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What Are Cross-Border Payments?

Cross-border payments involve the movement of funds between individuals and businesses in separate countries. Remittances, payments, and purchases all require money exchanged across borders, and cross-border transactions make this possible.

A recent study by Juniper Research revealed that the global spend on B2B cross-border payments will exceed $40 trillion by the end of 2024, increasing from $37 trillion in 2022 to $27 trillion in 2020. This shows that the cross-border payment industry is growing and will likely experience more growth in the coming years.

Read on to learn about the types and difficulties faced with cross-border payments and how AZA Finance solves these difficulties.

Types Of Cross-Border Payments

  • Wholesale cross-border payments: Wholesale cross-border payments involve the transfer of large sums of money between countries or jurisdictions. These transactions are primarily conducted by businesses, financial institutions, and government entities and involve significant funds. 
  • Retail cross-border payments: These are typically between consumers and businesses. Retail cross-border payments refer to financial transactions involving smaller amounts of money made by individuals or consumers across different countries or jurisdictions. They are characterised by lower transaction volumes and smaller amounts compared to wholesale payments. 
  • B2B (Business to Business)B2B cross-border payments pertain to the financial transactions between businesses in different countries or jurisdictions. These payments involve the transfer of funds between businesses for various purposes, such as purchasing goods or services, settling invoices, or engaging in collaborative projects.
  • B2C (Business to Consumer)B2C cross-border payments refer to the financial transactions involving businesses and individual consumers across different countries or jurisdictions. In this case, businesses with employees working in different countries may need to process cross-border payroll payments to ensure timely and accurate compensation.
  • C2B (Consumer to Business)C2B cross-border payments include international eCommerce purchases. In this context, individual consumers pay businesses in different countries or jurisdictions for the goods or services they purchase online. These payments are typically facilitated through various payment methods, such as credit cards, debit cards, digital wallets, or online payment platforms.
  • C2C (Consumer to Consumer)C2C cross-border payments are a less common but still significant form of international transaction. This payment type involves individual consumers buying products or services directly from other individual consumers, often facilitated through online platforms or marketplaces like eBay or Etsy.

Common Challenges With Cross-Border Payments

  • High costs: Cross-border payments are notoriously expensive due to the number of intermediaries involved in transferring money from one country to another, all of which charge fees for their services. The fees associated with sending money across borders can be significantly higher than domestic transactions. These costs arise from various factors, including currency conversion fees, intermediary bank charges, compliance expenses, and regulatory requirements. Additionally, the involvement of multiple financial institutions and payment processors can further contribute to the overall expense. High costs associated with cross-border payments can impact businesses, individuals, and economies by reducing the affordability and accessibility of international transactions.
  • Delayed transactions: Cross-border payments go through several entities, which slows down the process. The complexity of international payment networks, differences in time zones, and the involvement of multiple intermediary banks can delay the processing and settlement of cross-border payments. Additionally, regulatory requirements, compliance checks, and anti-money laundering measures may introduce additional layers of scrutiny that can further contribute to delays.
  • Transparency: Due to the involvement of multiple intermediaries, currency conversion processes, and varying regulatory frameworks, it can be difficult to maintain complete visibility into the fees, exchange rates, and processing times associated with cross-border transactions. This lack of transparency can make it challenging for businesses and individuals to accurately assess the actual cost of cross-border payments and understand the timing of fund transfers.

AZA Finance: The Solution for Reliable Cross-Border Payments

With AZA Finance’s cross-border solutions, businesses can enjoy instant, cost-effective, and transparent payments, seamlessly accelerating their operations in frontier markets through better payment and last-mile settlements, foreign exchange, and treasury services.

AZA Finance’s services are built on its leading proprietary technology platform available through the web and API. Your business & global enterprise can make intra-Africa and international payments and settlements across 50+ currency pairs in 115+ markets while enjoying competitive FX rates, faster settlement time, and no hidden fees.

Click here to learn more!
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