5 Major Cross Border Payment Challenges and Ways to Solve Them

5 Major Cross Border Payment Challenges and Ways to Solve Them
Anoosh Kotak22 December 2023

Several businesses attempting to tap into the global market face obstacles with cross-border payments such as high transaction fees, long processing times, and a lack of transparency. Despite the challenges, the potential is undeniably vast. 

A survey has projected that the value of all global payments will reach an astounding $250 trillion by 2027. 

But how can businesses navigate these major complexities of cross-border transactions and tap into this potential? The experts behind the architecture of Skydo have considered these challenges and built a platform that can make your life easier.

#Problem 1: High Transaction Fees

Let’s say you secured a deal with a US-based client. You’re excited about the new opportunity, completed the work, and now it’s time to raise that invoice. However, when the amount reaches your account, a major chunk of it is deducted from the fees associated with international transactions. 

Currency conversion, wire transfer, and other transaction fees can add up quickly. 

High Transaction Fees

They can even become a significant expense at the business’s bottom lines. Moreover, with a payment gateway, there are further charges, such as commission fees for each transaction. It’s like trying to fill up a leaky bucket - no matter how much money he pours in, Sanjay can’t seem to make it stay.

According to a survey, 68% of business owners potentially pay unnecessary high transaction fees.

Then, how can you avoid these high fees?

#Solution 1: A Flat Fee for every transaction

Payment method like Skydo simplifies and streamlines business payments with a flat fee structure for all transactions, eliminating unexpected fees and allowing for easy cost calculations and budgeting. This means you will pay the same price, regardless of the transaction size, which can help you save time and money. 

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#Problem 2: Unfavourable Exchange Rates

If you’re providing services to a US-based client, and the exchange rate between USD to INR is unfavourable, your client will have to pay more to buy the same goods or services from your business. This can make your services less competitive, and the US client may look for cheaper alternatives. 

But, let’s say, the client does pay the amount to you for the work done. You will need to negotiate with a financial institution for the best exchange rate despite the benchmark rate being higher.

#Solution 2: Zero Markup Rates

Skydo offers businesses competitive FX rates with zero margins for cross-border transactions, helping you save money and avoid hidden costs. Instead of negotiating with banks or FX providers, businesses can conveniently make transactions on the platform at favourable rates. This eliminates time-consuming negotiations and ensures efficient and cost-effective foreign exchange transactions.

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#Problem 3: Complex Regulatory Requirements

International payments involve a range of challenges related to tax and regulatory compliance. 

  • Accepting payment in local currency vs forex: If you accept payments in foreign currency, you will have to deal with fluctuations in exchange rates, which can significantly impact your revenue. On the other hand, accepting payments in local currency can be easier to manage but involves GST and additional costs for currency conversion.

  • FEMA compliance: FEMA governs foreign exchange transactions in India, and compliance with its regulations is crucial when receiving international payments. This involves obtaining approvals, meeting reporting requirements, and following repatriation guidelines for the funds.

  • Foreign Inward Remittance Certificate (FIRC): A Foreign Inward Remittance Certificate (FIRC) proves the payment was made in foreign currency. Unfortunately, obtaining the FIRA can be challenging for business owners as most payment channels do not automatically issue it. This may require repeated requests, causing delays and additional administrative work for the business.

Finding the right CA and utilising an effective payment channel can be helpful to avoid penalties or fines related to tax and to address these regulatory compliance challenges.

#Solution 3: Automatic Tax Compliance

Skydo automates FIRA generation, eliminating the need for manual document creation and management. Our platform ensures compliance with Indian tax laws and you can conveniently download all FIRAs with just one click from our dashboards, saving time and reducing the risk of errors.

Automates FIRA
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#Problem 4: Hidden Costs

Higher commission for quicker disbursement

Some payment channels charge businesses higher commission fees for expedited payment disbursement. This can be particularly challenging for small businesses that rely on timely cash flow to maintain operations. 

Diana Rajkumari, Director at Dimarkus, explains, “Finding the perfect balance between speed and cost-effectiveness has been a major challenge for us as we seek to receive payments from our global clients for a small company like ours. While traditional banks are slow and expensive, some fintech providers offer quicker transfers but at the cost of poor exchange rates.

Compare that to other companies such as Skydo provide a convenient way to transfer money to India from other countries. They offer flat transaction fees at competitive exchange rates and speedy transfers.”

Lack of transparency

Traditional payment gateways involve multiple intermediaries, which can cause transparency issues in foreign payments. Businesses often face unclear costs and difficulty tracking the process due to the involvement of various intermediaries. As a result, hidden costs may arise, negatively impacting the business's profits.

#Solution 4: Complete Transparency

Cross-border payments with Skydo will hit your bank account instantly. There are no commission fees or hidden charges in any way.

We help streamline payments by creating local bank accounts in various countries, making transfers quick and effortless. 

Here are the steps to streamline payments for businesses:

Steps to Streamline Payments
steps to streamline payments for businesses

#Problem 5:  Fragmented Payment Solutions

A survey found that 31% of organisations work with four or more payment processors to meet their cross-border needs. It's time-consuming, requires much manual effort, and can be error-prone. This process includes:

  • Manage multiple bank accounts: Businesses may need to open multiple bank accounts in different countries to facilitate payments in different currencies. This can be a time-consuming and costly process that requires significant resources to manage.

  • Payment fraud: Managing multiple payment solutions also requires businesses to be vigilant about the potential for payment fraud, which can be a significant risk when dealing with large sums of money and multiple payment channels.

  • Integration with accounting systems: Payments made through different platforms must be integrated into accounting systems to ensure accurate financial reporting. This can be a difficult process when dealing with multiple payment solutions.

#Solution 5: Single Source of Truth for All Your Global Payments

Skydo offers a real-time dashboard view to simplify foreign payment processes. This one-stop solution makes it easy to track payments and access transaction histories for each transaction. This eliminates tedious and time-consuming reconciliation between invoices and payments.

real-time dashboard view to simplify foreign payment processes

In a Nutshell

Working with global clients can be rewarding if a business owner is aware of the challenges of global payments. However, these challenges can be overcome with the right tools and solutions, like Skydo.

With Skydo, you can enjoy various features that streamline your payment experience, including instant payment processing, multi-currency support, and real-time payment tracking. And with its robust security measures, you can rest assured that your transactions are protected at every step.

Moreover, you can save money and lead to a smoother and more successful global business experience. 

Get in touch with our expert panel to discover more about Skydo and how it can assist your organisation in overcoming international payment difficulties!

Frequently Asked Questions

Q1. What is cross-border payment?

Ans: Cross-border payment refers to financial transactions involving parties from different countries, often requiring the transfer of money or assets across international borders.

Q2. What are the risks associated with cross-border transactions?

Ans: Risks associated with cross-border transactions include currency exchange rate fluctuations, regulatory compliance challenges, and the potential for delays or errors in payment processing.

Q3. Why do cross-border payments fail?

Ans: Cross-border payments may fail due to issues such as technical glitches, incorrect recipient information, regulatory restrictions, or insufficient funds in the sender's account.

Q4. What is a cross-border payment fee?

Ans: A cross-border payment fee is a charge imposed by financial institutions or payment service providers for facilitating the transfer of funds between individuals or businesses across international borders.

Save 50% on every international transfer
Receive from 150+ countries
Get global accounts
Zero forex margin
About the author
Anoosh Kotak
“The 0 to 1 journey filled with interesting problem solving & learning experiences.”Sports, Travel & Binge-watching
Save 50% on every international transfer