Making Cross-Border Transactions Smoother With APMs

There are plenty of benefits to expanding into overseas markets, but do you have the right payment infrastructure in place to support your plans?Making cross-border transactions smoother with APM-01


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In a highly connected world, commerce knows no borders. From all around the globe, businesses are reaching out to new markets and carving up a piece for themselves.

While plenty of opportunities are available, payment remains a significant problem for most merchants. Whether you're a brick-and-mortar business with overseas customers or an eCommerce store looking to access foreign markets, processing payments from overseas sources is surprisingly complicated.

So, with all that in mind, let's look at some of the difficulties merchants face nowadays and why alternative payment methods (APMs) are the way forward.

Challenges Posed By Cross-Border Transactions
1. High Costs

Cross-border transfers via traditional banks rely on multiple intermediaries to function, which incurs extra costs. These include forex and admin fees and regulatory charges, which can quickly reduce your profit margins.

For example, you have a Korean customer who intends to purchase a shipment of frozen durians from your company. But as you're Singapore-based, you source most of your product from Malaysia and Indonesia, which forces you to rely on overseas bank transfers.

At the same time, the same also applies to foreign customers looking to purchase your products. All of which reduces business revenue and increases expenditure.


2. Non-competitive FX rates

Another issue most business owners have with cross-border payments is the poor FX rates offered by financial institutions, as banks and financial institutions provide rates specially designed to maximise profit.

Naturally, you'll find yourself on the losing end whenever you perform overseas transactions. While there are ways to lock in currency exchange rates, the volatile nature of the forex market and the cost of options may put off some merchants.

There's also the fact that forex options are not 100% foolproof. While contracts can cover the risk of adverse forex conditions, there's always the possibility that the market may move in a direction unfavourable to the holder.

This would cause merchants to suffer a loss as they have already paid a premium to enter into the contract, thus making options impractical for smaller-scale businesses.


3. Long Waiting Periods

Besides incurring additional costs, cross-border payments tend to have longer processing times as various parties are usually involved at all transaction stages.

And when you factor in time zones and public holidays, it's easy to see why transactions get delayed. And in a time where funds can be transferred instantly between local banks or e-wallets, a waiting period of two to four working days is just unacceptable.

Such delays are disastrous for time-sensitive deals and can hurt a business's cash flow.


4. Security risks

Giving customers the confidence and peace of mind to proceed with their transactions is essential for forging new business relationships.

Unfortunately, cross-border payments are one area where cyberattacks are rampant, as banks and authorities can do little to recover any lost funds. Thus, it's easy to see why customers hesitate to make payments on a system they do not trust.

 

5. Lack of support for alternative payment methods

Overseas fund transfers have traditionally been the domain of B2B companies. But now, thanks to the rise of eCommerce and globalisation, more B2C businesses have found a use for these services. And this has given rise to what is known as cross-border eCommerce.

As consumers become more comfortable with online shopping, most find little difference between shopping online at a local online retailer and across the other side of the world.

While there are existing payment platforms that facilitate overseas transactions, most if not all require the usage of debit/credit cards, which may potentially alienate customers in unbanked communities.Making cross-border transactions smoother with APM-03

How APMs Open The Door For Cross-Border Transactions

As seen from the points above, current cross-border payment systems aren't suitable for a new generation of businesses looking to tap into overseas markets. This is why alternative payment methods (APMs) are uniquely positioned to disrupt the current status quo.

Let's take a look at how APMs can help facilitate better cross-border payments.

1. Localised payment systems

Southeast Asia is currently one of the world's largest eCommerce markets due to a combination of high smartphone penetration and rising internet connectivity.

But unfortunately, a significant portion of residents in SE Asia still lack access to financial services, which makes it difficult for them to participate in the eCommerce market.

Recognising this, eCommerce merchants in the region have begun accepting payments from e-wallets such as GrabPay, GoPay, and Touch n' Go, to name a few. Doing so allows individuals to shop online and make payments using their e-wallets.

2. Ease-of-use

Besides online shopping, APMs can facilitate smoother cross-border transactions by allowing visitors from foreign countries to access local cashless payment networks.

So, rather than having to rely on cash, tourists have the option to make use of e-wallets and other alternative payment methods. This is a significant advantage for the SE Asia region, where tourism is a major contributor to the local economy.

In fact, Malaysia, Indonesia, Thailand, the Philippines, and Singapore are all looking to connect their payment systems. All these will allow tourists to use local real-time payment systems such as DuitNow, BI-FAST, and PayNow by simply scanning a QR code with compatible payment apps.

For example, if you're visiting Yogyakarta, you'll only need to scan the BI-FAST QR code with your own payment app to complete the transaction. Any FX conversions are completed in-app with no fuss.

3. Lower costs

Cross-border transactions often incur various fees, which erode a merchant's profit margin.

As APMs do not require the involvement of third parties, this allows them to process transactions quicker for a lower price. These savings are then passed on to the merchant and their customers.

XanPay: The Answer to All Your Cross-Border Headaches
Quick to set up with minimal transaction fees and attractive FX rates, XanPay is the ultimate payments platform that bridges the gap between countries in Southeast Asia. With XanPay, you get to enjoy:Making cross-border transactions smoother with APM-02

For more information on XanPay and how we can help you take your business overseas, visit our website here.

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