Cross-border Payment Solutions with Fincra
According to Research, statistics show that most of the cross-border payments made in and to Nigeria have been a struggle and far from perfect. In its most basic form, they are inefficient in terms of cost and time. Despite its inefficiency, it still plays a huge role in the Nigerian economy, as it is the second largest source of foreign exchange behind Oil.
Having established how much of a role which cross-border payments play in the growth of businesses in Nigeria, and its economy, Fincra has been introduced to provide Cross-Border payment solutions that ensure optimal efficiency in cross-border transactions, payments, processing, and delivery in a much seamless and faster manner.
Before discussing in detail what Fincra brings to the table when it comes to cross-border payments in Nigeria, let’s take a deep dive into what cross-border payments is all about.
What is Cross-Border Payments?
To put it simple, Cross-border payments are transactions where the payee and the transaction recipient have business or are merely located in separate countries. These types of transactions can involve individuals (between family and friends), entrepreneurs, business owners, companies or banking institutions who are looking to transfer funds to another country.
While cross-border payments are mostly rampant in the business sectors, it is equally important for individuals as well. For merchants, entrepreneurs, sole proprietors that practice e-commerce and international operations, it is vital that they are able to accept payments across all countries that they are targeting.
Types of Cross-Border Payments
The development of technology and the diverse innovative ideas integrated by different companies in products has resulted in the presence of numerous cross-border payment methods across the world. When customers who are located overseas need to make payments, the customer chooses from the set of provided payment methods to execute and complete a transaction.
This stresses the need for businesses to integrate an international payment platform which supports diverse payment options suitable for different formats, as well as currencies. Types of Cross-border payment methods include:
- International Bank Transfers
To execute an international bank transfer, customers make use of their credit cards. This is one of the most popular and easiest payment methods that is within the reach of anyone. To make these sorts of payments, all customers need to do is to provide accurate details of their credit cards and transaction Pin. Once this is done, their transaction will be processed and completed in a matter of minutes.
While the process may seem to be so simple on the surface, it is much more complex. As transaction details are provided, the credit card company communicates with both the payer and the recipient’s banks before the transaction is completed and funds converted into a foreign currency. These types of transfers requires an additional fee for processing depending on the banks, currency, and so on.
- Prepaid Debit Cards
The prepaid debit cards are a bit similar to international bank transfers in that it is also fast and hassle-free. The funds required in the transaction are simply deducted from the payer’s account and moved into the recipient’s account. Transactions through the prepaid debit cards also involve a transaction fee where both the layer and the recipient are charged for the transaction executed.
eWallet is a digital wallet that executes international payments through digital apps including PayPal, Apple Pay, Google Pay, and so on. Though this payment method have been available for quite a while, its adoption is just picking up momentum in recent times. This is largely due to its efficiency and ease of use.
An eWallet like PayPal ensures your customers make cross-border payments with the click of a button from wherever they are. As easy as this payment method is, it comes at a price. High transaction fees and delays in payment delivery are usually the order of the day using this type of payment method.
Challenges of Cross-Border Payments in Nigeria
Cross-border payments are usually less efficient compared to local payments in terms of cost, speed, access and transparency. It is typically more difficult to make a payment from one country to another compared to making a similar payment within the same country. In some instances, a cross-border payment can take several days and can cost up to 10 times more than a domestic payment.
Enhancing cross-border payments was set as a priority for Fincra from the 2021 business year and beyond. This work included identifying the challenges associated with cross-border payments that arise from a long list of issues in existing processes and developing a set of innovative solutions to solve each one.
Key issues facing Cross-Border payments in Nigeria includes Fragmented and truncated data formats which occurs when Payments are made by messages sent between financial institutions to update the accounts of the sender and recipient. These payment messages need to contain sufficient information to confirm the identity of parties to the payment and confirm the legitimacy of the payment. Data standards and formats vary significantly across jurisdictions, systems and message networks.
Complex processing of compliance checks which results from Poor implementation of regulations of penalties and financial crime may mean a particular transaction may need to be reassessed on numerous occasions to avoid engaging in illicit finance. Financial institutions can resort to utilizing a variety of sources for conducting their checks which can lead to payments being incorrectly flagged. This makes compliance checks more costly to design, hampers automation and leads to delays or the rejection of payments.
High funding costs are incurred in cases where banks are required to provide funding in advance, often across multiple currencies, or to have access to foreign currency markets. This takes the banks to a position of risk where they will need to put aside capital to cover.
Also, Most banks do not have relationships with other banks in all countries. This is why banks go through other banks which they have established relationships to execute transactions. However, this results in longer transaction chains, which in turn increases cost and delays, creating additional funding needs, repeated validation checks and the potential for data to get corrupt before transaction is complete.
