SUMMARY
With the ever-growing number of cross-border SMBs, the need to find seamless and efficient payment solutions has increased
The next level in fintech evolution would be in the B2B and cross border payments domain with ever-increasing demand
It is important for the business to take note and select the appropriate payment services provider effectively as per the needs of the business
Every vibrant economy across the world boasts of a strong ecosystem of small and medium businesses contributing significantly to the growth of the country. With an estimated over 42.5 Mn SMBs in India, SMBs form a crucial part of our economic engine driving our growth in the domestic and global markets. Covid-19 has impacted consumer demand for products and services significantly and SMBs have been forced to course-correct and look at their target markets differently. Acceleration of digitisation and increasing understanding of digital business methods has resulted in SMBs, from linen manufacturers of Karur to sports goods manufacturer in Meerut going digital and succeeding globally.
For example, India has the chance to tap the potential of global ecommerce growth and is estimated to become the second-largest ecommerce market by 2034. India’s ecommerce exports are estimated to be over $ 1 Bn already and growing fast.
With an ever-growing number of cross-border SMBs, the need to find seamless and efficient payment solutions has increased.
Indian fintech space has shown way evolution of new-age tech in consumer payments with the rise of wallet players and technologies like UPI. The next level in this evolution would be in the B2B and cross border payments domain with ever-increasing demand from Indian SMEs to a better and simplified digitized ecosystem.
Understanding Cross-Border Payment Needs For Your Digital Business
Let’s begin with the definition of cross-border payments. Cross-border payments are transactions where the payee and the transaction recipient are based in separate countries. The transactions can be between customers and merchants, enterprise and its vendors who are looking to transfer funds across territories. If you are an Indian business making products for global consumers or serving SMB and Enterprise across the world, looking to expand globally, it is pivotal to have the ability to accept payments in a fast and seamless way across all countries and in multiple currencies you are targeting.
There are various feature spokes in the cross-border payments wheel. Each one of them provide an independent benefit in the long chain of money transfers to the Indian exporter. There are several terms that are used almost interchangeably when describing online payments:
Payment Gateway
A service that helps a direct buyer purchase on your website using a checkout solution. To have a payment gateway a merchant can approach a Payment acquirer, a Payment processor, or a Payment Service provider. Each of them serves different sizes of customer volume and come with additional or custom functionalities. The challenge for a small business really is to be able to forecast his need and choose the best-suited payment gateway solution. It is a complex process when selection goes wrong it could lead to either high cost or a below-par customer experience.
Payment Service Or Payment System
Where a payment provider offers multiple types of payment gateways – with different features and pricing – each type is referred to as a payment service or payment system.
Merchant Account
When an online transaction is successfully completed, the funds are transferred from the purchaser’s account to your merchant account, a special kind of bank account used exclusively to hold funds received from credit and debit card transactions. To accept online payments, you usually need to set up a merchant account with your payment provider. Funds accumulating in your merchant account are transferred to your organization’s bank account on a regular basis.
How To Choose The Right Cross-Border Payment Solution?
It is important for the business to take note and select the appropriate payment services provider (PSP) effectively as per the needs of the business.
Reach
Make sure the PSP you choose service the set of markets and service the currency you want to transact in.
Business Efficiency Support
Recently, payment providers have started giving additional benefits like access to working capital, availability of foreign bank accounts for Indian SMEs, easy management of multiple stores in different geographies with features like Store Manager and ability to pay VAT directly through one’s cross border transactions. Services like these can also help in managing operational aspects of businesses and lowering double conversion feed more effectively.
Transaction Fees
PSPs’ cost models are variable. You should make sure that you are aligned with all fixed fees (including sign up fees) and variable fees (including FX conversion charges and cancellation fees) before selecting the right payment partner for your business. Also, the transaction fees also depend on the country of origin and the modes of payments being used by the customer. A merchant should understand the overall transaction fees in any cross-border transaction.
There may be different aspects of transaction fees that may be applied by different PSPs:
- Application fee
- Setup fee
- Monthly fee
- Per-transaction fee
- Statement fee
- Monthly minimums
- Non-qualified fees
- FX conversion commission
- Gateway fee
- Minimum term contracts that you cannot cancel without penalties
- Chargebacks
- Rolling reserves
Security
This is a critical aspect in your customer experience. Make sure your PSP meets Payment card Industry security standards (PCI DSS). This step would ensure your and your customer’s financial transactions are secure and safe.
Access to Export Documentation
The government of India provides benefits to Indian merchants on their export revenue. To access this benefit, it’s necessary for businesses to have relevant documentation like Foreign Inward remittance Certificate (FIRC). This process might be tedious for many merchants as they need to get these through bank partners after a long time and at expensive costs.
With abundant opportunities available globally, adding a reliable cross-border payments solution is an important step to succeed in a global world. This will enable our Indian SMBs to make in India for the world and succeed on a grand scale.
