January 22, 2019
Financial technology solutions that make it easier to do business globally.
Can you remember a time when you didn’t have email? Probably not. The introduction of this now-ubiquitous technology has made it fast and easy to communicate with people around the world.
E-commerce has similarly exploded worldwide and is expected to become the largest retail channel in the world by 2021, according to Euromonitor International1. E-commerce presents similar opportunities for businesses. A multi-lingual website can draw buyers to your business and demonstrate your desire to do business in other countries.
But after potential customers land on your website and find a product they’d like to purchase, they’re going to need to pay for it. Your challenge is to equip your website with a fast, secure and efficient way to receive payments from around the world. When you are the buyer, you need to be able to make payments with comparable speed and ease.
The good news is, there are multiple new and innovative products on the market that do just that. Let’s look at a few of those.
Payables. Let’s say you want to purchase a piece of equipment from a vendor in Germany and need to pay the invoice in Euros. For exchange rate information, you google a website that may – or may not – be transparent about the rates it is posting. Many important questions are often difficult – or impossible to answer, including:
- Are the rates live or static?
- Is there dollar value threshold that must be met to qualify for the quoted rates?
- Are there inter-bank rates – the rates banks use among themselves for larger transactions?
- Presuming you choose to use the exchange rate website to make the wire transfer, what is the process for tracking or tracing the wire should the receiver claim nonreceipt of funds?
These are just some of the issues you must address on international purchases, which is why many people prefer to have their banks to handle these transaction for them. It makes good business sense. By working with a bank you trust, you have one point of contact to both initiate the transaction and trace it if it is not delivered. And most banks, certainly ours, have online capabilities. They are also aware that customers have many options and want to be fair and transparent about how their exchange rates are set.
Receivables. To appear more “local” to buyers or to compete with “local” foreign competitors, you may want to quote your U.S. sales in a foreign currency. If you are comfortable quoting in Euros to your European customers, for example, your bank partner can provide its Standard Settlement Instructions (SSI) for the EUR account held at the bank’s Germany correspondent. When your bank is notified that funds are received in its account, the bank can convert them and credit your account in U.S. dollars as payment for that sale.
Or, let’s say you have a small accounting staff and don’t want an added step in your business process. In that case, you can partner with a fintech that can help you manage the process locally. Boston-based Flywire is a good example of one such partner. Its platform provides buyers localized language and customer service support. Two-thirds of Flywire employees, in fact, are located outside the U.S. to help ensure the buyer/sender of funds has a smooth and simple “local” experience. With a solution like this, the only change you must make to your billing process is to add a hyperlink to your invoice that directs buyers to Flywire’s local in-country portal. The fintech takes care of the rest, providing your buyer a good payment experience at a fair local exchange rate.
Distributed ledger technology (i.e., Blockchain). Blockchain is a peer-to-peer electronic payments system, or cryptocurrency, that allows you to make instant, anonymous transactions online. Because every single transaction made on the Blockchain network is recorded and distributed in a public record, everyone shares in holding a copy of the “distributed ledger.” This can make blockchain technology very secure, very fast and uber transparent.
Among the many innovations now taking place in this space, one standout is Visa’s B2B Connect pilot, which reduces much of the “noise” involved in sending global payments quickly and transparently.
Innovation in international online transactions is ongoing, and it can be difficult to stay abreast of the latest and greatest options. Sometimes it makes sense to partner with a fintech. Other times, it’s smarter to replace old technology with new to improve your customer experience. The challenge often involves finding balance in how much you want to automate, who you choose to automate with and, of course, how much you want to spend.
To navigate the options in this constantly evolving technology landscape, you may want to consult with your bankers, too. They are also innovating, working in their own IT labs to design, test and launch the next generation of customer solutions. Also talk to fintechs and other innovative companies to learn how they are doing old tasks in new ways.
Thanks to innovation, email changed how we communicate. And now, innovation will help you unlock your business’ international E-commerce potential. You can start small and make incremental change changes as you go. The bottom line: international business is becoming dependent on E-commerce and soon your business will, too.
- Forbes, E-commerce Set For Global Domination – But At Different Speeds, August 14, 2018, https://www.forbes.com/sites/michellegrant/2018/08/14/e-commerce-set-for-global-domination/#3f84606cbfaf.
- Why global payments are about to get easier.
- Trade Matters: What you should know about doing business internationally.