Benefits of Cross-Border Payments
Cross-Border payments allow Tracking and confirmation which provide a different level of transparency and certainty in cross-border payments. End-to-end tracking unlocks full visibility across the correspondent network. This means you can help your customers identify delayed payments within minutes and, crucially, help them understand why they may have been held up. As a result, customer experience is highly improved.
Efficiency of operation is improved through real-time tracking which allows you to identify where a payment is in the chain, and pinpoint any potential hold ups. This greatly reduces the time required to investigate and respond to enquiries from your customers or other banks in the payments chain. With less time spent on investigations, you can focus on delivering value-added services to your customers, reduce operational costs and improve efficiency.
And lastly, it allows you offer new services. The availability of real-time payment data is critical to payment tracking and confirmation. Making effective use of such data enables banks to innovate in new ways, either by serving new products to customers through existing online banking portals, or by leveraging the use of technologies.
Receiving Cross-Border Payments – Tips for choosing a Payment Platform
Having the right payment platform aboard your business plays a key role in driving its growth. As an entrepreneur or business owner, it is critical to pin down efficient ways to accept payment from your customers who are based in other countries, either across Africa, Europe, America, and other continents around the world. Here are a few tips that will help you in choosing the perfect cross-border payment solution for your business.
- Choosing popular regional payment methods
We cannot stress how important it is to go for a regional payment method which is most popular and well known in countries around the world. Business with the mindset to expand into the international markets need to establish their customer preferences when it comes to payment methods. Do not forget that customers in your target market have a huge influence on how you model your business, in order to make sales faster.
As such, you should integrate payment methods that the majority of your target customers prefer. Say for example, customers in Europe mostly make use of payment cards such as Visa and Mastercard, while customers in America are more familiar with either the American express or Discover.
Note however, that while many opt for payment with card, others opt for options like bank transfers or digital wallets. Whatever the case may be, you must consider choosing a payment gateway that is effective enough to take care of the preferred payment methods of your customers. This helps customers have a connected feeling towards your business.
- Knowing your target market
One good way to make sure you’re setting up your business for a successful expansion is to work with a local partner in the markets you’re targeting. This can help with localising the payment options, and understanding any customer preferences in the region. It’s also a smart way to make sure you’re on top of any financial controls, fees or regulations you need to know about when working in a new country.
- Regional language preferences
After choosing the ideal payment gateway which your target market and customers are accustomed to, ensure that information for customers such as terms and conditions and your business website are available in all the languages of your target customers. Giving out information about your business in customer’s languages create a level of trust and credibility, allowing customers understand ways to make payments properly.
Steps to Sending Cross-Border Payments
Both domestic and international payment processing involves seven steps. With cross-border payments, additional factors must be considered.
When sourcing globally, you will find an international supplier you want to purchase from. If you’re buying online, you’ll be directed to the payee’s checkout page to make your payment. If you’re buying over the phone, a sales representative will conduct the checkout process. Either way, you’ll be presented with payment options.
Ideally, if you’re buying online, the checkout page will offer a localized experience, meaning it features your native language. The payee uses your URL to determine which language to present the checkout page in and will hopefully offer local payment methods that you are familiar with.
- Routing and Processing
Once you enter your payment information, it will be sent via an encrypted gateway to obtain authorization to deduct the funds from your account. Here’s the catch: If you are using a global payments platform that is connected to only one bank, the transaction may be flagged. Using a platform that is connected with multiple banks around the globe improves the chances of the payment being processed the first time around.
Whether you’re paying publishers or setting up a new supply chain, you want to ensure each payment goes through without error. A global payments platform can automate the payment process for you, regardless if it’s a one-time or recurring transaction.
- Payment Approval or Denial
Your payment will be approved or declined. Verification takes place to ensure you have sufficient funds in your account, and if necessary, a currency conversion will take place. This applies only if you are sending USD to an account that accepts a different currency and the payee has requested a different currency.
Hopefully, the cross-border payment is using banks that support international payments. If so, the transaction is more likely to be approved. A global payments platform excels in intelligently routing the payment through a bank that is most likely to approve the transaction.
- Confirmation (Approval or Denial) and Fulfillment
You will receive confirmation that the transaction has been approved or declined. If declined, you’ll receive a return code outlining why it wasn’t processed. If approved, your order then goes into the fulfillment.
At this point, depending on the type of cross-border payment you’ve used, there’s a good chance the funds will still appear in your account and not in the payee’s. A Global Automated Clearing House (ACH) payment takes anywhere from two to five days to reconcile.
