Cross-border trade in a post-Brexit, post-pandemic world offers enterprise-level companies opportunities as well as challenges. For many businesses, choosing the most appropriate payment method for paying suppliers internationally can be an obstacle that stands in the way of working with new partners overseas and fully exploring new horizons.

Paying suppliers – usually a straightforward process when dealing with local companies ‒ can prove complex when trying to break into different markets beyond the borders of the UK and Europe. Determining the most suitable payment option is often time-consuming and expensive, with myriad services creating confusion rather than convenience. 

Automated payment services are the best way for ambitious companies to save time and money, with savvy companies seeking out solutions that offer the technology, flexibility, infrastructure and regulatory compliance know-how to boost local and cross-border commerce.

What are the main payment management challenges?

For many businesses, establishing the best financial infrastructure for their needs is a combination of getting the basics right – such as saving time, not being penalised for exchange rate fluctuations and preventing  costly administrative errors – and having a deep understanding of the rules and regulations of the markets where they see potential for lucrative opportunities.

Gaurav Singh, growth strategist and founder of JPIN, a bilateral investment banking platform that links India and the UK, urges companies to start their international expansion journey armed with all the relevant financial expertise, either in-house or from external advisors. 

“A UK company looking to expand overseas will need to consider enlisting the help of a payment provider that specialises in, and is popular, in the particular market of interest,” says Singh. “Companies must also be aware of the regulatory and tax implications of expanding overseas, as this can prove to be very costly if not understood correctly.”

Singh recommends an automated payment solution that offers a “clear and real-time overview of profit and loss that accounts for cross-currency transactions and changes in forex rates” to save time and prevent errors.

Kevin Blackburn, business development consultant and co-founder and director of Systemise Fulfilment, says that based on his experience, businesses that seek to operate in broader markets are “working towards simplifying operations” and they value “easy-to-use options” for functions such as managing payments.

When expanding overseas, payment management can quickly become more complex thanks to regulatory requirements that differ from those in the UK, as well as currency fluctuations and technical challenges.

“The banking industry differs from country to country, and firms need to have a good understanding of what each landscape looks like, first of all,” Singh says, especially from a technology perspective. 

Seeking out markets in territories with financial systems where firms can connect via an application programming interface – better known as an API – will help streamline payment processes. Services and providers that specialise in helping firms in this area are becoming crucial for supporting enterprise-level companies with an international vision.

Brexit barriers or Brexit bonuses?

Since the UK voted to leave the EU in the 2016 referendum, there has been much concern and debate about the impact of Brexit on businesses keen to expand overseas. For many British businesses, a lack of preparedness for trading beyond the EU is holding them back on a macro level, before the finer details, such as cross-border payment management are even considered. To serve broader markets, it is crucial that enterprise companies ensure all operations are ready for growth. 

However, EY’s 2021 research on international trade capability found that UK firms were significantly less likely to have a dedicated trade function (54%), compared with 68% in other markets. The report found that not onboarding the relevant expertise was already having “a significant impact on business confidence and skill sets in strategic trade areas.” 

Blackburn says: “Brexit has created lots of confusion and difficulties; all the additional paperwork that is needed and legalities to consider have caused a lot of disruption.” However, he adds that for those businesses that commit to overseas expansion, opportunities have been created for “potentially rapid brand business expansion outside of the UK once a business is fully set up from a legal and operational perspective.”

Singh is optimistic about the possibilities for UK firms willing to “look far beyond Europe to the untapped potential in some of the world’s fastest-growing emerging markets,” especially in terms of sourcing investment.

“There is a wealth of deep-pocketed private investors, particularly in Asian countries, that can assist with the scale-up efforts of UK startups while providing them with the necessary expertise to expand into these countries,” Singh says, citing “high-profile negotiations” between the UK and countries such as India that are “piquing the interest” of UK startups that are now seeing the potential in foreign markets outside the EU.

Free trade as an EU member was certainly beneficial for UK firms keen to expand with minimal bureaucracy, but with the right advice and financial infrastructure solutions, such as an automated cross-border payment management system, forging new relationships in a post-Brexit world can be simplified. 

UK-based ecommerce company Linnworks, for example, has formed a partnership with Payoneer to simplify international transactions with suppliers through integrated payment options and competitive currency conversions. The payment solutions offered by Payoneer reduce cross-border fees, striking the right balance between globalisation and getting paid locally.

