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Challenges Facing SMEs with Cross-Border Trade

4 Cross-Border Challenges Facing SMEs

The last decade has seen many transformations in the cross-border payments industry with companies like Wise and WorldRemit revolutionising P2P payments, and Thunes and Rapyd finding their niche in the B2B corporate space. However, one group has remained neglected: SMEs.

As per recent World Bank reports, SMEs contribute to 90% of all businesses worldwide and create 7 out of every 10 jobs in emerging markets. These SMEs have also significantly contributed to the increase in international trade volumes that are projected to rise to $35 trillion in 2022 as the world recovers from the economic downfall of the COVID-19 pandemic. Despite the high potential within this sector, the gap remains unfilled. 

SMEs in frontier markets
SMEs are often limited by choice with regards to a cross-border payments partner

SMEs are unable to work with P2P companies as they are looking to make business payments, but their transaction volumes are too low for the corporate B2B payment platforms. Hence, they have had to rely on banks, which come with their own set of challenges.

Cross-border challenges facing SMEs 

  1. High fees: International payments are expensive; unfavourable rates, processing fees and other charges have remained consistently high, especially for SMEs who suffer from tight cash flow. Moreover, the cost of international transactions in emerging markets is even greater due to the use of intermediary currencies to process transactions. This means that a businessman in Ghana first needs to convert his Cedi to USD which will then be converted to Yen to pay his partner in Japan. Double conversions mean double fees. This remains to be a constant struggle for SMEs, creating a barrier to their growth.

    Slow processing times
    Cross-border processing times can take up to 2 weeks in some countries
  2. Long processing times: In most emerging economies, processing international payments can take up to 2 weeks. This is detrimental for small businesses as it delays the speed of their operations. In the cross-border trade industry, as an example, goods cannot be shipped until the payment is received in full. The longer the payment takes to reach the supplier, the longer it takes for the goods to arrive. This can cause a loss in revenue for these small businesses as their customers might not be as patient and would source the goods elsewhere.
  3. Lack of transparency: Despite the advancements in technology over the years, there still remains a lack of visibility when it comes to international transactions. Once the payment has been sent, SMEs have limited insights into when the payment will reach the end recipient, what payment systems or intermediary partners are being used, as well as data payloads.

    Complicated paperwork while making cross-border payments
    Lengthy paperwork and complicated process add to the burden of SMEs
  4. Complicated processes: User experience is key in every industry and SMEs expect the same flawless experience from their cross-border payments partner as they do from social networking sites. However, this need is unfulfilled. International transactions are haunted by paperwork, long processes and countless back and forths before the payment is even accepted. This poses a challenge for SMEs as it not only wastes their resources but takes away from the time that could be spent on acquiring a new client or streamlining internal operations.

The need for a reliable, integrated solution

The needs of SMEs within the cross-border payments sector are simple: transparent transaction times, faster access to data, lower fees and a better user experience. 

This is only possible by leveraging partnerships with existing players in the market and creating an integrated solution. Financial markets, particularly in frontier markets, are extremely fragmented, with banks, mobile money, cash, and credit card systems all acting separately. Through our web and API platforms, AZA Finance ties all these systems together and allows seamless collections and payouts, simplifying cross-border payments in the continent. Rather than building from scratch and excluding even more players, we leverage existing systems to scale faster and increase access more readily. 

Through this, we have served many SMEs that were excluded from global markets because banks did not prioritize them for liquidity or other services, forcing them to rely on unreliable options such as black markets. Now they are able to grow their cross-border business more reliably and securely. 

To learn more about how AZA Finance can help your business with fast, reliable and cost-effective cross-border payments, reach out to us today.

AZA Finance



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