How innovation in technology can speed up cross-border payments

Cross-border payments can be complex and slow, leading to disruption in supply chains

Laurent Descout looks at how innovation in technology can help businesses tackle delays and make payments simpler and quicker.

Supply chain disruption is rife and could cost European economies up to €920 billion in GDP by 2023. The Covid-19 pandemic and the current geopolitical situation have only compounded existing issues within supply chains such as lengthy cross border payment cycles.

Inventory days are a key factor when looking at supply chain disruption. When the shipment of goods is delayed, the number of inventory days – the time each item or stock is in the warehouse – increases.

Reducing inventory days should be a priority for businesses – but external factors such as rising interest rates and funding costs have amplified the risks and the urgency to react. In today’s volatile financial market, the more inventory days, the more costs businesses are likely to encounter on their goods.

Factors such as manufacturing and production have a major influence on supply chain timescales but so too do cross-border payment cycles. The problem is that traditional approaches to cross-border payments are complex, long, and expensive, adding to the number of inventory days. This means seeking a solution to slow payments through technology is essential for CTOs working with treasury teams.

Why are the cross-border payments so long?

It’s a drawn-out process for treasury teams working with the traditional banking system. Opening an international bank account is a difficult, long, and painful process – and the transactions themselves can add further days. Because businesses need to collect monies from across the world, they end up having different accounts for each country or currency, which adds complexity and further delays to transactions.

If a business needs to onboard a supplier in a different market, it can take weeks to get the infrastructure in place. Businesses are also losing out on cost, with cross-border payments, many banks don’t just charge the exchange rate and the FX margin; they also inflate the overall price.

Worst of all, many banks offer limited and incomplete payment information, making it difficult to reconcile payments, delaying the shipment of goods. All of which has a detrimental impact on the smooth running of supply chains.

If a business’ average payment cycle is two weeks and it can cut that by two days, it can save 50 days over just 25 payments. That could equate to significant savings on the cost of goods.

At a time when supply chain disruptions are rife, agility and speed is key, neither of which are offered through traditional banking partners. This means it is vital for CTOs to work with their CFO colleagues and look for new approaches in their cross-border payment practices to reduce the number of inventory days.

Innovation in cross-border payments

As cross-border payments continue to grow in popularity, businesses will need to find quicker, more cost-effective, and transparent solutions to their approach to reduce the number of inventory days.

It’s time for CTOs to reassess traditional relationships and explore how new technology can provide the tools their treasury teams need and the service they deserve. Innovation in payments can now offer up-front pricing and fee transparency, along with the ability to track a payment.

Businesses no longer need multiple different accounts for collecting monies in each country or currency. CFOs can set up their own international account with a multi-currency International Bank Account Number (IBAN) in their organisation’s name. As a result, they can manage corporate cash flows and view trading history, market data and statics, all in one place.

The emergence of virtual wallets is allowing businesses to make same-day payments. Businesses can use them to organise funds and store multiple currencies, ready for executing rapid payments or a currency exchange. This will make it a lot simpler for businesses needing to onboard suppliers in different markets.

Through these new approaches, businesses can simplify and speed up payments, reducing inventory days and ultimately cutting costs. This will not only enable these firms to survive this current period of volatility but to reduce costs in the long run.

About the Author

Laurent Descout is CEO at Neo. Laurent is a serial fintech entrepreneur and investor and has been a financial advisor in asset finance for more than 10 years. In 2017, he set up Neo, the first European fintech that offers MiFID II-compliant investment services and PSD2-compliant payment services from a single platform, to help SMEs overcome the numerous challenges of international banking.

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