Digital technology is enabling more industries to expand outside of traditional borders to reach more customers and take advantage of new sales opportunities. However, some industries are still establishing the infrastructure they need to benefit from cross-border sales.
Business-to-business transactions are one such area with a lot of growth potential. But to realize the full benefits of selling internationally, B2B businesses need to address the challenges of cross-border payments to get the best ROI.
Why Are B2B Payments Going Cross-Border?
Like with other industries, this is an ongoing shift in how business is being conducted. It is projected that 95% of all purchases will be online by 2040, which makes selling internationally much easier. In fact, this comes with a projected $250 trillion value for all cross-border payments by 2027.
Much of this is driven by the adoption of new tech and software. The possibilities offered by blockchain technology and artificial intelligence allows businesses to automate more of their transactions, in addition to alleviating many of the complications that come with cross-border commerce.
Trends Reshaping Cross-Border Payments
The companies successfully expanding into new international markets understand the challenges and are taking specific steps to ensure their success. We’ve identified three trends from B2B sellers that are growing their cross-border payments:
- Accepting Additional Payment Methods: When we looked at customers who received invoices from B2B organizations, we found they’re increasingly using more modern payment types, specifically:
- 21% of payments are taken by credit card
- 12% of payments are by local bank transfer or ACH
- 13% of payments are by wire transfers
A majority of B2B sellers have recognized this evolution, as, according to a B2B Progressing Payments Report, 53% of them reportedly want to accept more electronic payment methods, which can include local payment methods such as digital wallets and virtual cards.
- Emulating a B2C Style for Transactions: While many B2B businesses are still being paid via legacy methods, B2B buyers are increasingly expecting a digital experience that mirrors the ease of B2C transactions. On average, 23% of B2B customers are required to pay in-person and 22% pay over the phone, compared to only 31% of customers who are able to pay online or via a mobile app. Those suppliers who want to compete for international business need to provide modern, convenient digital transactions through embedded payments or Payfac-as-a-Service capabilities.
- Employing Accounts Receivable (AR) Automation: Businesses are integrating AR automation for good reason, and those that rely on outdated, legacy and often manual technology are damaging their cash flow. According to the payments report, 29% of businesses were not able to process paper check payments because no one was in the office, and 39% were significantly delayed in processing check payments because of mail delivery. Those businesses that automate their AR process are better able to complete transactions, cross-border or otherwise.
To navigate the complex nature of cross-border payments, businesses must be willing to invest in the technology needed to overhaul their legacy systems and outdated payment methods. Of the B2B executives we surveyed, 95% agree their organization should be investing more in AR automation and digital payment technologies.
Future Outlook
Expanding into cross-border payments is more than just conducting business-as-usual with new technology. A majority of businesses, 68% by BlueSnap’s estimate, only process payments where they’re headquartered instead of through a local entity where their customers are located. These businesses are also likely to continue using payment processing services localized within their home country or rely upon only a few select banks to process their transactions.
Why is that a problem? Without local card acquiring, these businesses are less likely to successfully process cross-border payments. Of those companies surveyed for BlueSnap’s Cross-Border Digital Payments report, 40% had a payment authorization rate of just 70% or less. That’s more than lost revenue — it’s an inconvenience for buyers and an impediment to growth.
To succeed, B2B cross-border payments need to employ modern invoicing and billing solutions in combination with local card acquiring and support for local payments. Those businesses that ally with the right global payment partner and can efficiently provide these services will be the ones to successfully compete and grow.