International pay's complicated digital migration has gotten much harder
Cross-border payments have always been a serious stumbling block in international commerce. Managing foreign currency risks, meeting verification requirements, and even collecting basic information all become much more difficult when paying globally compared to domestically. More than just an annoyance, inefficient cross-border payments hemorrhage revenue and put an anchor on growth.
According to our research, 73% of U.S. companies pay internationally, meaning we must be realistic about these challenges. Most of these companies see globalization as an opportunity (or at least an obligation), yet many fail to account for cross-border payment problems along the way.
Those issues can manifest themselves as unexpected costs, fraud and security risks, lengthy delays, and widespread confusion, all of which can translate into serious business setbacks.
These problems are present even in the best of times. In the worst of times — like in the middle of an unprecedented pandemic — they’re far worse.
Significant amounts of consumer activity have shifted online since the COVID-19 outbreak. In a bid to avoid stores, people purchase more through e-commerce, including products they’ve traditionally relied on brick-and-mortar retail to supply. Let’s put the sudden swing from physical to digital retail into perspective: Experts at eMarketer project brick-and-mortar sales will drop by 14% this year, while e-commerce sales will jump by 18%.
This comes as good news for any company that sells online, but managing cross-border payments throughout could complicate the process. As the scale of payments increases during (and likely after) the pandemic, slow or broken processes will alienate customers and subtract from profits. Companies can capitalize on this unique moment only if they handle cross-border payments correctly.
Considering there are an estimated 26,000 global payment rules in effect and companies spend a significant amount remediating failed transactions each year, that’s an uphill battle. It’s not impossible, however. Managing complex global payments successfully means implementing the right systems and processes that scale as a company grows. This requires fast, accurate mass payments to suppliers around the world with minimal effort required by accounts payable teams.
Toward that goal, payers must eliminate manual processes wherever possible. We’ve found that factors such as self-service onboarding, automated communications, and a unified payments processing interface can eliminate up to 80% of the manual payments workload while reducing errors and fraud risk along the way.
Companies should also be able to send payments to any country, in any currency, and through the most channels possible: U.S. and global automated clearing houses, wire transfer, PayPal, prepaid debit, and paper check. Flexible payment options forge stronger relationships with suppliers and customers while, again, discouraging fraud. Putting comprehensive financial controls in place — ensuring invoices are approved by the right signatories and payment execution is signed off by key executives — further minimizes fraud risk.
Finally, make tax compliance effortless by systematically collecting W-9s, W-8 series, or VAT ID forms. Similarly, you should produce submission-ready 1099 and 1042-S reports. A proactive approach saves time later and helps insulate organizations from expensive tax issues.
These steps would have been important regardless of COVID-19. However, as more of the economy moves online rapidly, proportional amounts of payments start to move across borders. Some companies accept this as a necessary hurdle, and others consider it a challenge to overcome. It’s no surprise who’s faring well right now.