How do Cross Border Payments Work?

 

As the name indicates, cross-border payments are transactions between payers and recipients based in separate countries. According to Alan Safahi, an experienced entrepreneur and founder of a San Francisco-based startup company, cross-border payments usually cover retail and wholesale payments, including remittances.

Credit card payments, bank transfers, and alternate payment methods are common ways to make cross-border payments. Thanks to advanced technology, the business world has a global reach, meaning remittances, purchases, and payments require money exchanged across countries. Read on!

Cross-Border Payment Market Overview

According to Alan Safahi Orinda, cross-border payments are a $22 trillion market. Safahi says the market is snowballing, and 80% of these payments are B2B-related, with banks dominated over 95% of the cross-border payment market. However, it is often challenging for banks to maintain their 95% share of the market.

Alan Safahi’s research shows that banks have not made substantial efforts to improve their back-end systems and operations involved in cross-border payments. Consequently, such payments often remain costly for customers. Safahi argues that customers face various pain points, including:

• Lack of transparency
• Inadequate tracking methods
• Slow processing times

On the other hand, non-bank players make substantial efforts to encroach on the conventional cross-border turf of banks, shifting from C2B to B2B cross-border payments. Non-bank players are forcing banks to reconsider their long-standing strategies and methods for cross-border payments.

Types of Cross-Border Payments

Bank transfers, credit cards, and alternative payment models (APMs) are common types of cross-border payments. According to Safahi, consumers or customers choose payment methods that are reliable and convenient for them. Let us talk about these types. Continue reading!

Bank Transfers

International bank transfers are a common channel for making cross-border payments. However, larger banks in the U.S have a limited range of stocked currencies, making it challenging for customers to place cross-border payments.

For instance, when a customer in the U.S wants to transfer money to another country, the bank relies on a foreign banking partner to streamline the transaction process. Likewise, smaller banks usually don’t hold foreign currencies, and they rely on larger banks to make cross-border payments on their behalf.

Credit Cards

Alan Safahi is an experienced entrepreneur who has thorough and up-to-date knowledge of cross-border payments. Safahi says that credit cards play a crucial role in cross-border transactions. Safahi recommends credit cards as a go-to option for consumers.

Cross-border payments via credit cards are relatively straightforward and quick. All you need is to enter your card details and wait for the transaction verification. Because banks make efforts to optimize the currency conversion process, you have to specific fees.

Alternative Payments

There are numerous alternative payment options for cross-border payments. However, the most common one used today is a digital wallet, also known as an e-wallet. It is a software-based electronic alternative payment model that allows consumers to pay for in-store or online transactions.

E-wallets enable customers to store their payment cards safely and make transactions through software and apps. The most popular and common e-wallet payment options are PayPal, Google Pay, Apple Pay, and Ali-Pay.

Final Words

According to Alan Safahi Orinda, the biggest advantage of making a cross-border payment is reliability and convenience, primarily when you use a global payment platform. Safahi recommends banks and private companies implement a solid onboarding process with a sophisticated online portal to make it easy for payees and recipients to place cross-border payments and update their information as necessary.

Originally Posted:-https://timebusinessnews.com/how-do-cross-border-payments-work/