Cross-border businesses going for growth to offset current economic headwinds
41% of global organisations believe that international business expansion is imperative to ease their current trading concerns.
That’s according to a new study released by global fintech-as-a-service partner Rapyd, which shows that a sizeable contingent of cross-border businesses are looking to double down on their growth ambitions as the best remedy for the economic headwinds facing them, despite mixed levels of business optimism.
Rapyd’s 2023 State of B2B Cross-Border Payments report shows that businesses are divided on how they view the year ahead. 43% expressed concern about the current state of business versus 57% that claimed not to be concerned. In the UK, business sentiment is even more polarised, with 49% of businesses expressing concern about the current conditions.
Half of global businesses cited inflation as their biggest worry, followed by increasing interest rates (46%) and market volatility (35%). Cross-border trading issues such as currency fluctuations (32%) and import/export challenges (30%) are also featured prominently in the list of key business concerns, with 35% of businesses calling for better fintech solutions to improve the transparency, speed and cost of payments.
Familiar payments challenges curb growth aspirations
Rapyd surveyed financial decision-makers in 715 medium-to-large cross-border businesses across seven global markets: Brazil, Canada, Germany, Mexico, Singapore, UK and US. According to respondents, speed, cost and efficiency continue to be the backbone of cross-border operations and expansion. Current cross-border payment shortcomings – specifically high transaction fees and payment delays – inhibit growth by eating into revenues, harming cash flow and making it harder for businesses to plan their finances.
The study found that 76% of businesses are burdened by excessive transaction fees of $10 or more on cross-border payments to suppliers, partners, distributors, employees and contractors, including 25% of businesses which reported typical cross-border transaction fees of $25-50, and 15% which claimed to be paying fees of $50+ dollars.
Similarly, more than two in five (42%) cross-border businesses paid between 0.25% to 1% in foreign exchange (FX) fees when carrying out cross-border transactions, with a further quarter of the businesses paying even higher FX fees of between 1%-3% or more.
And businesses aren’t faring any better when it comes to payments speed. 38% of respondents experienced delays of five days or more when sending or receiving cross-border payments to other businesses. In the UK, payment delays was the most commonly reported challenge when receiving cross-border payments, cited by one-third of businesses.
Globally, businesses recognise the need to overhaul legacy cross-border payment processes and see technology as essential to this transition. 35% of financial decision-makers believe that better fintech solutions will ease their current concerns, and more than 6 in 10 businesses (61%) have made payments systems digitisation a top priority, while another third have already automated their payments systems, although this figure drops to just 10% in the UK.
Capitalising on the UK’s green shoots
In recent weeks, the UK’s private sector has enjoyed a surprise return to growth, with business optimism also improving after the country managed to avoid entering recession in the final quarter of 2022. However, Rapyd’s report demonstrates the extent to which lingering fears abound amongst financial decision-makers in UK-based cross-border businesses.
Overall concern about the current state of business was higher in the UK (49% of respondents) than in G7 compatriots the US (34%), Germany (26%) and Canada (17%). UK businesses also polled higher than the study average for market volatility concerns (41%) and import/export challenges (35%), perhaps reflecting the country’s recent domestic economic turmoil, combined with ongoing trading difficulties caused by Brexit.
Notably, respondents also singled out improved cross-border payment terms as the factor most likely to ease their current business concerns. 41% of UK businesses called for improved payment terms to bolster the current state of business, compared to a study average of 33%, followed by faster settlements/payments (31%) and better access to working capital (29%).
Garðar Stefánsson, CEO of Rapyd Europe said: “Our report shows businesses all over the world battling hard against adversity. They are doing everything in their power to reach new markets and open up new revenue streams, but they’re constantly set back by the complexity and cost of trading in other countries – losing huge sums and vast amounts of time on cross-border transactions. The bigger their operations get, the more these costs rise. It’s an unacceptable situation at a time when so many advanced economies are struggling to grow.”
“Fintechs have a tremendous opportunity to help cross-border businesses with their expansion ambitions by providing faster and more cost-effective payment solutions, as well as creating innovative new approaches that simplify the way these systems operate. Ultimately, no business should have to take on the complexity of B2B payments by themselves when they’re going for growth – that’s why trusted fintech partners are critical. It’s time for fintech to step up to the plate and build bolder, better payments solutions that make cross-border trading seamless and straightforward.”
Rapyd’s State of Cross-Border Payments 2023 report is available here.