. The traditional payments infrastructure is complex and we can’t control fees charged by third parties, which is why with new FinTech products like Genome, we rely on regulated but optimised infrastructure partners. Our goal is to minimise the cross-border friction in terms of costs, requirements and processing time, and we are making great progress in this area with features like an instant currency exchange and instant payment transfers.

Tell us about the specific payment solutions that Maxpay offers.

 Maxpay’s focus is on online businesses accepting payments worldwide, so our payment service provision solution is geared towards enabling all legal businesses to accept local payment methods from international customers. But this solution isn’t a mass-market plain-vanilla type. The complexity we discussed earlier is partly solved by our payments solutions’ dashboard with extensive reporting on fees and exchange rates. Yet the real key in our niche is for online sellers to maintain healthy merchant accounts - this is why we invested in proactive chargeback monitoring by partnering with Covery, an AI-powered risk management and fraud prevention platform. We’re also constantly growing our risk analysis team who consult our clients on optimising their e-commerce websites to keep payment success rates high and chargeback rates (and costs) low. So while the PSP solutions market is crowded, we like to think that our clients turn to us for our expertise.

We are progressing toward a cross-border world with fewer middlemen and less paperwork, resulting in faster and cheaper access to financial services for more people over a variety of platforms.

How is Maxpay developing new strategies and ways to help your clients?

 We take both evolutionary and revolutionary paths to better serve our clients. With the evolutionary one, we use data science to test automation and smart algorithms that help lower costs and raise payment success rates with new tools like smart payment routing (for lowering transaction costs) and automated retry logic (for better success rates). We also realise that traditional banking is in flux, so we’re developing challenger finance ecosystems like Genome for business. So while finance still involves a lot of paperwork and switching between different systems, with Genome, we have unified personal and business finance, as well as made services for online merchants accessible from within a web and a mobile app. In the process, we’re solving the pain points for large and small businesses with more transparency, instant payments, and lower fees when compared to traditional banking.

What do you think the future holds for online payments?  

We are now witnessing the very first attempts at improving the overall efficiency of cross-border payments and international finance. These will eventually interconnect local payment infrastructures and then expand into closed finance ecosystems across borders, increasing the role of peer-to-peer payments. While being generally optimistic about overcoming obstacles, the FinTech community still needs to work on addressing legal, technical, and operational risks. In the end, we are progressing toward a cross-border world with fewer middlemen and less paperwork, resulting in faster and cheaper access to financial services for more people over a variety of platforms. There’s definitely room for more efficiency, better user experience, and we very much plan to be a part of that future.

About Maxpay:

More than just a payments service provider, Maxpay is a platform built by online business owners for online business owners to accelerate growth. At Maxpay, global teams provide access to a broad set of merchant tools within the payments processing stack, deliver deeper local payment insights and offer customised risk intelligence solutions that lower chargebacks. The committed network of online payments professionals offers online businesses live support, resources, and tools to scale worldwide.

 For more information, please go to maxpay.com

As contactless payments go from strength-to-strength and competing digital wallet options are rolled-out by everyone from the giant tech companies to mobile operators, the number of articles and experts publicly heralding the imminent onset of a ‘cashless society’ increases proportionally.

From the latest tranche of predictions, the country cited as leading the current all-digital currency race appears to be Sweden (ironically the first European country to issue banknotes back in 1661). Here cash payments accounted for just 2% of the value of all transactions made in 2015, and electronic payment optimists are forecasting a cash-free society as early as 2020. It’s also the country where protest continues at the decision to no longer accept cash on the capital’s Metro, and where cases of electronic fraud have more than doubled in the last decade.

There’s certainly no denying that new digital payment technologies are gaining traction, but those promoting this as evidence of the imminent arrival of cashless societies should, for want of a better phrase, ‘take note’.

IOU deja-vu

Back in the early 1950s, around the same time the very first Diners Club Cards gained popularity across the US, the vision of a cashless society was enthusiastically predicted. More than sixty years later, cash payments still account for 85% of all global retail transactions by volume.

Beyond the hyperbole, often generated by those with digital payment options to sell, the common-sense prediction for the future of cash is probably that, while the world will inevitably evolve beyond physical currency at some point, it’s more likely to happen sometime in the next century than the next decade.

The immediate reality is far more likely to be a future where, while cash is no longer king, it becomes a facility regarded as a fundamental part of our suite of payment options, sitting alongside contactless cards, eWallets and mobile payments, each ready to be used in the most convenient instance.

Show me the money!

Using cash in this context is far from archaic. Even today, cash is the fall back that always works. What do you do when it’s time to settle the restaurant bill but the chip-and-PIN machine’s broken? Work off your debt in the kitchen – or pop over the road to the ATM? Cash is the only format familiar to all purchasers, regardless of age, affluence or technological awareness.

Furthermore, the physical act of exchanging money can feel secure, and manageable.

Taking out cash for the week or month can help households to budget, and the act of handing money over still allows many consumers to better visualise their budgets and keep track of what they’ve spent.

This is supported by a recent survey taken by price comparison website GoCompare, in which 15% of respondents expressed concern that digital payment systems encouraged them to spend more than they should, with a further 7% stating they didn’t connect spending in this way with ‘real money’.

In an age of increased public surveillance and electronic monitoring, cash also offers a level of anonymity that many people are reluctant to give up. In a survey recently undertaken by Cartridge Save, 70% of Britons said they would be unhappy with government agencies being able to track every single payment they made.

Cash is staying – so let’s deal with it

As much as retailers enjoy the convenience and benefits of digital payments, for now, cash is here to stay. In fact, there’s never been more of it in circulation, and far from becoming a transactional default relied on by less sophisticated nations, the world’s most cash intensive economy is Germany, where it still accounts for over 80% of all payments made.

Responding to this reality intelligently on behalf of modern retailers, demands methods for the effective management of cash in the omni-channel world. Acknowledging that its physical nature means processing cash efficiently requires extra levels of logistics and supply chain management.

Optimising this Retail Cash Chain enables retailers to accelerate the speed of cash through their operations, from the customers’ point of purchase to the deposit in their bank account. Applying techniques to authenticate, secure, automate and accelerate within this Retail Cash Chain realises significant benefits, ultimately optimising the levels at which the value of cash can move, far beyond its apparent physical limitations. In other words, reaching a point where cash transactions become as expedient for retailers as electronic payments.

Physical currency may be one of the world’s oldest methods for making a purchase, but that doesn’t mean the way it’s handled shouldn’t employ the best of 21^st century technology and innovation.

About Siôn Roberts:

In his role as EVP Global Retail, Siôn is responsible for defining and delivering Glory Global Solutions' Retail Strategy worldwide. He has over twenty five years’ experience in the Information Technology sector, most of which has been gained selling and delivering technology based solutions within the international Retail Industry, specifically store solutions.

With an MBA from the University of Liverpool, Siôn originally started out as a Software Engineer in Point of Sale and retail store systems. Siôn has successfully held roles across technical/development management, consulting, sales/marketing and commercial/executive roles within a number of large and small global organisations. Prior to joining Glory Global Solutions, Siôn was Group CEO at software consulting firm Ivar Jacobson International, and has previously worked for Electronic Data Systems (a division of HP) and ICL (now Fujitsu Services) in senior international management positions. At Fujitsu he formed a new global business unit focused on in-store interactive technology and electronic/mobile commerce.