Cross-border payments – financial transactions between payers and recipients located in different countries – have become crucial to so many in recent years, providing people and businesses alike with a means to weather the often-challenging economic backdrop.

As the world’s small and medium-sized enterprises (SMEs) seek to bounce back from the twin shocks of the pandemic and rising prices, cross-border payments are gaining importance in our ever more interconnected, digital world.

Whether it’s a jeweller in India sourcing materials from China, or a consultancy in the US paying a remote worker in Spain, being able to make quick, transparent, reliable and low-cost international payments has never been more vital to the smooth functioning of the global economy.

It’s this importance that has made the G20 place enhancing cross-border payments at the centre of its priorities, with the Financial Stability Board’s roadmap setting a number of targets around speed, cost, access, and transparency.

However, despite the importance being placed on cross-border payments, it’s clear that pain points persist which threaten to hamper economic recovery. To better understand these challenges, Mastercard has surveyed thousands of individuals and small businesses across the globe who are at the very heart of cross-border payment flows as part of our upcoming third borderless payments report.

What became clear when speaking with businesses, regardless of where they were based around the world, was the ongoing importance of smooth, reliable systems and an increasing need for a fast, secure and transparent payments journey.

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Facilitating a more global approach to business

What quickly became evident from our research was that so many small businesses are taking an increasingly global approach when looking to expand their business.

Three in five (61%) SMEs say they are now sourcing more suppliers internationally than they were 12 months ago, and two in three (65%) say they expect to source more abroad in the coming year. A similar proportion (67%) say the pandemic helped them to open up opportunities with new international suppliers.

What’s more, half (50%) of individuals around the world that we surveyed now say they are planning to work or live abroad in the next three years, underlining the need for smooth, reliable methods of making international payments for businesses to remote workers.

This hunger to source new suppliers and the openness to do so across borders shows a growing emphasis on doing business internationally, as barriers are broken down in our digital-first world. Two in three (67%) SMEs say they now doing more business online, whilst half (51%) say they are doing more international business than ever before.

Cross-border payments are essential in facilitating this global approach to business, with many businesses citing that they have improved efficiency, helped them to grow, improved cash flow, and enabled them to survive.

Addressing a plethora of pain points

Unfortunately, despite the benefits and opportunities that cross-border payments have enabled for so many businesses, a number of lingering pain points risk stifling this economic potential. Our research reveals that over a third (37%) of SMEs have experienced a failed or late cross-border payment – a figure that rises to more than half of those in both Saudi Arabia (54%) and India (51%).

The fallout from these failed transactions is substantial. Nearly half (45%) of SMEs said it meant they could not pay a supplier in time, while a third saying they were then unable to buy essential supplies (33%) and suffered reputational damage as a result (30%).

More worryingly, around half (47%) of those who experienced a late or failed payment say the experience has made them far less confident using cross-border payments – so much so that 46% of these SMEs say they now opt to use domestic suppliers instead even if the cost is higher. This trend damages the prospects for growth, not just for small businesses, but the global economy as a whole.

But it’s not only late or failed payments that are the cause of so much pain for businesses. Fraud also remains a barrier to SMEs when it comes to sending money internationally, with 41% reporting it as a major concern.

As businesses continue to expand their reach, it’s crucial that the industry comes together to tackle these barriers around uncertainty and reliability, providing businesses with more efficient and secure cross-border payment systems that address their pain points whilst helping to boost the bottom line.

By providing quick, secure and transparent cross-border services, we can support payments to multiple endpoints, create greater economic empowerment for businesses internationally and help foster a truly global economy in which everyone stands to benefit.

Alan Marquard is Executive Vice President, Transfer Solutions, Mastercard