Nearly three-quarters of the 700 respondents to the Travelex Global Business Payments Report, which was released in June, made and received international payments. That’s good news, of course.
At the same time, international payments can be difficult to complete. For starters, 81 percent of the survey participants said that payment patterns varied from one region of the world to the next. Because just about every country has its own payments systems and rules, standardization becomes difficult, says Adam Tiberi, senior vice president of global product management with Travelex. One-fourth of respondents said obtaining confirmation of payments and/or receipts was their greatest challenge when it came to international transactions, and 20 percent cited the lack of visibility into their cross-border payments and receipts.
While companies can use SWIFT wires for international payments, they’re not cheap. Each bank involved in the transaction takes a small cut; by the end, a $100,000 transaction could result in fees of $100 to $150, Tiberi estimates.
To be sure, some signs of progress can be seen. Europe, for instance, now has the IBAN, or International Bank Account Number, a standard numbering system developed to identify bank accounts from around the world, Investopedia writes. It was originally developed by banks in Europe to simplify transactions involving bank accounts from other countries. The IBAN number consists of a two-letter country code followed by two check digits and up to thirty alphanumeric characters known as the basic bank account number (BBAN). Currently, the IBAN is primarily used by banks in Europe, Tiberi says.
At the same time, a number of financial service providers are developing their own applications for international payments, Tiberi notes. The goal is “to make international payments as easy as ACH,” and less expensive than SWIFT, he says. What’s more, many of the applications allow payers to include documentation, such as purchase orders, with their payments. That way, both the payer and payee have a better understanding of just what a particular payment covers.
The upshot? While the international payments environment is slowly improving, “this is still an area where a lot of businesses have challenges,” Tiberi says.