Doing business across borders — whether physically or digitally — is becoming increasingly important for small businesses. The majority (91%) of U.S. and European small business owners feel cross-border commerce is a moderate to high priority, with 48% saying it’s critical to keep up with the competition.

Essential International Payment Solutions

Of course, businesses expanding overseas require international banking support. This means community banks need to be able to offer their small business customers guidance, technological capabilities, and certain key cross-border services.

• International wire transfers or payments, also known as foreign wire transfers, form the backbone of cross-border transactions. Being able to help your customers electronically transfer funds to different countries around the world quickly and securely is essential to supporting them in any international business efforts, particularly for those dealing in e-commerce.
• Foreign exchange forward contracts can provide your small business customers with protection against the risk of fluctuating exchange rates while providing your institution with additional fee income. By offering this service, customers can lock in exchange rates at a future date when buying or selling currency. Aside from helping them to manage risk, these contracts can help small businesses plan for future transactions with foreign suppliers and customers.
• Letters of credit, through which your institution guarantees that a supplier will receive payment from your business customer for the correct amount and on time, are particularly important for international trading. They can provide greater security and trust for both buyers and sellers.
• By offering foreign check clearing, you can help businesses easily clear U.S. dollar and foreign currency checks on a cash letter or clean collection basis, making it easier for them to clear incoming international payments.
• Currency exchange services are useful for those customers that need to travel abroad for business, as they may want to have some local cash in hand.

Staying Ahead of the Competition

With many fintechs, neobanks and other financial institutions offering increasingly seamless cross-border payments solutions, banks need to ensure they’re exceeding their customers’ expectations in this area. If not, there’s a chance they’ll move to a competitor who offers the services you’re lacking.

According to a 2022 Mastercard report based on a survey of over 3,074 small businesses, there are several ways in which institutions can ensure their cross-border payment solutions support their customers’ needs:

• Enhanced transparency about your fees and process, how much transfers will cost and the exact amount that will be received. A shocking 39% of small businesses surveyed reported having no transparency about fees for foreign payments.
• Security measures, as many small businesses worry about fraud when it comes to cross-border transactions, knowing that their financial information is secure is essential.
• Reduced costs, such as lower transfer fees and/or better exchange rates compared to other providers.
• Ongoing communication, so that businesses can track the status of their payments in real-time and know when money has been safely received. Initiatives such as SWIFT gpi can allow a bank to offer their business customer more visibility regarding a payment’s status.
• Efficiency and reliability to ensure funds are transferred quickly, and without hassles.

Offering cross-border payment facilities — whether in-house or through a correspondent bank — should enable community banks to support their small business customers to expand internationally, grow their e-commerce business and work with suppliers around the world. Providing secure, efficient, reliable, and transparent services can help deepen long-term customer relationships, attract new business customers, and increase an institution’s fee income.

If you’d like to offer international services to your small business customers, PCBB provides a full suite of international services that includes all those listed above, and even more payment options to help your small business customers expand their markets outside the U.S. To ensure our customers remain competitive, we make investments to keep up to date with industry and technology advancements, like FedNow and SWIFT gpi.

To continue this discussion, or for more information, please contact Jay Kenney.