In an increasingly digital world, it’s never been easier to build a borderless B2B business. But making the most of global opportunities requires getting to grips with B2B cross-border payments. Sending funds between countries creates new challenges that can derail your cash flow and add extra costs, so it’s important to plan ahead.
What are B2B cross-border payments and why do they matter?
As the name indicated, B2B cross-border payments are financial transactions between businesses located in different countries or economic zones. That might look like a wholesaler in Germany paying a manufacturer in China, or a UK-based SaaS provider collecting subscription fees from US-based clients.
Different regions have their own financial systems and institutions, meaning that sending funds from one to the other requires a more complex journey than domestic payments. This might mean sending funds via multiple banks, or working with a payment provider that has payment connections – known as payment rails – between your country and your customers’. But setting up your business to manage payments to and from multiple countries can provide major advantages, including:
- Easier market expansion: Enabling cross-border payments lets you tap into new markets. With global ecommerce spending on the rise, offering easy, flexible payment methods can unlock customers in new countries and grow your revenue internationally with borderless ecommerce payment processing
- Supply chain efficiency: Many companies import materials or parts from overseas suppliers. Having a reliable and cost-effective payment process helps maintain strong relationships, ensuring that you can secure the inventory you need without delays.
- Cash flow health: Inefficiencies or extra fees in cross-border transactions, from unexpected FX costs to slow settlement times, can leave you short of working capital. That can mean cutting into your profit margin, slower product development, or delayed deliveries.
How do B2B cross-border payments manage currency conversion?
For cross-border transactions, currency conversion is often the most obvious friction point, since payments don’t just traverse distance – they’re also changing currency.
- Intermediary costs: A single payment might traverse several correspondent banks. Each step can add extra fees or markups and slow the time before funds reach the recipient.
- Fluctuating FX rates: Exchange rates can shift by the hour. That can erode your expected revenue if a payment is delayed or if you lack a defined strategy (like buying currency in bulk or using forward contracts) to lock in favorable rates.
- Local regulations: In some markets, converting currency may be heavily regulated, driving up both paperwork and costs for your business.
To cope with these complexities, many businesses partner with fintech providers or payment network solutions that specialise in FX management, offering pre-agreed exchange rates, or multi-currency accounts to help avoid unpredictable swings.
How to navigate regulatory and compliance challenges in cross-border payments
International transactions must contend with varying regulatory frameworks. This includes Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements to data-protection laws in different regions. Noncompliance can trigger hefty penalties and damage your customer trust
Common strategies to reduce compliance headaches include:
- Due diligence: Run credit checks and verify customer identities before onboarding. In many industries (especially ones deemed ‘high risk’), thorough KYC processes are nonnegotiable.
- Technology-driven monitoring: Payment solutions equipped with automated fraud detection and real-time screening can flag suspicious transactions quickly, helping you intervene before funds are lost.
- Local experts or partnerships: Collaborating with payment providers who have on-the-ground compliance expertise in various countries can dramatically streamline your cross-border workflow.
What are the costs and fee structures of B2B cross-border payments?
Cross-border payment fees can be notoriously opaque. For example, your invoice total might not match what eventually arrives in your bank account if multiple intermediaries siphon off transaction costs. Typical charges include:
- Intermediary or correspondent bank fees: Additional charges by banks that facilitate the payment mid-route.
- Foreign exchange markups: Hidden spreads between the “real” exchange rate and what you’re actually charged.
- Service fees: Flat per-transaction costs from payment providers.
When you’re looking at payment providers, it pays to choose one that is as transparent as possible about costs. Even if per-transaction costs appear higher at first, a transparent approach often ends up cheaper once you factor in hidden spreads.
How can I minimise costs and manage currency risks in cross-border payments?
Keeping costs and risk down requires keeping an eye on exchange rates, timing your payments smartly and tracking the right data. By comparing multiple providers, holding funds in multi-currency accounts, and using tools like forward contracts or automated invoices, you can reduce the impact of volatile exchange rates and high transaction fees.
- Compare providers: Don’t settle on the first offer. Evaluate multiple payment partners for the best exchange rates and the smallest transaction fees.
- Use multi-currency accounts: Holding funds in different currencies can shield you from the whiplash of daily rate fluctuations. Withdraw when rates are favourable and hold when you need to.
- Forward contracts or hedging: If you deal with high-value or recurring transactions, forward contracts let you lock in rates, preventing budget issues.
- Automate invoicing & reminders: Late payments in B2B settings can spiral if no one is actively following up. Automation keeps you on top of what’s due and ensures you’re not forced into expensive, last-minute FX conversions.
Leveraging technology for efficient B2B cross-border payments
While cross-border payments were traditionally the domain of banks, new specialist payment providers have significantly shortened settlement times and boosted reliability:
- Real-time payments networks: Systems like Faster Payments in the UK or FedNow in the US help push near-instant transactions. More countries are adopting similar approaches, improving speed and transparency for cross-border commerce.
- APIs for integration: Application programming interfaces (APIs) let businesses embed international payments directly into their existing software to optimise their ecommerce payment processing, reducing manual steps and tracking everything in one place.
