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According to the Bank of England, cross-border payments are financial transactions where the payer and the recipient are based in separate countries. They cover both wholesale and retail payments, including remittances.
There are several ways to make cross-border payments, and they include credit card payments, bank transfers, mobile payments and e-money wallets.
While the cross-border payments landscape is massively evolving, especially with the increase in fintech emerging in this market, it still faces some challenges.
Read on to learn more about the challenges of cross-border payments and the solution AZA Finance provides to these challenges.
Here are some of the top cross-border payments challenges:
From currency exchange costs, intermediary charges, and regulatory costs, every transaction incurs a fee, but cross-border payments frequently incur several. This is because more players are involved in international transactions than domestic ones and want to be paid for their services. Depending on the geographic region, a single transaction may have to travel to three or four countries. With each region governed by its laws and restrictions, there is a myriad of currency conversion and regulatory fees. Navigating these different protocols adds up, and someone must bear the cost, either the provider or the customer.
Cross-border payments through traditional bank transfers normally take two to five days to process. A multi-stage transaction necessarily takes longer than a simple direct transfer. As cross-border payments involve multiple entities, each of which must process the payment — these transactions can take several days to complete, leaving the recipient waiting on the payment to go through.
Lack of Transparency
With so many intermediaries involved in the process, cross-border payments can have transparency issues. Tracking the payments and getting a clear picture of the entire process is very difficult and may have hidden costs associated with it. This can severely affect the profits of the business.
Unfortunately, cross-border payments lack both speed and transparency. Multiple intermediaries, geographical distance, and differing regulations can create a complicated transaction path. Then there are the extra fees, some of which are necessary but cannot be traced, leaving customers to wonder what they’re paying for.
Security is paramount for all financial transactions, especially with cross-border payments. When institutions or individuals transfer money between countries, they risk encountering weak security protocols or inferior cyber protections. Businesses want to guarantee the safety of their international transactions, but that guarantee isn’t always possible since they are not solely responsible for the transfer. If a cross-border transaction is intercepted, the security breach could be especially costly in cash and customer loyalty.
Most cross-border payments work by the pre-funding of accounts to settle payments, thereby ensuring that there is enough money in the correspondent bank accounts to meet payment obligations within the stipulated deadlines. Since different geographies operate in different time zones, it also poses a challenge for financial institutions to deploy funds and manage their liquidity positions effectively.
AZA Finance: The solution to cross-border payment challenges
With AZA Finance, you can make secured international and intra-Africa business payments instantly. Enjoy transparent and competitive rates, robust infrastructure, a stable and high-performing API with low error rates, fast settlement time, live transaction status, 24/7 customer service and more when you trust us with your payment needs.
Your business can also outsource its corporate treasury and seamlessly manage its cross-border payments and liquidity with our unique services available via web and API.
Overcome the hurdles of cross-border payments with AZA Finance’s unique services, exceptionally tailored to ensure your business enjoys a seamless cross-border payment and settlement experience.
Do you want to learn more about how AZA Finance solves your cross-border payment challenges? Click here to see for yourself!