Beyond borders: why the global marketplace depends on seamless money transfer

Digital cross-border payments have been vital for companies worldwide throughout a year which has seen the world face significant upheaval. Transparent, seamless and efficient international transactions have been crucial in keeping communities, individuals and small businesses afloat and will be key in the road to recovery.

Efficient money transfer is essential but hurdles including high and changeable costs, complexity, lack of transparency and the potential for fraud threaten the process at a time when it is needed most.

When Jenna inherited her family business selling fabrics and homeware in the US, she took over a company in which she was invested both financially and emotionally. She quickly found that paying overseas suppliers – who are vital to her success – was not as simple as she had hoped. “It takes longer to send money overseas than within the US,” Jenna says.

Ideally, transferring funds to her fabric supplier in India would be as easy as paying a supplier in the same state. The extra complexity, including multi-stage and manual verification, affected both her company and her wellbeing.

“The two core areas at the centre of our approach are solving the problem of uncertainty and ensuring predictability,” says Stephen Grainger, the Executive Vice President for Cross-Border Services at Mastercard. “A small or medium enterprise such as Jenna’s might owe payments, need to meet suppliers and have payments due to come in from customers – this creates a cash flow problem.

“What matters most is the certainty of when a payment is going to arrive. Once they have that certainty a company can start to manage its position in a much more effective way.”

Cash flow lifelines

SMEs are more vulnerable to uncertain business climates and most will not have the resources of bigger companies. A survey¹ by the International Trade Centre showed that two-thirds of micro and small firms were “strongly affected” by the pandemic. This is significant given that SMEs represent 90 per cent of the world’s businesses² and are the backbone of local communities.

Adding Value

SMEs have the potential to gain significant market advantages from the innovation in technology that is speeding up cross-border digital payments and Mastercard says the appetite is clearly there. When choosing their platform SMEs rated speed, cost, good customer service and reputation most highly, according to the Mastercard survey, while 96 per cent of businesses prized all these factors.

Clarity and efficiency are essential to what Grainger describes as the “north-star goal” of making cross-border payments as straightforward as domestic payments. He says: “If you can reduce friction, you can actually spend time as an SME doing the things you are good at. That’s the competitive edge.”

Innovation means that many SMEs are not only weathering the economic storm caused by the pandemic but are strengthening their businesses. They are also benefiting from competition in the payments sector, with fintechs and challenger banks offering more cross-border business banking services. However, there is only value in these advances if the transactions are cost-effective and fast. Staying connected in turbulent times is vital for SMEs, and there is little doubt that the cross-border ecosystem is central to their recovery and resilience.

For people such as Jenna and other SME owners, it can mean the difference between surviving and thriving.