Making the payment solution decision

The McKinsey Global Payments Map for 2021 found that international marketplace payouts account for up to $250bn annually – and this figure is projected to grow by up to 30% annually in the coming years. Against the backdrop of an increasingly digital economy, the businesses that are serious about expanding and competing globally will need to bridge the gap between what they need to thrive and what is offered by many existing payment solutions.

Blackburn summarises the main priority for businesses wanting simplified payment solutions when expanding overseas: “Time is incredibly valuable to everyone, so making something twice as fast, easier or simpler will be worth the investment for companies, even if this means moving entire operations from one platform that needs many integrations to one that is an all-in-one solution.” 

Technology is making payment across borders easier, but Blackburn reminds businesses that the human element cannot be eliminated entirely from these processes. He urges businesses to prioritise establishing an internal finance department, “whether that is people making sure invoices are being paid [or] making sure that payments and expenses are being paid – it’s all very important – there are some things that you need a team to support you on and you can’t rely entirely on automation yet.” 

By streamlining the internal processes, and implementing payment technologies, companies can save time and resources while mitigating risks in mass payments. 

“Today’s businesses realise that success and resilience against the unexpected both necessitate a diverse global network of customers and vendors,” said Robert Clarkson, chief revenue officer at Payoneer. “This has created exponential demand for easy and secure payment solutions to support cross-border transactions.”

This strategy has become ever more crucial in the post-Brexit landscape where companies are seeking to grow their businesses beyond the UK’s borders.

As companies expand, payment procedures typically become more complex. Systems capable of handling payments to a small number of domestic suppliers can buckle under the strain of international growth. Soon enough, suppliers, contractors and freelancers experience failed payments and all the dissatisfaction that goes with them.

To address this issue, firms first need to understand the underlying causes of these failed payments. “Historically the process for cross-border business payments has been cumbersome and costly, partly because of the multiple parties – such as banks, market infrastructures, and regulatory bodies – involved in the clearing and settlement of the payment,” says Rasika Raina, senior vice president of Mastercard Cross-Border Services. “This has meant that payments are subject to delays, hidden fees and failures, and common issues such as unexpected intermediary fees and exchange rate fluctuations can lead to incomplete payments.”

Although domestic payments are usually executed through highly standardised payment networks, cross-border ones often travel through a chain of three or four banks around the world and may be settled through multiple payment rails.

“In order to ensure completely seamless execution, a payment must include the technical details of all parties of this payment chain such as account numbers, bank identifiers and routing numbers, not merely of the ultimate beneficiary of the funds,” says Isabel Schmidt, co-head of global payments products at BNY Mellon. “And those details must be presented in the correct format in the payment as it travels around the globe.” 

Cross-border payment delays and failures can therefore stem from a lack of communication within the supply chain. “Banks, businesses and suppliers from different countries may not have the same level of communication with one another as they might have with national suppliers,” says Ted Datta, head of financial crime compliance practice for Europe and Africa at Moody’s Analytics. “Poor communication can also cause incorrect or incomplete payment information and possible due diligence red flags, leading to potential payment failure.”

The payments industry is working to address these issues. The ISO 20022 standard, for example, will support the inclusion of richer and better-structured transaction data in payments messages and should enable more accurate compliance processes, as well as improved fraud prevention.

“The deployment of the ISO 20022 standard across the payment infrastructures for the most commonly used cross-border payment currencies over the next few years creates the necessary foundation for seamless transmission of payment data across the globe,” says Schmidt, “eliminating the risk of loss or transformation of data which often leads to delays today.”

Banks, payment networks and fintechs are also using a variety of tech tools to perform better validations of payment data when payments are initiated. Beneficiary account validation services confirm that an account number is correct and linked to the intended beneficiary, for instance. While routing directories and AI solutions can determine the most successful payment route and confirm all necessary bank identifiers. 

The deployment of the ISO 20022 standard across the payment infrastructures for the most commonly used cross-border payment currencies over the next few years creates the necessary foundation for seamless transmission of payment data across the globe

New technologies and approaches are also helping to address the challenges created by an ever-changing patchwork of inconsistent global financial regulation, says Schmidt, allowing payment providers to understand what regulatory regimes a payment must satisfy to ensure a smooth settlement. “The challenges however are significantly greater in this area as individual national policies evolve quickly and remain highly fragmented and nuanced,” she adds.

