Strategies for international remittance providers to reduce remittance costs

 In the digital financial industry, cross-border payments are among the fastest-growing markets. In the year 2023, global remittance transactions were valued at around $840 billion. It reflects the growth and pace of this industry.

 

As we are observing tremendous growth in the market of cross-border payments, international remittance providers are also constantly looking for cost-effective solutions for reducing remittance costs. If they can get cost-effective solutions, they will be able to provide affordable services to their customers.

 

A cost-effective strategy can resolve major cross-border issues and help your business get a competitive edge in this industry. Thus, in this article, we will go through the significant challenges in international remittances, how a cross-border remittance solution can elevate your business, and much more.

 

Significant Challenges in the International Remittance Industry

Businesses with international operations face multiple challenges when it comes to cross-border payments. These significant challenges will not just impact the growth but can also reduce the customer base. 

Here are the critical challenges to overcome: 

High Transaction Fees

The involvement of hefty fees in a cross-border transaction makes it challenging to send money abroad. The involvement of intermediaries like banks, PSPs, Compliance, SWIFT, etc., increases the costs. There will be a significant drop in the profit margins due to these associated costs. The high fees of forex, wire transfer, and commission make things even worse. 

Unclear FX Rates and Markups

With cross-border transactions, sizeable foreign exchange markups and spreads is a common thing. But the actual fees of exchange and fees charged don’t reflect due to complex fee structures. This ambiguity creates difficulty in determining the exact transaction costs.

Slow Processing Times and Manual Processes

It generally takes 3-5 days for cross-border payments in settlement. This extended period is primarily due to legacy systems, batch processing, and manual reviews. If any delays hamper cash flow and operations then it will further increase the time. 

Limited Control and Visibility

In the international remittance transfer, there is a lack of visibility and control at the business end over the entire transaction lifecycle. The business doesn’t have access to overcheck payment status as it passes through multiple intermediary banks. They can’t even check the exact fees charged at each stage.

 

Thus, it would always be challenging to pinpoint where the significant delays are, and you can’t even fix the arising issues.

Compliance Risks 

The regulatory requirements for cross-border money transfers are complex. There is a risk of non-compliance with KYC, AML, and sanctions screening requirements in different jurisdictions. Violations may result in significant fines or payment suspensions.

 

Strategies to Reduce Remittance Costs

A major and the most effective strategy for reducing remittance costs is to utilize a cross-border payment solution that will elevate your business while keeping your customers delighted. 

It will reduce the transaction fees and FX fees and enhance cash flow & liquidity management. It will also offer operational efficiencies and productivity gains with high security, compliance, and risk management.

 

Here are the key features or strategies to look after in an international payment solution:

Competitive Exchange Rates and Low Fees

An advanced international payment solution should offer highly competitive exchange rates to the customer and maximize the value of their currency conversions. Also, the transactional fee shouldn’t be too high to reduce accounts receivable significantly. 

Top Compliance and Data Security

Compliance and Data security should be the top priority due to the money flow from one country to another. The payment solution should ensure complete compliance and security at all costs.

Easy Onboarding and Navigation

An effective and efficient international payment solution should offer an API-driven onboarding process to minimize the time and effort required to integrate into the existing digital payment solutions. 

Advanced Reporting and Tracking

The international payment provider must have advanced reporting and analytics solutions to give in-depth insights into every transaction and customer trends and patterns.

Fast Processing Times

Last but not least, the transactions must be completed within days, if not hours, instead of weeks like traditional transfers.

 

Wrapping Up

A robust cross-border payment platform will pace up the process of cross-border payments within minimum costs. We provide a reliable and secure cross-border remittance solution for businesses. Let us know your requirements.