You will receive a reconciliation report from each bank that you work with. This can be extremely confusing and is an inefficient way to keep track of your cross-border payments. With a global payments platform, you can receive a consolidated reconciliation report showing all payouts through all banks and which transactions have been reconciled, as well as which ones have not.
Anna Barnett of PayStream Advisors served as the lead analyst on the research study mentioned earlier. She says that, in order to perform cross-border payments correctly, businesses must have their AP department integrate multiple extra steps and controls into their cross-border payment management strategy.
An example of an extra step would be to implement a practice that validates the accuracy of payment data. And with more than 26,000 global payment rules impacting cross-border payments, using a global payment platform that checks payments against these rules is of the utmost importance.
Anna goes on to discuss how international payments are often made via multiple payment rails, making them much more complex than domestic-only reconciliation. Having a single platform to work from streamlines the global payable process.
Any business that wants to sell or acquire products and services on a global basis should integrate cross-border payments into its AP practices. Not every payment gateway can process international payments, making it crucial to use one that can. More so, using one that has extensive knowledge of navigating the cross-border payment ecosystem can help make your operations as efficient as possible.
B2B Cross-Border Payments
B2B cross-border payments is simply the transactions between two businesses which are situated in different countries. The largest chunk of Cross-Border Payments is the B2B cross-border payments. It is also the most valuable aspect of cross-border payments, as international businesses execute transactions between each other. This usually serves as the basis and a driver for the economy of different industries and countries which they are situated.
One popular model which most businesses around the world operates on is access to quality for reduced price which can give them a competitive advantage over others operating within the same market. Numerous options are at the disposal of businesses which require the services of a B2B cross-border payment. Since this market is still growing with a huge future potential, businesses can explore B2B cross-border solutions that are cost-effective and offer more to their businesses.
Some of the few B2B cross-border payment solutions are as follows:
One of the biggest B2B cross-border payments solutions today is the SWIFT payment. Through this platform, businesses across the world can execute transactions and complete them with relative ease. Customers should understand that SWIFT payments is not just restricted to B2B payments, but also regular payments in traditional banking.
The downside of B2B SWIFT payments is that similar issues encountered by local customers in traditional payments are also present in large scale payments like B2B. Problems such as reduced transaction speeds and high transaction fees are usually encountered in this method. This is a significant Deterrent for many businesses whose profits and cash flows will likely be affected by these key issues. Additionally, it is usually unknown to both the payee and the recipient the fees which will be charged before the transaction is completed. These issues make SWIFT payment method quite a stretch for the seamless operations of business.
As already mentioned earlier in this article, PayPal is an international payment method for B2B cross-border payments as well. The platform has an organized portfolio which contains products such as International transfers, Invoices (Sending and settling) and so on. Despite its impressive products, PayPal also charge huge fees for its B2B cross-border payment. As a popular payment gateway around the world, businesses usually find these payment gateways as a big issue which usually stem from the complexity of fees charged. It is definitely not a suitable option for businesses that wish to adopt PayPal for the longer run.
Fincra – B2B Cross-border Payment Solution
Having acknowledged the fact that businesses which aspire to grow to projected levels need efficient B2B cross-border payment solutions, Fincra was set up to become the ideal gateway in Africa, either for B2B or regular cross-border payments. With Fincra, Businesses in different countries can make digital payments in Africa.
Through the innovative solutions offered by Fincra, businesses in Nigeria can incorporate cross-border payments and B2B into their operations. The products offered by Fincra helps businesses eliminate complexities and costs related to international payments. The relative transparency which the company uphold creates a huge difference in the quality of services provided by the payment gateway. Remittances can easily be sent or received, depending on the different products and parameters involved in the transaction between businesses or consumers. Additionally, Fincra eliminate the need for prefunding and cut operational cost from unstable and unfair exchange rates.
Products Offered by Fincra
Fincra offers a series of products to businesses, as well as consumers across the African space. Each of these products are well tailored to satisfy the numerous business needs which most have struggle with for quite a long time. Through these products, businesses can provide good value for their products, cut down on operating costs, attain growth projections within speculated time, and most importantly gain a competitive advantage in the market which they operate.
Cross-border remittances and domestic payments to individuals and businesses in NGN, UK, EU, and other African countries through our merchant portal.
Virtual bank accounts in Euro (EUR), British pound (GBP) and Nigerian Naira (NGN) for payments and collections whether businesses operate within Africa, Europe/UK or not.
Full suite of Fincra’s products offered via API.
The operation of Fincra within the African space to the rest of the world is a already a movement in the realization of its vision to create a world, where movement of money is instant, and as easy as sending a text message. Business who want to enjoy this vision, as well as the vast benefits that comes with using Fincra should simply sign up and integrate the platform into their business portfolio today.