- B2B Buy-Now-Pay-Later: Providers such as iwocaPay can combine simple payments with value-add solutions like B2B Buy-Now-Pay-Later (B2B BNPL), helping businesses scale faster by offering flexible payment terms while reducing payment risk.
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How can I integrate technology-driven payment solutions with my existing systems?
You can integrate technology-driven payment solutions by finding software that fits with your current systems, testing with select partners, and training your team to prioritise low-cost, efficient methods, reducing manual errors and boosting visibility over your cash flow.
- Before signing on with a new provider, check that your enterprise resource planning (ERP), accounting platforms, or ecommerce store can accommodate the payment solution’s API or plug-in.
- Start small, selecting a limited group of overseas suppliers or customers for trial transactions. This allows you to monitor performance, like transaction speeds or fees, before implementing the solution across your entire base of partners.
- Even if your system is user-friendly, your finance team (and potentially key clients) should understand how to initiate invoices, process refunds, or handle currency conversions
- Once up and running, track payments to see how quickly they settle, note any fees incurred, and watch for error rates. Collecting this data makes it easier to fine-tune processes, reducing friction points and ensuring your payment solution evolves in line with your business’s changing needs.
Implementing robust security and fraud prevention measures for B2B cross-border payments
The complexity and multiple agents involved in cross-border B2B payments makes it easier for security risks to arise, especially when it comes to fraud. Payment fraud in cross-border business-to-business (B2B) transactions has risen by 18% recently, as larger transaction sizes make them prime targets for scammers.
Protecting your business needs to be a priority, not a nice to have. When you’re choosing how to manage your international payments, make sure to consider the following:
- End-to-end encryption: Ensuring payment data is encrypted at every step helps guard against interception and tampering.
- Multi-factor authentication: Requiring more than just a password (e.g., a one-time code or biometric scan) significantly reduces unauthorised access.
- Transaction monitoring: AI-driven tools can analyse patterns and flag inconsistencies in real time, which is particularly handy in high-volume environments with high volumes of trade receivables or trade payables.
What are the emerging trends in B2B cross-border payments?
Given the huge market for B2B cross-border payments – estimated at $31.6tn in 2024 – there are a range of new solutions being developed to make the flow of money worldwide safer and easier, including:
- AI for fraud detection & analytics: Machine learning models can be trained to identify suspicious behavior much faster than manual reviews. They also help plan and optimise payment routing to minimise delays or fees.
- Real-time interoperability: As more countries adopt instant-payment rails, businesses can route funds more directly. This reduces reliance on correspondent banking and shortens settlement times to hours or even minutes.
- Consolidated services: Many payment providers now offer integrated solutions, such as combining currency conversion, invoicing, and credit management into one platform. This “rebundling” of services saves businesses from juggling multiple tools, while making it easier to manage payments at scale.
B2B cross-border payments through Brexit and geopolitical uncertainties
While cross-border trade presents big opportunities, they’re more sensitive to geopolitical shifts than other forms of payments.
For example, post-Brexit, some UK firms still have to comply with new local EU rules or face potential additional tariffs on their goods. Likewise, the payment data used to manage payments between the UK and the EU is still subject to GDPR compliance.
Changes in international agreements can change customs duties, creating new, unexpected costs for businesses reliant on imports or export when tariffs are imposed.
Cross-border payments are also intimately connected with currency costs, so fluctuations in respective economies can trigger FX changes, impacting invoices and settlement times.
Integrating BNPL and trade credit solutions in B2B cross-border payments
One of the defining features of B2B payments is the trade credit, offering extended terms like “net 30” or “net 60”, to streamline large-volume purchasing. Traditional trade credit models were based on personal relationships and trusted partners, but offering this internationally adds extra hurdles that can slow down your expansion.
Technology-driven payment solutions like Buy Now, Pay Later (BNPL) provide new ways to sell on-credit across borders, helping your close high-value deals while still getting paid promptly.
Providers such as iwocaPay provide the funds to pay upfront to sellers while letting buyers service the cost over time, lowering default and fraud risks for sellers. By integrating BNPL or trade credit insurance, businesses can better predict monthly inflows, reducing the usual volatility of cross-border deals.
From a customer service perspective, cross-border BNPL terms opens the door to overseas customers who might not have the immediate capital on hand, but who can still become valuable customers.
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Reducing risk and friction in cross-border payments
If you’re looking to scale internationally, your payments need to work for your business, rather than being a source of unnecessary costs and risk.
iwocaPay helps you cut through the complexities of international transactions, offering a simple, secure, and streamlined way to get paid faster and protect your cash flow. By partnering with iwocaPay, you can transform your B2B cross-border payment process from a source of stress into a competitive advantage.
- Get paid upfront while offering flexible payment terms to your customers.
- Simplify multi-currency handling and protect yourself from volatile exchange rates.
- Reduce the burden of credit risk and late payments, as iwocaPay takes on the collection process.
- Provide your clients with an easy checkout experience that minimises friction and boosts loyalty.