False positives, which occur when a legitimate transaction is flagged as suspicious, could also be greatly reduced – or even eliminated – by deploying the right technology. “False positives are frequently a close match to entries on international sanctions lists and payments often trigger simple rules designed to cover regulatory red flags,” Roger Bush, product manager at Lucinity, explains. “Using modern technology that lets you continually tune and optimise your detection system is vital, as is embracing newer approaches such as machine learning and artificial intelligence to remove as much of the noise as possible.”

To further ease some of the challenges around cross-border payments, payment service providers are increasing transparency around fees and delivery times and enabling end-to-end payment tracking. In addition, a data or information sharing portal connecting all parties in the payment chain can help streamline data collection. “They also have the ability to correct errors or stop and recall payments which can give businesses more control in the process,” says Raina.

However, as Datta points out, there are also some essential KYC and KYB procedures that companies must have in place to avoid issues with cross-border payments, such as sanctions compliance checks, including hidden risk through ownership and control networks. “Ensuring that you or your business is not inadvertently attempting to accept or make payments with a sanctioned network is the crucial first step in avoiding cross-border payment issues,” he says. 

Ultimately, as Schmidt says, the most valuable assets a business has in avoiding cross-border payment risk is compiling accurate data on their payees and leveraging reputable banking and identity solutions when making payments.

What is the most important thing organisations can do to improve their payment process? 

Without a doubt, it’s automation. Let me explain why. Today we’re all doing business with people and organisations that we don’t necessarily make physical contact with. 

We’re paying freelancers and contractors all over the world, we’re buying through marketplaces and third parties. As a result, we’re dealing with multiple currencies and payment methods and banks and intermediaries. It’s time-consuming and complex.  

Automating payments take away all of that complexity and gives you one payment processing service that takes responsibility for the end-to-end process. When something does go wrong, there’s one person who will take responsibility for resolving that issue. 

What is the biggest challenge organisations face when making payments today? 

The payments landscape is increasingly complex and costly. Let’s say you’re a European company making a payment to a US supplier. You pay your invoice in euros, but the French bank needs to pay the US bank in dollars. That’s a potential point of failure, not to mention there are probably associated foreign exchange and transaction fees. 

When something goes wrong, it becomes very hard to find who is responsible, and fix the problem. Was it the French bank or the US bank? Was it human error on your side, or the bank’s side? And at the same time, you’re having to manage a relationship with a partner who is waiting to be paid. With a modern payment service like Payoneer, you’re more likely to get full transparency and a single point of contact in the event that things go wrong, along with full support for local and global business payments. 

How do mass payout services help improve the payment process? 

If you're a marketplace or platform that has sellers, like eBay, Airbnb or Fiverr, you need to do KYC for those sellers to sell on your platform. They will be in all different countries. You have to think about things like: How many currencies can you pay in? What currency do payees want to get paid in? How do they want to get paid? Using banks means it's a bank transfer and that could have high fees and FX. Then there are human errors from both sides and the time it takes to get to 1,000 plus payees…

When it comes to paying freelancers, contractors and suppliers on a frequent basis, businesses have to think about how they are allocating their resources. Are you spending excessive amounts of time and effort on manual accounts payable processes? Are you concerned about the reliability, efficiency, cost, and legality of your cross-border supplier payments? If the answer is ‘yes,’ it’s time to automate invoice processing, global invoice payments, and ERP reconciliation flows with Payoneer.

Payoneer helps you simplify and streamline your accounts payable process from end to end, while ensuring reliable, secure, compliant cross-border payments in over 150 currencies to users in more than 200 countries and territories. 

We can now automate that whole process. We’ll receive a list of payments from the client and complete the KYC checks. Once done, the client only needs to click one button to start the payments. The whole process is simple, fast and provides reassurance that if something goes wrong, you’re covered. By automating the process, customers have typically seen a 90% reduction in failed payments. 

How does this type of service work on marketplaces like eBay? 

If you’re a marketplace seller using a site like eBay or Fiverr, and you buy product from China to sell globally, then you know payments can get very complicated, very quickly. 

You might be a UK business, but pay for product in yen, sell to customers in euros, and pay eBay fees in US dollars. Traditionally, you would need to transfer currencies each time you make a payment, with associated costs. With automated payment services like Payoneer, it’s possible to hold and make payments in any currency, without incurring additional fees or delays.  

