Can you imagine a time when traveling across the ocean meant booking a long, slow journey by ship? It wasn’t until the first commercial transatlantic flight in 1939 that international travel became faster and more efficient. Today, sending money across borders has undergone a similar transformation — what once took days or even weeks can now be done in seconds. But just like those early flights, cross-border payments still hit some turbulence. As businesses expand their global operations, financial institutions must address these obstacles to provide efficient, reliable cross-border payment solutions.Based on recent findings from a report by Datos Insights, cross-border payments are emerging as a critical area of opportunity for community financial institutions (CFIs). The report draws from a comprehensive survey of over 1K employees from midsize and large businesses across North America and insights from industry experts. For institutions that offer cross-border payment services like foreign wires, understanding the current landscape and challenges is essential to staying competitive and supporting customers effectively.The Growing Importance of Cross-Border PaymentsCross-border payments have evolved from being a niche service to a core offering for businesses of all sizes. According to the Datos report, 97% of North American businesses consider cross-border payments to be important to their operations. This is no longer just a service for multinational corporations; mid-market businesses, in particular, are fueling a surge in demand. Nearly 80% of surveyed businesses reported an increase in cross-border transaction volumes, indicating that growth in this area is expected to continue.The report highlights mid-market businesses as a key driver of cross-border payment growth. Forty-nine percent of larger mid-market firms indicated a need to enter new international markets, surpassing the needs of both smaller mid-market and large organizations. CFIs that cater to this segment have a chance to capitalize on the increasing demand for efficient and cost-effective cross-border solutions.Challenges and Pain Points in Cross-Border PaymentsWhile the growth of cross-border payments is undeniable, the report underscores several challenges businesses face. These friction points include:
- Fees. High transaction costs remain a major concern.
- Security and Fraud Risks. Businesses are increasingly concerned about the safety of international transactions.
- Currency Conversion. Complex currency conversion is another area of difficulty.
- Settlement Delays. Slow settlement times create frustrations for companies managing global cash flows.
Addressing Cross-Border Payment Friction PointsTo effectively manage the friction points identified in cross-border payments, CFIs can implement strategic solutions that not only alleviate these pain points but also enhance their service offerings. By leveraging advanced technologies and strategic expertise, CFIs can optimize cross-border payment processes and build stronger relationships with their clients.One approach is to reduce fees through the use of automated systems and global payment networks, streamlining transaction processes to lower operational costs. Additionally, CFIs can enhance security measures by integrating AI-powered and real-time monitoring tools to detect and prevent fraud, ensuring compliance with international regulations like AML and KYC. For currency conversion challenges, CFIs have the opportunity to offer FX forward contracts and multi-currency accounts, providing clients with predictable and competitive exchange rates. Lastly, adopting real-time payment systems can significantly accelerate settlement times, allowing businesses to manage cash flows efficiently and with confidence.In meeting these critical business needs in a thoughtful way, CFIs can position themselves as reliable partners for businesses seeking efficient, secure, and cost-effective cross-border payment solutions.As cross-border payments continue to grow in both volume and importance, community banks and credit unions have an invaluable opportunity to serve the evolving needs of their customers. By addressing the friction points businesses face and embracing new payment technologies, CFIs can position themselves as trusted partners in the global marketplace. With mid-market businesses leading the charge in expanding internationally, now is the time for financial institutions to refine their cross-border payment offerings and stay competitive in an increasingly interconnected world.
