When sending payments internationally, payments can become delayed for many reasons, including slow intermediary bank processes, regional differences, and time-consuming fraud prevention. Luckily, with the help of technology, the entire payment process can be optimised.
In this blog, we discuss these three factors that affect international payments, we also cover three additional ways SMEs can boost the speed of their payments. Plus, keep reading to learn how Freemarket can help your business achieve faster international payment processing times.
It is commonly known that international payments take longer to process than domestic ones, but why exactly is this and what factors impact the efficiency of these payments?
Here are 3 key reasons why international payments can take longer to process than domestic payments:
When sending money abroad, several regional factors can impact the speed of international payments.
These factors include:
Intermediary banks often play a key role in international payment transfers.
An intermediary bank — a type of financial institution that helps facilitate international transactions — has the ability to handle high-volume transactions that require currency conversions.
Although intermediary banks are one of the pillars that make international payments possible, the entire process can be time-consuming and can sometimes involve multiple intermediary banks. With these extra steps added into the money transfer process, international payments end up taking longer to arrive.
When sending money internationally, working hours that may not be aligned with those in your own country can have a significant impact on payment processing times. For example, if your SME is based in New York, and sends a payment to a business in Thailand at 10am EST, the recipient’s settlement system may not be operational until normal working hours in the local country, so that payment may not reach its destination for another 12 hours, when the banks open up at 9am ICT. Over time, this can have a huge knock-on effect on liquidity, as exchange rates can change dramatically between the time someone sends a payment, and the time it reaches its destination.
Legacy platforms are a hurdle across banking, but particularly when it comes to processing international payments. The systems financial institutions leverage to process cross-border payments were created when payment first became digitised. This creates a significant number of delays due to a lack of automation, inefficient monitoring, poor data processing and a high dependence on batch processing.
As the financial and banking industry becomes more digitally oriented, the emphasis on strong fraud prevention procedures has become even more pronounced.
In traditional banking settings, these fraud prevention models can take time to complete, as they often involve some amount of manual labour on the banking staff’s behalf. Moreover, fraud prevention becomes more complex when sending money internally, contributing to the slow processing time.
Of course, both clients and institutions alike benefit from these fraud prevention models — after all, without them, many payments could end up lost and in the hands of financial criminals.
Luckily, as banking technology has continued to develop, so have the options for faster, automated fraud prevention programs.
If you rely on international suppliers, business partners, or clients as part of your business structure, finding ways to optimise and hasten your international payments is key.
Let’s examine 3 ways businesses can boost the speed of international payments:
If you know your SME will be conducting business internationally, one of the best initial steps you can take to make your international payments speedier is to open a multi-currency account.
A multi-currency account is a type of financial account in which you can store, receive, and send money in a range of currencies. From a business perspective, this means you can hold the currencies of the countries you work with, this enables you to send payments that are already in the correct currency of the recipient.
Among other benefits, a multi-currency account makes it possible to eliminate the use of an intermediary bank, as your business will already have the ability to hold and convert currency on its own.
While some banks may offer multi-currency solutions, the best way to utilise a multi-currency account is through the use of a digital wallet.
Digital wallets are a type of financial technology (typically offered by FinTechs or other technology-oriented financial businesses rather than traditional banks) that allows you to store, send, and receive funds entirely digitally.
Like multi-currency accounts, digital wallets further enable you to avoid the time-consuming processes of an intermediary bank. Moreover, digital wallets often make it simpler to conduct business according to local regulations in the region you are sending money to.
Once you have a multi-currency digital wallet or payment account set up, the last — but still highly important — step to take is to familiarise yourself with the local culture and financial regulations in the regions you plan on doing business with.
On the regulation side of things, you need to be sure that you are following all the proper regulatory requirements to remain in good compliance with financial law. This is especially important when using a digital wallet, as there may be additional fraud prevention models or other legal requirements to send and receive money.
As for local culture, having a clear understanding of how a region operates in terms of business hours and holidays is essential. With this information, you can choose the ideal times to send international payments.
There is another way. At Freemarket, we provide your SME with the technology needed to enable fast, secure, and reliable international payments. We provide you with the capability to send and receive funds in more than 40 different currencies across 100 countries.
Our core services include:
To get started with Freemarket, talk to us today.