How do you expect the payment landscape to change in the next year? How can organisations prepare for those changes? 

I think that cross border payments are going to continue to become more commoditised and following that mass payout will become more commoditised and competitive. It will be hard to win the market on simply competitive rates for cross-border. My guess is that we will see new clusters of types of companies with different value props to the marketplaces.

Some companies might focus on becoming a turnkey financial solution for marketplaces, Some might do it white label, like financial infrastructure as a service, including payouts, working capital, FX, treasury as a service and more.

Companies are going to have to decide what their competitive edge is in an ever increasing competitive landscape and commoditisation of payouts.

Scaling a business is a complex process, particularly when it involves expanding into new countries and regions. Language and cultural barriers must be overcome, new customer needs met, and compliance and regulatory matters addressed. Legacy tech systems and talent gaps can also put the brakes on international growth. And then, of course, there’s the issue of payments.

The need to make mass payments across multiple countries – and in multiple currencies – to a growing roster of freelancers, contractors and suppliers can quickly cause problems. “Poor ability to manage cross border payments can be one of the major growth blockers for businesses today,” says Rori Cadavieco, general manager EMEA at Jeeves, a corporate card and expense platform for global startups. “For those without the right technology there’s a lot of manual work involved, which costs time and money, reduces visibility and leaves businesses exposed to risk and errors.”

David Ritter, director, financial services strategy at digital consultancy CI&T, says that what businesses really need is “a scalable platform to convert currencies and provide clearing and settlement for transactions with customers and vendors.”

While major payment card networks and banks provide these functions, high transaction fees, slow processing times and ever-changing FX rates can be a stumbling block to efficient and cost-effective cross-border payment processes. “As a result, a host of startups are trying to simplify and reduce the cost of cross-border B2B payments,” says Ritter, “some using alternative rails like blockchain and crypto.” 

Edward Cahill, CEO of Onbord, makes the point that when starting out, many companies do not build their onboarding and payment processes to deal with doing business internationally. This means they are often wedded to processes, decisions and gateways that only operate domestically.  

“They go with the cheapest, quickest option without thinking through the medium-term consequences of doing so,” he says. “If a business has international ambitions it should look to implement onboarding and payment technology that can work internationally from the outset.”

Reducing the time it takes to onboard a new business can ultimately make payment processes more efficient across different regulatory environments. “It also allows you to react when regulations change,” says Liam Chennells, CEO & founder of Detected. “In the past, payments businesses have connected to data providers who solve current challenges without considering the adaptability needed to stay compliant over time.”

Indeed, as companies expand into more territories, they are inherently exposed to more compliance risks. “Each country has a different agenda that they are driving; some prioritize financial inclusion, while others emphasize the increased speed of transactions,” says Matt Birtch, director at Altman Solon. “Understanding these drivers will allow businesses to act in good faith when compliance is grey. Other tactical solutions are to ensure you have a strong regulatory tech structure that is easy to audit and update.”

Michael Levens, global head of payments at Delta Capita, believes companies should also embed a process – or function – of horizon scanning in their operating model. “Horizon scanning is looking ahead to anticipate the regulatory changes that might come into play, so that a firm is ready to implement such changes when they come into force,” he says. “The interpretation of a new regulation within a particular sector can be difficult, therefore any up-front support on translating regulations to different circumstances would be welcome.”

Introducing compliance automation can also help businesses to reduce the administrative burden of regulation as they expand. “With the help of right technology and tools, such as AI, manual processes can be removed and rich data across the organisation – e.g. payments message data in ISO 20022 – can be leveraged to track and manage compliance,” Levens adds. 

Nick Maynard, head of research at Juniper Research, also highlights the importance of KYB platforms, “which offer aggregated data from multiple sources to allow for business verification. Businesses also need to take a localised approach; there are no one-size-fits-all solutions in compliance,” he says.

Regardless of how they approach cross-border payments, businesses certainly shouldn’t allow legacy payments infrastructure to stifle their growth ambitions. “By implementing the latest payment technologies into the business, and moving away from legacy infrastructure, financial teams can centralise payments across a global network,” says Conor Colleary, group vice president of financial services at Oracle.

In other words, while scaling a business might be complicated, the right payments platform will ultimately help to support international growth rather than stopping it in its tracks.