B2B Cross-Border Payments Bring Fraud and Complexity

Jan 15, 2020

Revenues for global payments are soaring. It is projected that it could potentially become a $2 trillion industry by 2020. Cross-border revenues alone make up approximately $200 billion. It is also estimated that there are currently .7 international transactions per capita every year. This up from .5 back in 2014.

In 2018, B2B cross-border payments produced $125 billion in revenue. With the rise of B2B Cross-Border Payments you also see the rise of fraud. This is mostly due to fragmented processes within cross-border payments, leaving companies vulnerable to unnecessary risks.

Cross-border payments are complex. They involve multiple players, currencies, regulations, markets, systems, and risks. Furthermore, cross-border transactions can take several days to complete since as they are passed through intermediary banks. This can also mean fees added to the mix.

c also struggle with cross-border payments due to having to navigate convoluted governmental regulations. Compliance results in slower processing times which presents a great inconvenience to customers.

Fortunately, payment providers are addressing these pain points by creating solutions to guarantee seamless transactions.

Recent innovations in artificial intelligence (AI) and machine learning (ML) have come up with solutions without the slowdowns. Without having to depend on clunky human analysis, AI enables companies to process thousands of transactions per day, creating faster, stronger networks.

Other payment providers are utilizing blockchain and distributed ledger technology (DLT) to speed up the cross-border payment process.

Visa’s solution is a cross-border payments platform called Visa B2B Connect.  This platform processes payments with Visa’s partners in a single day, without it being routed out of the network. It also helps businesses by making payment status and detailed transaction information accessible.  This will greatly cut the time that banks spend managing cross-border transactions. The most important aspect is that it is a “permissioned network” where each participant is known and equipped with a unique digital identity registered on the network, thereby decreasing fraud.

Mastercard has taken the route of purchasing cross-border transaction providers to expand its payment networks to offer like solutions. A Canadian payments network called Interac is also investing in DLT and blockchain solutions.

A significant player in this space is Swift, which launched its “global payments innovation (gpi) initiative” back in 2017. Its focus was to create a “fast and frictionless” cross-border experience. This service has been adopted by 270 banks worldwide, enabling banks and corporates to quickly send and receive money internationally. This includes end-to-end tracking, lower fees, and greater transparency.

More innovations are set for 2020 by Swift. Besides global adoption, it also plans to launch a payment pre-validation service as well as financial institution transfers.

In Conclusion

Although B2B cross-border payments do pose a lot of challenges and complexities, many solutions and innovations are moving in the right direction to minimize and hopefully eradicate these issues and problems. The next challenge is to bring governments, corporations, and financial institutions (FI) to work together in the form of interoperability for a sustained solution.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

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Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

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EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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