Blockchain can cure cross-border's scalability problem
It should be simple to initiate international payments right from your accounting system using the same automated workflow as you use for domestic payments, without manual effort.
Many banks say you can send wires internationally for free. But banks pay fees to other banks in this process, and they’re going to make money on the transaction.
There is potential for blockchain technology to transform the market for international payments, and this is one of the reasons you see so many banks investing in it. Banks don’t want to lose out, and they’re moving as fast as they can to keep up with fintechs.
But, I think we’re still three to five years out from a robust, complete blockchain solution for international payments, and that’s not helpful if you’re trying to scale your business globally right now. Fortunately, alternative fintech solutions exist to help companies make scalable international payments now, freeing SMEs from at least one obstacle to achieving global ambitions.
If it’s not from the transaction fee, it’s going to be from the currency translation rate (foreign exchange rate), which is harder for the customer to track. If you can't see the currency translation rate before you send the money, this is a good indication that you might not have the best rate. Look for a provider who is transparent with all fees pre-transaction.
Even with automation, payment errors are inevitable. Watch your payment as it travels. If your bank isn't right on top of the mistake, they will charge for things like investigating the error—and that’s absurd. Look for a provider that supports the payment on the back end. Review the visibility into the progress of the payment. Ask how fast they react to problems. Do they charge extra for support services?
Banks have enjoyed the lion's share of cross-border payment business for some time, and as a result, it’s very opaque market. Manual payment initiation and data entry, hidden fees and lack of support aren’t such a big deal if you’re only paying a handful of vendors internationally. But once making hundreds or even thousands of payments, it reveals a huge pain point.
It’s not just the direct costs either. Companies report that cross-border payments account for just 20% of payment volume but typically take 80% of accounts payable's time. That's simply not scalable. You can’t just keep throwing people at this problem.